Disintermediation Effects of the Internet and the Outsourcing Movement
Posted by Pat Kitano at 11/6/2006 7:35 AM 
Categories: Technology, New Business Models, Realty Realities, Disintermediation, Real Estate Economics, The Future
Categories: Technology, New Business Models, Realty Realities, Disintermediation, Real Estate Economics, The Future
Kevin at 3Oceans makes solid points on why the internet won't put Realtors out of business like the travel agents. On a larger scale, industries that are prone to disentermediation by the internet must also contend with the disintermediation effects of outsourcing to lower wage countries. In both cases, American jobs are lost and whole occupational groups must adapt to new realities.
The internet and the outsourcing movement are intimately linked simply by the fact that the internet enables anyone in the world to work with us in real time. The industries most affected by outsourcing are data-driven. A week ago, I clipped an article from Bloomberg's Mark Gilbert that postulates how pervasive outsourcing will affect our financial industries at senior levels... research, the analysis of data, will move across, followed by the trading functions that apply those data. Data transparency will consequently enhance market transparency, and occupational fiefdoms that relied on the application of proprietary or closely held data are disappearing .
The Bloomberg article quote: "Anyone who believes the U.S. and Europe have some kind of monopoly on intellect is cruising for a bruising". I speak with my kids, their friends and their friends' parents about the effect outsourcing may have on their newly minted careers. Biotech? China is building sophisticated labs that will cheaply and efficiently "mine" for new drugs... be aware. Investment banking? Great profession, but don't get stuck in a back office. Tech? Be sure to take entrepreneur courses in college because you'll need to know how to apply your tech knowledge to the real world. Architecture? Be sure to take enterpreneur courses, at first, architecture is much more about shmoozing for business, not as much on design sense.
The traditional "relationship" professions - law, medicine, consulting and real estate - are all solid paths if you have a passion for them. Of these professions, the internet best facilitates real estate, a business model based on mass marketing to the consumer, and those who learn how to use the internet will be well positioned in their career.
P.S. Thanks to Landlord Shmandlord who hosts this week's Carnival of Real Estate for noting our article about some recommendations I'm making to the title insurance industry. Again, thank you.
Technorati tags real estate disintermediation outsourcing internet landlord shmandlord carnival of real estate
Congratulations on a the well deserved recognition in the Carnival.
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Thank you so much Maureen!
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Only those who are unable or afraid to embrace the changing technology, or those who are unable to offer nothing beyond the same technology as everyone else, should be afraid of the rise of the Internet in the real estate industry.
If anything, I believe the Internet has made it possible to work with a far higher number of buyers and sellers simultaneously than would be possible if we were driving every buyer around to find just the right house.
Schwab ran into this once upon a time. The company pioneered Internet trading, only to watch everyone else match what they were doing at a minimum and exceed what was being done at a maximum. And the company has spent several years trying to play catch up because of it.
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You're ahead in evolution Jonathan... those who understand the power of internet technology to reach the consumer (and today's bloggers are best positioned for the new real estate marketing that will replace those generic real estate websites) may skew that classic 80/20 rule to 90/10. That's because very few can combine the technology grasp, the smarts and the realtor skills to succeed at this next generation level. Think of the math - realtors who are tech-savvy (25%, let's be kind), smarts (20%), good realtor (20%). 25% * 20% * 20% = 1%. (Yes, it's simplistic, just making a point).
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We have been doing a nice business on the internet for 4 years, It has made us much more efficient. The MLS's need to let the information flow (it already is) and they are not in control! My main concern is all the behind the time technology real estate vendors that sell bad products to REALTORS and don't encourage a positive learning vehicle.
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My comments to Jonathan above also apply to you Terry. I'd like to hear more about these archaic technology vendors you describe... maybe it's something you should post on your blog... let me know... I'm always interested in business models and strategies, especially ones that are phasing out due to the new transparency in real estate.
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The Internet certainly holds the possibility of disintermediating many different bits of the home buying and selling process. Shoot, if I can outsource my transaction management to my sister in Seattle, there's no reason I couldn't outsource it to India, the Phillipines, South Africa, etc. (Don't worry, Cynthia, I'm not planning on doing that!)
Where you'd get in trouble would be if the Internet would disintermediate the real estate relationship as opposed to parts of the real estate process. As I noted in the article Pat quotes above, I don't think that will happen.
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Keep your eyes on India for major outsourcing of title work.
Many of the titles we examine now are typed in the Philippines.
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I have been speaking with many of our contemporaries here, and I find so much resistance to technology, even as far as putting up a website, nevermind a blog, I can't understand why people aren't embracing this.
Outsourcing is most definitly the wave, and for we Americans to think that we have a monopoly on brains, is incredibly stupid, and short-sighted. I hope that we will break through all of this fear, and jump in. We need to not fear the unknown.
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