Facilitating Virtual Businesses

Technology has levelled the cost of connection and efficiently resolved the arbitrage. 

Bala thinks that  there is a paradigm shift in the way businesses are managed today compared to few years ago.  Flexibility is essential. for survival. It's not just the infrastructure or  the geographic location of a company that makes the difference, it's the people who power it.  Today no business can be completely brick & mortar or completely virtual. Every business has some "virtuality" to it.

Take the example of nineMotion.com. It is a 1 year old US registered company with 2 founders and no other employees, no physical offices or assets except 2 laptops and a website.  This, however, belies their global foot print.

Just as the old saying goes that ‘It takes a village to raise a child', Bala explains that nineMotion is supported by a large ecosystem of providers and freelancers consisting of 8 software developers, 1 user interface expert, 8 market researchers, 2 marketers, 1 public relations agent in Bangalore, 1 public relations agent in the US, 1 branding expert, accountants, legal experts, etc. Within just two and a half months of launching their website, more than 600 service providers from over 14 countries have signed up on nineMotion.com , and 15 to 17 buying transactions are being undertaken.

nineMotion itself is a proof of what it is promoting - outsource for efficiencies. nineMotion is an online marketplace for services targeted at small and medium businesses(SMBs). SMBs worldwide can get their work done smarter on nineMotion, and can use project management and collaboration tools to monitor the outsourced projects. The service providers on nineMotion are either freelancers or SMBs with varied skill sets i.e. software developers, engineering designers, website designers, graphic designers, language translators, market researchers, data / document processors, etc. Any one who can use a computer for their work and deliver the end product digitally can take advantage of nineMotion to provide their services to the world.

Wikipedia defines "arbitrage" as the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices nineMotion tries to resolve this arbitrage by providing an easy, low-cost and efficient channel for connecting the buyers with service providers.

Bala goes on to explain the principle on which nineMotion.com works. If you are in Bangalore and want to translate a 10 page document to Chinese, you will probably find just a handful of chinese translators locally, resulting in a very high quote and cost. However, the irony is that there are millions of chinese translators elsewhere in the world.

But how does a customer sitting in Bangalore reach out to these service providers elsewhere in USA or China? That's where nineMotion comes into picture, it uses the concept of reverse outsourcing - the prospect can receive a proposal from USA !!

With the help of technology, a service can be provided economically from where it's available in abundance to where it is needed.

Focus and specialization are essential. Businesses have to focus on core strengths and outsource everything else. To do everything oneself results in mediocrity. Internet and Google have democratized information and hence information and reach is largely free today. Talent lies in assimilating and harnessing it. 

Let's look at an example:, a brick and mortar music store cannot store every album in the world because of prohibitive overheads so they stock only the best sellers. The result is that they lose a customer looking for a rare album. However, iTunes - an online, virtual music website, stores every album ever produced and hence caters to every need. In other words products in low demand or have low sales volume can collectively make up a market share that exceeds the relatively few bestsellers: this is called the long tail effect and similarly technology today has enabled specialized virtual businesses to be profitable.

Lets take another example. If someone wants to build a sales management application, instead of hiring, training and motivating a team of software programmers, it can be outsourced cheaper and efficiently on a services marketplace like nineMotion.com. Similarly, freelancers in tier 2 or tier 3 cities can now reach far away customers, hence they can maximize their revenues while sticking to their specialization and without having to build technical and marketing infrastructure. For both customers and the providers this is a win-win situation.

Hence according to Bala, small is the new big, far is near and less is more i.e. specialisation has a market.

Q: How is after sales support & conflict resolution handled in outsourced projects?

Checks and balances, that's the value nineMotion brings. When it comes to product where the specs are similar, the decision is made purely on the basis of price. Lets presume it's a service, e.g. if a 3D CAD model needs to be developed and 5 service providers come forward to do it, how can they quote for the service if the requirement is not clear?.

That's where ninemotion  helps by providing templates  thereby clearly documenting the requirement. This results in good quality proposals. Accurate estimates can be arrived at based on specifications. Collaboration is provided for clarifications. Messaging is available. There is a template even for writing proposals.

Checks and balances are put in place to prevent conflict. Contract management is provided which provides a fair and robust framework to govern  every engagement. To minimise the  risk further delivery based milestones and payments are agreed upon by customers and providers. 

Conflict resolution - If all else fails there is sufficient documentation history to help resolve conflicts.

Q:. How do providers get paid? Can they request advance payment?

nineMotion advocates a pre-negotiated milestone based payment system. Providers can request advance payments but they should know that since this is a marketplace, there might be many other service providers who may be willing to start without it. It's a fair market. Various payment options are available to both buyers and providers such as PayPal, cheque, wire transfer, credit card etc. The payment is credited to nineMotion, and nineMotion in turn pays the service provider.

Q: How does nineMotion ensure safety of transactions. How does it prevent spurious buyers and providers?

To build trust in the marketplace, each and every transaction is evaluated by both providers and clients. Lets presume a service provider has done 5 projects and all 5 of his customers have rated him well. It is available for all users to see and his reputation helps him position favourably with prospective customers. Similarly buyers build their reputation to get proposals from good providers. Unlike in the offline world, online reputation can not be erased.

Apart from this, ninemotion also does stringent checks, certification and reference checks on all the service providers, because ultimately quality wins.

Majority of the online transactions are safe. However, to ensure absolute safety, nineMotion  will be rolling out an escrow mechanism shortly as an additional payment option. Currently payments are done based on milestone based schedule. 

When escrow is enabled, buyers deposit the full project value  (say 1000 $), into a neutral third party escrow account. Based on milestone based schedule, after necessary buyer approvals the money is transferred from the escrow account to the service provider. This protects both the buyers and the providers.

He was speaking at a Panel Discussion organized by Businessgyan and Tasmac on the topic ‘Virtual Businesses'.

Compiled by Ms. Mangal D Karnad for Businessgyan

Issue BG79 Oct07