The real cost of outsourcing work to the cheapest bidder

This post was originally published on Medium.

You can get an iPhone app developed for $800 on Elance — but is it worth it?

Books like 4 Hour Work Week and similar blog posts make us believe that we can just outsource anything to a guy in China or a gal in India, pay them $1.11/hour and expect to get the results. After all, $1.11 in a third-world country is a lot of money! But, alluring as this is, a cheap laborer is a bad solution for any sizable project.

Take, for example, this article from TheNextWeb on how Mike Lemovitz built an iPhone app by using Elance, and had a bad experience, full of disappointment , inconsistencies and ambiguities. Was it reasonable for him to expect an iPhone app at $800?

Good work costs money and why outsourcing sites like Elance or oDesk, while good for some types of work, won’t be able to give you a good experience when you’re looking for quality creative professionals.

Sites like Elance work well when you outsource mundane tasks.

Excel data entry, translations, copy-paste research, or similar mundane tasks can be easily outsourced because they are simple and easily replicable. A huge number of people can do them relatively well at a set low price, interchangeably.

Munda tasks only require workers that can execute on your exact specifications.

These guys want to make money quick by doing straight-forward work. You are not paying them to think, you’re paying them to stamp out product. Just like in the Henry Ford factories, where guys put the pieces together without much though or involvement into the product; day in and day out they just churn out parts.

You have to be driving the project, your communication has to be direct and targeted on taking your exact specification and converting them into a working product. You do the thinking, you do all the work, they just stitch it together, and unless you are a very experienced clients who is used to this process, you will not have a good experience.

oDesk and Elance drive the prices down to the bare minimum.

The competitive nature of the low-cost outsourcers does not encourage creativity, but rather it pushes workers to seek projects which can be executed quickly with little thinking involved.

oDesk and Elance are focused on arbitraging cheap international labor and therefore they attract workers willing to take on extremely inexpensive project. Even if one of them knows that to give you great results he should quote say $3000, instead of $800, everyone else around him will bid significantly lower, thus winning the project away. Anyone with the right creative skills does not stand a chance against an army of people bidding cheap prices who just want to make money, fast.

A professional freelancer is not a screwdriver, but rather a temporary team member that works with you to achieve the best results.

Let’s say you wanted to contract an experienced local freelancer who would work with you directly on your project. Typically, you would reach out with project details, talk a little bit about your needs, agree on all the specifications for the app and outline exactly what needs to be done. In case that you don’t have all the pieces, a freelancer would give you a rate at which she could help you hash out all the details.

Experience freelancers will either add buffer time for anything that might go wrong, or tell you that anything that is not covered in scope will be done at a weekly rate afterwards. That’s pretty normal, especially given that application development is bound to yield some unexpected needs.

Can you still save money and get great results?

In the past, if you wanted to design a website or a mobile app, you would go to a big agency that would charge you tens of thousands of dollars. They would invite you into their office, pamper you with their process, offer you tea … but there was no free lunch. Due to the size of these agencies, they had to charge up to 75% markup in order to maintain their business (account managers, book keepers, marketing departments, office space, janitors …etc). In other words, if you were charged $20,000 for a project with a big agency, only $3-4K went to the person actually doing the work!

In the recent years, more and more of these professionals have quit their jobs and turned to freelancing. You won’t find them on oDesk or Elance because they are not interested in competing for the lowest price. They are, however, interested in doing a great job on interesting project. Experienced and respected freelancers don’t take on all projects and don’t work with all clients. They are as selective about working with you (and on your project) as you are about choosing a freelancer.

In fact, that’s one of the reasons why we started Scoutzie.com - to give clients and freelancers an opportunity to find each other online in a way that is respectable and replicates what you would do in the offline world.

So what, should I work with a freelancer ?

The answer is yes. Working with freelancers is a great way to get your project completed. You will save money by not paying for fluff and you will also get started much faster, getting access to multiple freelancers at the same time and gaining expertise of world-wide community at your fingertips.

However, unless you are an exceptionally experienced person, you should find a freelance partner that will work with you (not for you). Don’t think of online work as a way to outsource for cheap, but rather as a way to find just the right person at the right time.

Good luck and good night!


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