Using the Web for Short-Term Outsourcing

Whether it's specialized work or drudgery you need done, these fast-growing go-betweens prove handy. Just don't forget your due diligence

By Nick Leiber

Danny Guillory of San Francisco has been using Elance, an online marketplace for professional-service vendors, for five months, and already, he can't imagine doing business without it. Guillory is chief executive of Innovations International, a $750,000 human resources consulting firm with five employees. Through Elance, he has hired a graphic designer in Provo, Utah, to work on a client's posters, and an administrative assistant in India to crunch numbers. Now he's using the site to select a market researcher. To date, the outside help has cost a mere $1,500. Without Elance, says Guillory, "there's no way I could have afforded to do [some of this work]."

Like Guillory, other entrepreneurs are turning to online marketplaces to outsource all kinds of work to freelancers. More than just job boards, these sites connect buyers with vendors, help manage projects, and deal with disputes and payments. You don't need to be a techie to use them, but it's important to be specific in describing a project and to vet vendors thoroughly.

Alok Aggarwal, chairman of Saratoga (Calif.) research firm Evalueserve, says more than 90 such marketplaces are now online. Two of the most popular, Elance and Guru.com, position themselves as one-stop destinations for professional-services work, ranging from Web design to accounting to translation. DoMyStuff.com specializes in personal chores and mundane business tasks. RentACoder is all about software development. Then there's Amazon.com's Mechanical Turk for low-skilled, repetitive work.

One caveat: Some freelancers may, er, embellish their skills. Jeremiah Reams, who's trying to transform his three-person microblogging site CitySpeek into a business, was disappointed last August with a team of Indian Web developers he'd found on Elance. Instead of writing the code he requested, he says, they just tweaked some sample designs. Reams complained to Elance, and the Indian team agreed to forgo its $750 payment. Reams then tried another group in Lake Oswego, Ore., which bid $1,000. "It was a match made in heaven," he says.

Most such sites charge vendors a subscription fee and a percentage of the project fee. Buyers post project descriptions for free, leaving freelancers to bid on them. The sites offer limited vendor reviews, and some point to examples of freelance work. Elance has a tool that helps buyers interview a would-be vendor. But screening freelancers still falls largely to the buyer.

Anthony Johnson, founder of six-person, $600,000 ICC Software, has used RentACoder since 2003, saving up to 60% on coding projects. He warns not to jump at the first bid, as 15 usually roll in within an hour of posting. Wait a few days for freelancers too busy to respond, he says. Buyers normally receive intellectual-property rights to work done through the sites, so Johnson is quick to copyright work as it comes in—making it truly his own.

Leiber is Small Business editor for BusinessWeek.com .