Why the current tech freelancing model doesn’t work

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The gig economy has caught our imagination.

Numerous marketplaces have sprouted, and the range of services is pretty wide—from handymen, accountants, salesmen, to techies. They make a strong business case: easy counter-party discovery, increased transparency in terms of reviews and ratings, and affordability, among others.

While the value proposition is clear, extending the same model across various industries doesn’t work. This can be especially noticeable in software development.

This is why I wanted to discuss whether the gig economy works for the tech industry or not.

Are ratings and reviews a reliable way to hire?

The gig economy largely functions on identifying the best through reviews and ratings by past customers.

The evolution of this ecosystem has relied on refining and improving this system. But while this solution is apt for not-so-complex services like driving and restaurant delivery, it isn’t so for hiring software developers.

Software development varies significantly in terms of skills, complexity, working environment, team structure, etc. For example, one developer may have worked on a single-page marketing website, while another may have worked on a complex logistics solution.

Comparing these individuals across the two projects on their ratings and reviews is not only a gross trivialization but also a misrepresentation of their capabilities. This causes problems for both the companies and talent. The latter can’t showcase their skill sets effectively and bid for projects mainly on price, while the former can’t judge one individual against another.

Does the typical bidding model incentivize participation?

Most marketplaces allow talent to price themselves. This seems like a fair and natural choice. However, let’s delve into the process of getting a job in more detail.

Companies post job requests on marketplaces and describe their requirements as extensively as possible. Freelancers then bid on a job request with their price and timeline estimates.

Since freelancers are unable to position themselves mainly on their skills (as discussed earlier), they are forced to play the price game. This competition sends the price spiraling down. While this might work well for product marketplaces and simple services, in tech freelancing, it just doesn’t make sense for quality talent to work at lesser than a certain price.

Freelancers also have to apply to as many jobs as possible to increase the probability of winning one. This means a lot of time is being spent converting leads rather than actually working on a project. So, top talent might struggle to find a project, and if they do get one, they would likely have to work at a price below what they deserve.

This doesn’t seem very appetizing, does it?

Is plenty not a problem?

Are traditional marketplaces doomed to fail?