Outsourcing of small -mid project - Freelancer or Service Provider?
As a client with project management capabilities and with small or medium-sized project would you prefer to hire freelancer through online marketplaces or service provider?
With the recession taking away jobs for many and hours for those that are still "employed", more and more specialists have turned to freelancing making up freelance marketplaces such as Odesk, Elance, GetaCoder with more highly-qualified resources. More business owners are discovering that there's often a better value for their dollar when they hire freelancers. And they're able to choose from an almost unlimited field of skill-sets for each specific project they need help with. On leading marketplaces, interesting projects can attract 100 and more bidders. Another functions of freelance marketplaces are feedback and rating information, which could be a valuable tool for buyers to find appropriate resource. However, as there are providers from various parts of world the prices can considerably vary between areas with low cost of living and developed countries, in addition there is an overwhelming number of individuals trying to mislead buyers by underestimating how long it takes to complete a project in a good quality and proposing unrealistic bids. As a result there is a risk of poorly finished or failed project.
The freelance model has some other problems in comparison with traditional outsourcing model e.g legal problems with contracts and payments, intellectual property problems, quality supervision, and the handling of resources. Although, freelancers can form teams with different areas of expertise for the project they still lack of processes, effective communication and quality management.
In general, the emergence of new model of outsourcing - multi-sourcing, where buyer works with multiple providers to source various components, and increasing demand for one-off projects can provide a good future prospects for freelancing.
Clarification added September 11, 2009:
I think at this point Ms. Leanne Walker has responded with a very interesting theory of personal reputation in freelancing. And I agree with her in terms of importance of reputation and references for both companies and individuals. I am not agree that there is only place for either freelancers or service providers, but with a rapid development of communication and web technologies there is much more opportunities for everyone to start small business. What is the most important it's your expertise and ability to provide with best-in-class service for clients whether you are freelancer or small-provider, and the best prove of your expertise would be your happy clients and completed projects that you might, and I think should showcase, unless there is a strict NDA signed.
There is much arguing about target markets for freelancing and outsourcing, and I think it's mostly determined by the level of size and maturity of customer, e.g if it's a large multi-corporation with a large projects and strictly-specified processes resulting in a lot of red-tape and long-time assessment stages it might fit more to competent provider, while small companies are more adept to work with freelancing model by utilizing state-of-the-art web collaboration tools that make interaction more efficient.
Answers (14)
Bob P.
Owner, Small Business Websites, LLC. Professional Website Designs, SEO and eCommerce for Small Businesses.
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I think that the familiar phrase "You get what you pay for." applies to your question.
I do web design work as my business, and looked at sites such as you mentioned when I first started out. II found that the rates were equivalent to what I could make as a bus driver. In addition, those sites take out a substantial commission which pushes the rate down even more.
I make a specialty in my work of designing sites with SEO built-in, since I believe that no matter how pretty a site looks, it will not attract visitors unless search engines bring visitors to it.
Do you think that people who advertise themselves as web designers and make $12/hour know much about SEO? Probably not. Do you think that people who rate these designers highly know much about SEO? Probably not.
And so on...
My perspective is that to the freelance marketplace, you (as a client) are viewed as a commodity like butter or bread. You will be told things like "Yes, we can do it" by someone who has not taken the trouble to dig into your requirements and understand them.
On the other hand, if you hire a firm that takes the trouble to do this and then signs a contract with you, their reputation and your satisfaction with their work are on the line. They want you to be a satisfied customer because it will help their portfolio.
Often, they will do much more work for you than their invoice shows. In my own business, I typically do twice the work that my advertised hourly rate (and my invoice) indicates, because I want my clients to be satisfied.
So, let me modify the universal rule I stated above to something like:
"If the price is too low, you get what you pay for."
Paula P.
Senior Human-Digital Marketer grounded in Demand Generation and Revenue Attainment
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I agree with Bob and will expand on it some. There are areas where off shoring can be a good value as with call center, 24hr chat, VA's and some IT development. However, caveat emptor when you are looking for specialty areas that are best done on home soil.
My firm is a marketing outsourcing service provider. I have a team of freelance professionals I have vetted for my clients and we can provide services through the entire customer experience. While there are many individual freelancers on these sites, I question their ability to create marketing continuity for the client.
The client will get their website built, but will it convert the target?
The client gets the graphics they want, but are they using them effectively?
The client gets a direct mail piece, but will it reach the right audience.
I won't even go into conversion tracking, because that's so rarely included in an RFP and it's one of the most important pieces on any marketing tool.
I can only speak to my industry, but there are areas where a business could cut costs and others where it could cost them even more in the end.
Paula Pollock – Director
Pollock Marketing Group
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Chuck M.
Sr. Technical Writer at Model N
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I would suggest that your assertion that "business owners are discovering that there's often a better value for their dollar when they hire freelancers" is misleading at best. The problem is that in the majority of cases, outsourcing, especially of business-critical functions, is just plain penny wish and pound foolish.
Of course those who run companies that provide outsourced talent, as well as that talent itself, would disagree. And on the face of it, it's hard to refute their arguments.
I've done contract work. I do it well (of course). But I much prefer being a full-fledged employee. Why?
In my case, it's because I care, about the company, about its products, about making those products the best they can be.
Of course you could say that freelancers also care, but making the best product or providing the best service is not their primary motivation. Getting the job done to spec and getting paid is. Their goals are not your goals.
Employees, on the other hand, are invested in sharing a company's goals. You hire employees, especially talented ones, treat them well, put them in a position where they can succeed, and the rewards you reap cannot always be quantified by the bean counters and Wall Street analysts. Employees who harbor that sense of loyalty, that streak of passion to do right, will go to the ends of the Earth and back for you. Contractors, typically, won't.
Sure, there are some employees who will use your company as a stepping stone. But more often, by investing in the employee model, rather than the freelance model, you will build a foundation for your company that makes it more able to withstand the hard times and puts it in a better position for long-term success.
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Clarification added September 8, 2009:
There is a place for freelancers. But they necessarily should not be in mission-critical areas or in your core business practices and needs.
One of the fundamental reasons is elucidated very well in one of Joel Spolsky's many fine articles (http://www.joelonsoftware.com/items/2006/08/09.html), defining the difference between intrinsic and extrinsic motivation.
In general, employees perform from intrinsic motivation. And in general, freelancers perform from extrinsic motivation. Having people who do work for you perform from intrinsic motivation is *much* better for your business.
Certainly there are times ehen outsourcing might be necessary, such as when you have an immediate need that is not in your employees' skillset. But what does having that immediate need say about your management and planning that such need was not foreseen before you need to make outlay outside your regular payroll? In addition, your employee's intrinsic motivation increases when offered a challenge that lies outside their realm of knowledge, when given the opportunity to first expand their knowledge and skills and then apply then to a company project. You then (a) get the work done by your employees, and (b) have increased your employee loyalty and happiness.
Leanne W.
Owner, Bookkeeper and Virtual Assistant, Walker Administrative Solutions
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I disagree with Chuck. There is a place for hiring freelancers. Chuck likes being an employee and freelancers probably make that harder in his field. I like being a freelancer, so my answer will be skewed that way.
Freelancers can provide a project-based capability that the company may not need outside of a certain project, or they can put a small company with very limited resources on a more equal footing with large companies, by providing critical capabilities to the owner, again without the expense of an employee. For instance, one of my clients occasionally needs a software developer for projects, but may go a year between projects that require such a service. Keeping a developer on staff when not needed is a waste of resources.
I think one of the most important aspects of working with contractors is clearly defining expectations and regularly communicating with them about the project. Another client of mine has a totally outsourced staff. We all have our areas of expertise and responsibility, all know how to (and are encouraged to) contact each other for whatever we need, and all have individual accountability sessions to make sure we are all accomplishing what we need to accomplish to further her goals. The reason it works is because she manages us and our work and communicates regularly. We are a team of non-employees.
Another reason the outsourcing model works for my clients is because they don't hire the cheapest people they can find, they hire the people they need and pay probably more per hour than they would a regular employee, but make the savings on the number of hours worked and on employment costs.
My clients don't tend to use the freelance sites (Odesk, Elance, Guru), although they will if there is a specific need. They really prefer referrals. They also prefer local people to make communication easier.
Ultimately, if you are going to use freelancers, have an idea of how much you would pay for an employee to do the work and if anything, expect to pay a little more rather than a lot less to get quality results.
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Although "You Get What You Pay For" is usually true, there are variables to keep in mind. A lot of places I've worked marked their prices up to look like they were better than they actually were. And, strangely, it worked. It's all about personal calibre and references.
Adrian P.
Portals & Online Communities Architect, Owner at Softescu
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Odesk, Elance, GetaCoder promote the lowest price model and this is never going to be sustainable. Get what you pay for it's truly true. I dropped looking for projects there as i feel like is close to working for free.
Exercise caution with multi-sourcing geographically dispersed project resources because without a tried and proven methodology for project collaboration and communication this can be a problem in itself. Unless you're able to articulate the requirements and the success conditions for each of the components (designed by an architect) you're taking a tremendous system integration risk.
Furthermore, the sourcing websites you mentioned work on a lowest-cost reverse auction principle, rewarding the project to the cheapest party is just the beginning of your woes.
In my opinion freelancing works best with a more localized presence in which case you end up picking contracting/consulting professionals.
Niel L.
Labratory Manager / Depatmental Safety Officer, Mechanical Engineer at Johns Hopkins University
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When looking to outsource any technical or business effort one of the principle elements is always to be sure to do your due diligence. This has not change, this will not change. You can not simply assume that a person or company offering to do the task can do it. They must be able to demonstrate up front that they have an understand of what needs to be done and present to the Buyer / Client a proposal that demonstrates that the Provider:
1. Fully understand what you NEED, not simply what you want. They must understand what you need.
2. Are offering to to the work for an economically justifiable, reasonable and acceptable amount.
3. Have defined a schedule that will meet your objectives.
This is true for the individual Freelance or Service Provider. It is true for a team of Service Providers.
There is a lot of discussion on the web as to how certain market places (Elance, Guru, ODesk, I-Freelance, etc.) are caught in a race for the bottom. This is only true because Providers and Buyers undervalue the value of the services being offered, it is not a inherent function of the sites themselves.
Niel
Mark R.
President, Nth Generation
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The problem with using sites like Odesk, Elance, or GetaCoder is that the people who shop their projects there are looking to get a lot while paying almost nothing. Those are not the kind of clients that you want. Not only do theynot pay well but they always want you to throw things in for nothing.
I think that most things can be successfully outsourced (note that outsourcing is not the same as offshoring). For decades I have watched as nay sayers proclamed that this or that activity could not be successfully outsourced and then watched them on by one proved wrong. That does not mean that it always makes sense to outsource.
Problems with outsourcing certain functions are lack of continuity (the candidate will run off as soon as a permanent positin comes along), lack of loyalty or a lack of familiarity with your existing systems or processes. People who are considering outsourcing a functin should be suspicious of anyone who is looking for outsourcing work simply because they can not find a regular job.
On the other hand outsourcing allows you to bid for the best price or service and allows you to purchase only the amount that you need (if I only need a DBA or a phone technician for 20 hours per month that is all I have to pay for). If a certain knowledge set, or better yet combinations of knowledge sets, is very expensive to obtain but it is needed less than full time that can be a compelling argument. And of course there is the avoidance of a lot of taxes and regulations when you outsource.
I would be more inclined to sell yourself on these benefits than on price.
The assumption that a freelancer would not do a good job or tell you yes not matter what is a common mis conception. I am a free lancer and know that if I want more business I'd better be on time, on budget and with a working solution.
We all live in a cottage industry, i.e. this blog, and the news can get around pretty fast if someone does you a bad job.
I take a lot of pride in doing a good jub and enjoy repeat business. Its just like anything else, you have to know what you are buying. Don't hire someone who has no references or actual experience. Don't expect top of the line results with bargain basement fees. You do get what you pay for. There a differently advantages to temp help. For example: Some business issue needs a technical solution and all the full time employees are too busy holding the company together to do a "shoot off" project. This is a perfect time for a temporary person.
Getting a freelance or outsourcing is a preferable route to take if you have a single, very specific and detailed task. For example - if you have a technical specification for an element of object to be created, then go ahead.
If you are building a fully fledged web solution, then forget it. A web solution cannot be built by an individual. You need a myriad of skills and these are left brain/ right brain opposed. Some individuals are fantastic on the creative and graphic side while others are logical and program orientated, but it is virtually impossible to find someone who is skilled across the board and then intop of that, have the ability to liaise with a client and interpret their needs / vision.
Going back to the first example - its also only successful if you as the outsources have the requisite skills to evaluate the end product being produced. There are numerous examples where people who are not techically savvy outsource to a developer and don't have the technical aptitude to manage or evaluate if the developer's code is robust
Uri Estrin
President - Estrin Technologies
uri@estrintech.com
I think with any type of site or project today you need to make sure that it is a partnership more or less. Technology and markets changes so frequently that you need to make sure that you are taking an iterative approach to your software.
This is one of the main reasons my partners and I started this company so you had more redundancy than a freelancer and more attention than a bigger more expensive company. We have a team of 3 people and we are your team on design, development, and management.
Of course there are exceptions to every rule but the main thing in my mind is the people and making sure that they are on the same page with you about your idea or product. I like the bread and butter analogy but that is why we wanted to start our company because I think it should be more than just dollar signs.
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I don't see the difference.
I would go with the one who has a proven track record of success.
