Can Crowdsourcing be an alternative to traditional Consulting?

During the course of Hearst challenge, several acquaintances  have commented on the beauty of the  analytics competition business model? Putting up amounts which are significantly less than normal consulting fees, companies can get large number of people to work on a problem that is of interest to them.

While a lot of this is true, I do see some drawbacks of the  competition or crowd sourcing approach:

• To the extent organizations invest in  analytics to gain a competitive advantage,  the crowd sourcing approach has a disadvantage that it is harder to keep a secret in a crowd. You might swear the winner to secrecy, but what about the guy who almost won?
• Data  confidentiality is another issue. As a consultant, I have always seen clients being very sensitive to giving others access to their own data. Therefore,  they will be very reluctant to post really sensitive or important data in a public forum
• Another problem with the crowd sourcing model is that it is a winner(s) take all system, putting  a lot of risk on the participant. for example, 750 teams participated in the Hearst Challenge and put in 6 weeks of effort, but only 1 will get the $25k prize.  Therefore, for someone to be willing to put in that kind of effort, they must be either doing it part time  in spare time, or just starting out. So majority of  full time participants in these competitions are likely to be students or organizations looking to make a name for themselves. This  might have scalability.

These drawbacks do not mean that this is not a viable way of solving business problems. Just that some more thinking and improvisation might be needed to make it scalable, or else it might just be a niche strategy --but definitely a very enticing one.

--Datamining_guy