You're a freelancer or small software business and you want success fast. Should you go down the Elance path, or stick with Appstores?

You're a freelancer or small software business and you want success fast. Should you go down the Elance path, or stick with Appstores?

In times when the economy is stressed, as it has been over the past couple of years in most parts of the world, it is harder to keep or find a job. Luckily, people with IT skills have weathered the downturn reasonably well. For one, software and information technology have become so pervasive that while IT workers may no longer command the hefty salary premiums they once did in most countries, there are certainly a lot of jobs for people with these skills. That said, a lot of software developers, graphics designers and others with technical skillsets look to break out on their own. Perhaps it’s the promise of being your own boss, the ability to earn a more substantial income, or simply augmenting or replacing a revenue stream (salary!) that might have been lost. Things used to be tough for freelancers and budding entrepreneurs in this position. They may have the technical skills to deliver on business, but where do they find the business to begin with?

With the advent of demand aggregation sites like oDesk and Elance that make it easy for freelancers to find work, much of the pain in sourcing business has been alleviated. That said, these are incredibly competitive marketplaces and breaking in to win that first contract can be tough on your nerves and your ego. There are numerous examples of fairly successful freelancers or small businesses that use Elance, oDesk, Rent-a-coder and other such sites as their primary means of obtaining customers.

For programmers and software gurus, there is yet another option. Instead of selling your talent on these service marketplaces, why not take some time and develop a product that you would own and one that will be selling regardless of whether you’re hard at work, taking a long relaxing shower or on vacation in Dubai! With the rapidly rising popularity of application marketplaces like iTunes, Appworld, Android Marketplace and numerous others, this can now be done. And doesn’t it sound enticing? With so many visible success stories, at times, it appears to be a slam-dunk proposition. After all, who hasn’t heard of our very own iTeleport (aka Jaadu), a company that evolved with one guy and his weekend project and that even now is essentially comprised of just two people. Wouldn’t you like to be in those shoes? Pulling in a few hundred thousand dollars a year with no boss, no job to worry about and no customer meetings and presentations to worry about? Sure you would. But what are the chances of the ordinary Joe replicating this level of success?

Folks starting out as freelancers, or looking to build an early stage (non-VC funded) software company often wonder which of the two presents the better model. Should I try and get services customers from an Elance, or should I write an app and hope it sells like hotcakes on the Appstore? I’ve been asked this question often, in various different ways. As Robert Frost said in his famous poem, “Two roads diverged in a wood, I took the one less traveled. And that has made all the difference”. This decision can make all the difference, depending on what your goals are. I am not sure either one of these paths can qualify as “the one less traveled”, but that doesn’t make the choice any easier. Please remember that the advice below is *solely* for unfunded entities, i.e. “a couple of guys”, and/or individual freelancers. This is not general purpose advice in other situations. I can see several scenarios where I might argue the opposite, or add more options.

1. You have a higher chance of success if you sell your services via a site like Elance or oDesk. To be clear, success, here, is defined as bringing in monthly revenue that is in the neighbourhood of a fair market salary for your skillset. The key, as mentioned below, is to think of it as getting a foot in the door. You will have to bid low, sometimes lower than your ego will comfortably accept. But given the level of competition, this is the only way for you to get in, get some projects and develop a profile with reviews and rankings. Your online reputation is incredibly important for future business, so you’ll have to take it in the shorts in the near-term to have a hope of surviving long-term.

2. While it is possible to scale an Elance business to eventually become a reasonably sized (10-50 people) software company, you won’t get there with Elance alone. Uraan is a Lahore based software company which has grown to a fairly large size (60+ people), and they did it by developing their initial customer base via Elance. However, their scale can’t be attributed to Elance alone. The story goes something like this: one of Uraan’s European customers, acquired via Elance, liked their work. This company also happened to be one that was large enough and could afford to pay. They developed a direct relationship with Uraan that in turn led to a long-running services contract. This is the “ideal” outcome for an Elancer/oDesker. You prove yourself, and then take ownership of the customer relationship directly. Ideally, the customer is a large, well funded entity that can support your business. If you go down the Elance track, keep this in mind. Those initial few jobs are just a foot in the door… look for work that comes from a company rather than an individual, and especially for work that has a Phase II, Phase III and so on.

3. Unless you are a game developer who can match something like “Cut the Rope” in quality of gameplay and graphics, please don’t hold any hopes of making it BIG on the Apple Appstore. Painful, but true. With over 300,000 applications, and thousands more coming through each week, your chances of getting noticed are next to zilch. So if you think you will write a single iPhone app that will deliver revenue share of anywhere between Rs. 50-100,000 a month, think again. It’s harder than you estimate. A small, teeny-tiny fraction of the 300K apps on iTunes actually get all the revenue. Everyone else ends up looking like a dolt. An unpaid, unhappy dolt. So think about this long and hard before you make up your mind.

4. If you must go down the path of application development, consider markets beyond the overcrowded iPhone (and perhaps Android and Blackberry) space. Can you develop something meaningful for a new, upcoming device that you think will end up being very successful? Of course, in this case you are betting on the success of your app and the device, but I still think moving early in an unsaturated market is better than trying to get noticed in a massive space, with no marketing funds and no brand to boot.

5. Being completely passive about promotion no longer works. Not for Elance and not for Appstores, but especially not for Appstores. You can do organic promotion, but remember that you are competing against thousands of professionals who know every organic trick in the book and also pay for campaigns. So, ultimately, if you do ALL the right things, spend some money AND do the organic promotion activities, then it will come down to plain and simple luck; will you get picked up by a Lifehacker or Gizmodo, will you get selected as a Featured App or an Editor’s Choice? Of course,  if you don’t put in the promotional effort, you won’t even get to the point where luck matters. It’s that old adage about luck coming about when preparedness meets opportunity. You have to be prepared. Promoting your product, or yourself, can be the most important and daunting task.

So, net-net, if you’re new to the game and money matters to you in the near term, head straight to Elance, oDesk and all the other services marketplaces. Bid low, try to get business, do a good job and develop a profile with good ratings. If  money doesn’t matter immediately (say, you’re a student with another two years to go, your parents are footing the bill right now but you want an early start to your professional life), apps might be the thing for you. For one, you can work on them on your own time, as opposed to having to meet deadlines for services work. And second, you have some runway.

All the above, of course, is the very tip of the iceberg. A lot more needs to be said, many more categories of potential business models need to be looked at, and most importantly, the subject of promotion needs to be thought about a lot more. But I’m out of time and out of space (not really, but who’s keeping tabs!) so all those tangents and elaborations will have to wait. In the meanwhile, if you have comments or questions, please fire away in the comments section below. Look forward to the interaction.

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