This is entirely wrong. You are comparing US and Western European high-cost market with the lower cost markets of Eastern Europe, Asia and South America. Yes, a contractor in a high-cost market, offering his services on oDesk won't be top caliber, because he should be able to get local contracts with much higher rates.

But contractors in lower cost countries are just as capable, while charging one third to one fifth of Western European / US prices. While this sounds low, the living cost, tax rates and average salaries are such, that oDesk freelancing becomes very appealing for a person in such a location.

A specific example: A frontend dev salary in Eastern Europe (full-time position) of 3.000 USD a month is quite decent. On oDesk, he can charge 25 to 30 USD pr. Hour. If he is good, he will end up with full allocation, and thus a salary of 4000 to 5400 USD pr. Month given a 160 hour work month. Additionally, he also has the personal benefit of working 100% from home, at hours which he usually has some control over.

Being unable to find good people to work with on oDesk and similar sites, is due to lack of experience in outsourcing, not because it is a market for lemons.

1) Freelance $30/hour is absolutely not equivalent to a salary of 5400.

2) Assuming 100% utilization is completely unrealistic. Does this frontend dev ever want to take vacation or take a sick day? Does the time that they spend searching for new clients not count towards utilization? Etc..

3) Every actually good developer with excellent English skills I've ever run across from lower cost markets like Eastern Europe, Asia and South America all charge full high cost market rates.

1) Sure, when talking freelancers / contractors you of course have to account for a ~20% deduction for sickness and vacation. So the base wage increase is often around 100% but compared to a full-time position, it is closer to a 50% increase.

2) It is only unrealistic for freelancers doing many small jobs. Not for contractors with ongoing 40+ hour contracts, of which there is a lot on oDesk. Maybe the confusion is semantics: When I talk of 100% allocation, I mean 160 hours of available work. Over a year, you'd remove 10-20% for vacation and illness, like mentioned above.

Check the work history of the higher rated contractors on oDesk if in doubt about this. There are many doing much more than 160 hours on average.

3) This is certainly not the norm :-) Not a lot of companies are interested in hiring a person a thousand miles away for the same amount of the guy next door. Especially not the type of companies who can afford developers contracting at high-cost market rates i.e. 100-300 USD pr. Hour. Again, if we are nitpicking, there are of course exceptions like especially well known developers or developers who are proven and known to a specific client. Then it's an entirely different story.

1 and 2) Not just that. In most countries, a freelance wage and salaried wage are different. For a freelance wage, you're paying for things out of pocket (taxes, benefits, etc) that your employer is required to pay for instead if you were salaried. You can't just do the math of $30/h * 40 hours * 50 weeks/year = your salary. It overlooks so much of the overhead costs of freelancing.

3) I'll readily admit that this point was anecdotal from me. But as someone who has worked with many both "good" and "bad" offshore ESL freelance developers, I can definitively say that the good ones asked for a competitive wage while the bad ones were asking for pennies on the dollar. It was really self-segmenting in this way.

$62,000 per year ($30 USD/hr) is actually an average salary (and an excellent entry-level salary) in many places in the US for the kinds of development people who use oDesk and elance are looking for. Hell, on one of these threads some time ago somebody in the south bay area was gushing with pride about how he pays his developers "well" at around $90k/yr ($45 USD).

That aside, given the ease of access to information the internet age has brought, I think it's more likely that hourly rates and skill aren't as coupled to geography as you suggest. A skilled developer even in Eastern Europe, if he is at all aware of his own skill, is likely to charge as much as any western developer unless he's hopelessly ignorant or just plain desperate. The rest are as average or below-average as their rate indicates.

Completely disagree. I've been freelancing on oDesk exclusively for 2 years now and I make a great living. Don't be stupid and set your rates to $10/hr, you're obviously going to compete with the bottom of the barrel and work with shady clients.

Up your rates and suddenly shady guys don't contact you, and good clients recognise talent and you get a good paying job.

Let me put it like this. I did an oDesk rate analysis. 5 star developers in my niche charge SIGNIFICANTLY less than I am right now, and I'm considering raising rates.

You might be making a fine living. But I suspect that if you're a good developer on oDesk, you'd be making a lot more off of oDesk.

Let's put it this way. Working in my country, Bolivia - I used to make $X/month.

Switching to oDesk and raising my rates immediately helped me land $X+400%/month. Immediately. It was just astounding to me. I'm sure I could earn more on other websites, and as a matter of fact I'm currently attempting to join TopTal.com

I've heard great things about that site and the way they operate.

You should raise your rates and get off of oDesk. Though it sounds like that's what you're about to do, with TopTal. If you're a reasonably experienced Rails developer with strong English skills and you're not charging at least 100USD/hour, you're underpaid.

I'd like to give freelancing a shot at some point. How would you build a reputation network coming from a corporate background?

I don't know what kind of freelancing you plan to do, but for me the method of moving to freelancing that worked (after two failed attempts) was connecting with veteran freelancers as quickly as possible. I became the technical resource for a creative agency by just calling them up and asking them if they needed technical help. From there it was a matter of being responsive to their communications, helping them look smart in front of their clients by feeding them ideas, and giving them flexibility--trying not to say "no" too often, even after seeing their pie-in-the-sky Photoshop mockups.

Since then, I've expanded my opportunities by reaching out to my competition to build friendships and explore ways of working together.

I found my (limited) corporate background a bonus because I was used to working on a relatively productive team (edit: so I could basically pull a team of freelancers together and bid on a large project as a group of independents), and a liability because I tended to think "I could always go back to the corporate world" instead of taking every opportunity to figure out how I might make self-employment work. It wasn't until I hired a business coach (a former SV corporate guy himself) that I started to learn how to make the whole thing psychologically/emotionally sustainable. There are opportunities to write your own failure narrative around every corner. :-)

Hey, I am starting myself and this is one of the best posts I ever saw on the subject, can I be your friend? ( from my point of view, you are a successful freelancer! )

Ha. :-) Yeah, no problem. porkfriedriceplease [de] yahoo

I'm in the corporate environment myself and definitely interested in seeing what I can do on the side. Could I get in touch with you for some insights?

Sure thing. porkfriedriceplease [symbol] yahoo

do you blog? where?

marccarson.com/articles (occasional freelancer-oriented content)