OpinionsStrategy

Ever since Jeff Howe used the term 'crowdsourcing' in a Wired magazine article in 2006, it has gained wide acceptance. The scope and significance of this phenomenon has also increased considerably.
 
The basic concept of crowdsourcing, a portmanteau that combines "crowd" and "outsourcing", is pretty simple: A task is given out to an external crowd or mass of workers on certain conditions. Instead of a regular contract meant for a single individual or company, in crowdsourcing a distributed set of individuals or firms are involved.
 
Some of the earlier and popular examples of crowdsourcing include the Search for Extra Terrestrial Intelligence (SETI) and Wikipedia. In the former case, a large mass of people allow the idle compute power of their systems to be tapped in a collective effort to process huge amounts of data that could lead scientists and explorers to the discovery of extra terrestrial beings (or "aliens" as we know them).

And in the latter, people from all across the globe contribute to creating, editing or monitoring what is now the world's largest encyclopedia of knowledge.

In fact, crowdsourcing providers reported a 75% increase in revenue last year to US$376 million, up from $215 million in 2010 and $141 million in 2009, according to a report by crowdsourcing.org, a Dallas-based site that tracks the crowd-funding industry. 
 
It is believed that crowdsourcing offers several benefits over the traditional model of outsourcing.   For one, a solution or product developed through crowdsourcing can have inputs from a wider base of people - often implying that the end result will be of better quality.

Another benefit is that crowdsourcing connects a business directly with its audience or consumers (for example, Indian mobile maker Micromax recently used a nation-wide contest among TV audience to come up with a new logo for the company while Starbucks' My Starbucks Idea has met with resounding success).

Some people also consider crowdsourcing to provide a testing ground for a product, as the development phase itself involves a large number of contributors - many of whom happen to be product users. Open source software is a case in point. Besides, those who contribute to the product under crowdsourcing are often amateurs or professionals ready to cut their price in a bidding system. This keeps overheads and development costs low, and the end product is often cheaper (or almost free like in the case of Wikipedia).
 
Some new or related concepts have also evolved around crowdsourcing --  for instance, crowdfunding, fansourcing, wikinomics and microtasking, among others. But they all essentially use the core idea of breaking down a bigger task into smaller components and farming it out to more people. 
 
In fact, as the Internet further expands in its reach and as people continue to form communities in the virtual space based on common interests, shared beliefs or pressing needs - such as those through social media, or sharing and bookmarking sites - the underutilized potential of people round the world will be tapped more and more through crowdsourcing. Not only is there "wisdom" in the crowds, there is a business model as well.

Rajeev Rastogi is the vice president and head of Yahoo! Labs based in Bangalore.