..at least One Way to Give oDesk a Raise
Hi everybody !
I've got oDesk newsletter today, and the topic theme was "10 Ways to Give Yourself a Raise". There are some advices for providers on how "to hone your competitive edge".
Then, after short oDesk news checking out, I've realized that one of the #1 topic nowadays at oDesk is world's economic downturn, and it's affect on oDesk as a marketplace. You can vote in current poll on the theme, and check out related blog posts. So I thought it's right time to make my suggestion on how to "Give oDesk a Raise". I mean oDesk as a marketplace.
I suppose many of oDesk users aware of the approaches governments utilize worldwide nowadays to minimize sequences of economic downturn. What do they try to do ? Right, they try to stimulate economic activities. How do they do that ? They low taxes & fees.
In fact, oDesk tries to stimulate activity also, posting that 10 ways. And there are tons of advices on the site how to be more competitive, so on. And definitely, oDesk still a great marketplace. But, I think there is one good way to make oDesk even more attractive.
Look at this charts - Rate Statistics and Rate Distributions by Job Categories. As you can see, average hourly rate is about $15, and everything higher than $30 seems to be in fact isolated instances. So why so few contracts with higher rates ? Everybody knows that really good job just can't be cheap..?
I think one of the reasons is the oDesk fee policy. oDesk takes 10% regardless of the rate: if your contract is at $5/hour, or $15/hour, $50/hour - nevermind. Plain 10%..
But, the truth is that the oDesk services are the same regardless of how much you pay for them: $0.50, $1.50, $5 per hour, or even $10 per hour (I don't think there are any active contracts at $100/hour right now, but theoretically). Yes, oDesk provides great toolset for work (and I do use them with pleasure), as well as support of all kinds. But, what's the reason to pay e.g. $5 or lets say $3.50 per hour for just every-ten-minutes screenshots ? When buyer pays $1.50 or $2 in addition to provider's rate, it makes sense because of all the advantages oDesk does provide. But, when one must pay $3.00 or more for the same software toolset actioning in the same way as for only $1.50, it seems to be a bit costly. In addition, that contracts with higher rates are between both more competent buyers and providers, so oDesk spends even less efforts on such contracts, because of very rare or not at all support requests ! That's why some buyers find top providers with skills they need, and then just entice them to work directly, without having oDesk as an intermediate. As an oDesk veteran provider, I've seen such several situations, as providers just went on with the direct contracts (..top providers, with rate much higher than average rate).
So, I suggest oDesk to put ceiling on their fees. It can be any appropriate value, but from that rates-distribution diagrams, and from my own experience with oDesk, it would make sense to have $3.00 maximum fee. So, all providers rates higher than $30 would have just plain addition of $3.00, instead of 10%.
That way, I do believe, oDesk will become much more attractive for high-caliber professionals, and for buyers with longer-terms contracts. In fact, everybody will win:
- buyers will get cut-off of their expenses with the ability to hire more qualified providers in the same time
- top providers will get ability to increase their rates, and get ability to get contracts easier, as the effective rate will decrease, preserving their own rate
- oDesk will become more attractive place for bigger contracts between more qualified buyers and providers, making even more money and getting more and more positive feedback as a marketplace for virtually every market niche
Please note, that doing that way, oDesk won't break their own niche, because it's in fact *empty* as you can see from the charts above.
And, don't forget that such activity stimulation would be very desired during the economic downturn, which creates new challenges for businesses worldwide. Again, as oDesk veteran, I remember the times when oDesk has been taking firstly plain $6.00, then 30% with the minimum of $3.00 as their hourly fee. Seems now is right moment to review the fees again.
Please feel free to share your thoughts on the above, regardless if you're oDesk staff, a buyer, or a provider.
Thank you,
Oleksandr Barabanov
(an oDesk veteran provider)
..exactly ! Thank you Abel
..exactly ! Thank you Abel for sharing your thoughts.
In fact, I hardly envision reasons why not to realize that idea.
Additionally, it would be extremely useful for US-based providers (such as Abel), and top-notch providers from other locations, making their rates more competitive. Could be very opportunely taking into account economic downturn in US and worldwide..
Look forward to hear from oDesk managers on this 
As another veteran - making higher wages
From a providers perspective the 10% that oDesk charges is more than worth the expense *regardless* of my rates because frankly, sure I could go 'out of the system' but what protection do I have that once that happens that the buyer is going to continue to pay me when I invoice them? Frankly, that's a protection I enjoy for the 10%.
oDesk feedback system offers me as a provider a chance to build my reputation and have it clearly visible to anyone who cares to look into it. I'm happy with that.
From a buyers perspective the additional fee wouldn't discourage me from hiring on oDesk - even for a provider who has a 'higher rate'. Why? Well it's simple: If you're a provider who bills me for hours that were not spent on my project well I can dispute the charge. If I offer to go 'outside the system' and you and I have a dispute over hours billed/work done then my choices become limited: I either don't pay you (and forever burn my bridge) or I pay you.
oDesk provides a feedback system so that if I'm not happy with your work as a buyer then I can say so in feedback as well preventing you from perhaps burning another buyer.
So that's my 3 cents for today 
Doreen
I agree with Doreen. The
I agree with Doreen. The feedback is priceless and the ability to guarantee payment is priceless as well. I would never consider going out of the oDesk system for these reasons.
While I'm relatively new to freelancing, it seems that before oDesk the biggest problem freelancers had was the possibility of not getting paid, even by buyers that you have built a relationship with and trust.
10% is not worth the risk. And again, the feedback is fabulous as well.
rate caps
on Thu, 2008-10-30 05:48.Great discussion! We have considered this in the past, because we agree that sometimes a % fee seems more onerous for higher-wage contractors.
However, there are a couple of issues. The payment risk that we take on, as well as payment fees associated with credit cards, is directly proportional to the hourly rate. The more money that is spent, the higher our costs are. More importantly, the bigger the team is, the more value we add, such that paying one high-rate provider individually may not be worth the hassle. oDesk is a lot cheaper than maintaining an office!
One approach would be to change our pricing so that credit card fees were separate, but that would add complexity as well.
Michael
An alternative suggestion
Those are good points, and I can see the complexities of the issues that you raise. Even at the rate I work at, if I work for a full 40 hours for my main guy, at the end of the week, if his credit card is declined and he ditches Odesk, you would stand to lose about 1000 dollars. At the higher rates we are discussing, it is even more money.
However, the example I gave earlier was for long-term relationships. I do agree with Doreen in the sense that for short term, or new prospects, the benefits of staying in the system are far greater than the possible benefits of making a few extra bucks from that client. The time-tracking tools are great, and in general, the system keeps everyone fairly honest. Plus, the guarantees are there. This doesn't apply as much to long term relationships, which are often trust-relationships when people get to know each other, and are far less likely to go wrong. Time tracking, after all, can be done with open-source software.
Also, some of the buyers here are large corporations. You may not know this, but Yahoo is a buyer on Odesk. I know this, because one of my semi-regular clients runs an arm of Yahoo, and uses Odesk to do everything from building blogs to data-entry. Big companies are not likely to write bad checks.
What I would suggest, considering the risks you raised, which I think are valid, is that Odesk do an analysis of how many hours a long-term client-provider relationship typically lasts before the relationship ends. Not all of them are ending, as I am guessing some have lasted for years, and some end after a year, or whatever. It is impossible to say how many of these go off the system, but I promise that some of the trust-relationships that form go to some other payment method as the risks diminish. When their risks diminish, so do yours! What I propose, is that you offer some incentive to parties that have worked together for say, 1000 hours, to give them more reasons to stay with Odesk. Something similar to capping the hourly rate at three dollars may be enough to keep more of the high-performing long-term relationships with you.
I think
Those are good points, and I can see the complexities of the issues that you raise. Even at the rate I work at, if I work for a full 40 hours for my main guy, at the end of the week, if his credit card is declined and he ditches Odesk, you would stand to lose about 1000 dollars. At the higher rates we are discussing, it is even more money.
However, the example I gave earlier was for long-term relationships. I do agree with Doreen in the sense that for short term, or new prospects, the benefits of staying in the system are far greater than the possible benefits of making a few extra bucks from that client. The time-tracking tools are great, and in general, the system keeps everyone fairly honest. Plus, the guarantees are there. This doesn't apply as much to long term relationships, which are often trust-relationships when people get to know each other, and are far less likely to go wrong. Time tracking, after all, can be done with open-source software.
Also, some of the buyers here are large corporations. You may not know this, but Yahoo is a buyer on Odesk. I know this, because one of my semi-regular clients runs an arm of Yahoo, and uses Odesk to do everything from building blogs to data-entry. Big companies are not likely to write bad checks.
What I would suggest, considering the risks you raised, which I think are valid, is that Odesk do an analysis of how many hours a long-term client-provider relationship typically lasts before the relationship ends. Not all of them are ending, as I am guessing some have lasted for years, and some end after a year, or whatever. It is impossible to say how many of these go off the system, but I promise that some of the trust-relationships that form go to some other payment method as the risks diminish. When their risks diminish, so do yours! What I propose, is that you offer some incentive to parties that have worked together for say, 1000 hours, to give them more reasons to stay with Odesk. Something similar to capping the hourly rate at three dollars may be enough to keep more of the high-performing long-term relationships with you.
You might have misunderstood what I was saying: I have plenty of clients that I've worked with/for that I trust implicitly. We still work in the oDesk system - and frankly we both feel that it's beneficial. You'll see looking at my profile that I don't have a lot of client turnover - Also, what you dont' see is that in addition to what's currently in my profile these same clients moved over to the affiliate that I now have from my original freelance profile. The only time we 'end' jobs these days is to change rates. Otherwise I have no qualms about staying in the system for all the reasons I pointed out above, and I've never had a client complain about oDesk fees in spite of my rates!
Doreen
re: rate caps
Hi Michael, and thanks for your feedback.
However, there is still big room for expanding oDesk presence to higher-wage scopes.
So far oDesk sends newsletters with advices on how providers could "Give Yourself a Raise" - get more contracts, at higher rates so on, and how to make more money including more fees for oDesk.
That's ok, everybody understands your motivation - it's a business, and who don't want to make more income ? Additionally, economic downturn takes place..
But, the truth is that times are changing, and there is just no guarantee that old business model will be successfully working on. By sending that newsletter, oDesk has admitted that some undesirable trends take place - average rate is lowering, providers are dumping more often, consequently oDesk's income lowers too. So, we can continue to glorify oDesk, saying how much value it adds, or that it's "a lot cheaper than maintaining an office!", or that "the feedback is fabulous" (as some responders say), so on. Or, we can try to figure out some ideas about how to make oDesk even better place for business.
Don't take me wrong, I do agree that oDesk is really good, that's why I'm working through oDesk for last 3 years, having more that 3500 billed hours by the moment. And there are few tens of people with even more hours - 4000, 5000, 6000 and even more.. But, in the same time I know that oDesk has been changing their business model during this years: e.g. it's obvious that lowering fee from 30% to only 10% (btw, about two years ago, in fall 2006) made great impact on oDesk and has driven to the such great growth of the marketplace. So all I wanted to say is that now it seems to be a time to make some another, next impact, changing business model slightly. After all, I'm personally interested in oDesk as robust and evolving marketplace 
I'm leaving risks' estimation to oDesk analytics, but it's obvious that current oDesk's business model isn't attractive for top contracts, as you've noted:
we agree that sometimes a % fee seems more onerous for higher-wage
contractors.
and as we can see from Rate Statistics charts. Money are being made in top and middle markets niches, so for oDesk the question looks kinda "how to push average contract to a bit higher position ?" Apparently, more attractive fees required for higher-wage contracts to do that. It could be some regressive fees scale-grid: the more rate is, the less % fee - e.g.:
$25-35/hour - 8% fee
$35-45/hour - 7%, so on.
That way, contracts with much higher than average rates will be encouraged to stay in the system, and as result more experienced buyers and providers will get even more reasons not to skip oDesk but continue to use all it's value.
paying one high-rate provider individually may not be worth the hassle.
I can't agree with this. Fewer top-notch engineers can easily produce more income for oDesk than crowd of newbies or providers with low qualifications. Sure, oDesk can keep to spending money on advertising, studying and support of thousands of new providers, while loosing qualified engineers which find and establish trusty relations with their customers, and then go off the system.
But I'd suggest another way: why not to have both ? oDesk can keep attract new providers (oDesk is very good in that), and send them training materials like that "10 Ways"; and in the same time - retain top engineers experienced with oDesk and facing hassles during moving forward and evolving. Why not ?
All is needed are some thought-out changes to business model. Then, no brain leakage.. And real growth.. Everybody's satisfied: buyer, provider, and oDesk too.
I'm pretty sure it won't be trivial to elaborate and implement changes like that, but in my opinion (and no only mine) the idea is worth to be considered. After all - no pain, no gain. I'm sure Stratis Karamanlakis and his partner were aware of that when starting oDesk in faraway 2004 or even 2003
Best regards,
Oleksandr.
Good idea
I think that is a very reasonable idea, although I had to think about it to be sure. The reason I think it is wise, is that it is my opinion that many employers and providers that are paying, or receiving, the higher rates, are eventually going off Odesk, because although they don't receive the same services, the potential monetary benefits are greater at the higher rates.
Let's say someone earns 35 dollars per hour. In odesk terms, that means an extra 3 dollars and 50 cents per hour that must be paid. Let's say the provider works an average of only 30 hours a week. That adds up to an extra 105 dollars per week that could be saved by going off of the system. Of course we are talking about long-term provider-buyer relationships here. When thinking about it in those terms, 105 extra dollars per week, on a consistent basis, is pretty significant.
What happens if someone earns 50 dollars per hour (certainly not unheard of, I know of people in the web-programming industry that earn closer to 75 per hour). For these high performers, the difference between paying 5 extra per hour and 3 per hour might be enough to keep them in the system.
Will you still lose some of them? Sure, but the benefits will outweigh the risks. After all, you are talking about a minority on Odesk. It won't have a broad, sweeping effect on the economy, and the amount of commissions earned here. I won't be affected at my current rate for my long-term relationship, for example, although I am definitely above the average rate with all of my clients. However, my earnings only seem to be increasing, and eventually I may fall into that category. A little extra incentive may be enough to keep me in the system.