On Wikipedia, crowdsourcing is defined as \u201cthe act of outsourcing tasks, traditionally performed by an employee or contractor, to a large group of people or community (a crowd), through an open call.\u201d In describing the benefits of crowdsourcing, that same entry notes that \u201cthe community may feel a brand-building kinship with the crowdsourcing organization, which is the result of an earned sense of ownership through contribution and collaboration.\u201d<\/p>\n
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So, in other words, an organization that practices crowdsourcing has \u201chappy suppliers,\u201d right?<\/p>\n
Not so fast!<\/p>\n
One of the earliest crowdsourcing organizations, iStockphoto, is now being watched to see if crowdsourced suppliers are treated as firmly as traditional suppliers in economically challenging times and in certain circumstances. Yesterday, CNET published an article entitled \u201ciStock growing pains show crowdsourcing challenge\u201d that chronicles iStockphoto\u2019s recent announcement that it was changing the way that it calculates contributor royalties (i.e., the amount that it pays its suppliers).<\/p>\n
iStockphoto estimates that 24% of their exclusive contributors\/suppliers will see their portion of sales decrease. Needless to say, those contributors\/suppliers are not happy.<\/p>\n
Though crowdsourcing sounds warm and fuzzy, the bottom line is that business is business. And, in this economy where most suppliers are being pressured for lower prices, employee pay cuts are common, and discretionary spending is being choked off, it\u2019s no surprise that even crowdsourced suppliers are being pinched. Especially in iStockphoto\u2019s situation.<\/p>\n
What do I mean by that?<\/p>\n
Well, iStockphoto is a subsidiary of Getty Images. Getty Images, once a publicly-held company, was purchased by private equity investment firm Hellman & Friedman, LLC in 2008.<\/p>\n
Did Hellman & Friedman buy Getty because they love photography?<\/p>\n
No. They bought Getty for the reasons they\u2019ve bought other companies: to make the companies more profitable and either sell them for more than they paid for them or to take them public. I predict that Getty will be sold or will go public in 2012 or 2013.<\/p>\n
In these private equity ownership structures, there is a lot of pressure on the executives to do the two things to increase profits: increase sales and cut costs. Like most other organizations, iStockphoto\u2019s sales growth rate depends on the economy, so attacking costs in the form of contributor\/supplier royalties isn\u2019t an approach that is out of character for a private equity-owned firm. Typically, the management teams of private equity-owned companies face two possible fates: (a) fail to grow profitability and lose their jobs, or (b) grow profitability and get nice payouts when the company is \u201cflipped.\u201d<\/p>\n
Considering all of that background, should crowdsourced supply be perceived as another cost to be attacked or should it be treated more preferentially?<\/p>\n","protected":false},"excerpt":{"rendered":"
On Wikipedia, crowdsourcing is defined as \u201cthe act of outsourcing […]<\/p>\n","protected":false},"author":12,"featured_media":4056,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2935","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n