How do companies sustain by working on freelancing sites?

Question

We were asked to do a few jobs via oDesk, elance and guru freelance websites. While working via these services, I noticed that there are many "companies" there who basically use these services to find clients and at the same time their company members have accounts there, attached to its company account. Even more, their workers will bid the project and negotiate the clients, while all earned money goes to company's pocket and they only receive crumbs.

Now, how is possible that such companies work and make a profit when their workers can see the price of every job? Aren't workers discouraged from knowing the price of a job and comparing it to what they get? These people mostly work hourly for small sums of money.

Let me elaborate the question: the first thing I learned when started working for a company was that I never knew how much they charge their clients. I am getting my monthly salary and I don't care if my company earns $1000 or $1000000. It's better if the company is earning a lot because I will have a salary, but in general it was not my concern. We heard stories about how we were working on on multi-million dollar projects, but we were never able to know how much they charge their clients for our work. And we could do nothing because we were not in their league - their clients would not even talk to us, God forbid they offer us a multi-million dollar job. So after a couple of years I figured out that I can earn more and work in a less stressful environment by working as a freelancer, so I quit and became a freelancer.

The story of mine is not unique. It's a story of every freelancer here.

Now, back to my question. When you have clients and workers on the same network where workers can see earnings of their bosses, how can such a company survive? Why would some person work for $10/h if you see that your company is charging the client $100/h? Shouldn't such a worker go to their boss asking for a higher hourly wage for that job? Or start working alone for the same (or larger) amount of money without pressure, from your own home? And yet, they have workers who work for them for years.

A majority of people would become envious and angry just by knowing that their boss is earning 10 times more on your work working with clients you can also reach (approach to). These websites are not Intel or Kodak or USPS company where you can never reach CEOs. Here you have a direct access to the client.

For the 3rd time, how do such companies remain on the market? Why would I work for someone giving me A dollars per hour, if I can see he earns 5xA per hour? Even though I understand the whole principles of a business, I don't think I would be able to work as quality as I in cases I don't know how much my boss charges our clients.

Answer 1

Peter,

To answer your question, the guys who are using actually using the bid sites aren't the same guys who end up doing the work -- not if they're trying to run things as a multi-person business.

Yes, someone from the company has to FIND the work. Let's say this person finds a gig worth $25000. They evaluate the job, and determine that it's feasible.

Okay, then somebody has to finance the work. Computer equipment and networking. Internet access. Development tools. Office space. Utilities. That person with the money isn't necessarily the person that finds the job.

Then somebody has to find the talent to do the work.

Then somebody has to manage the talent to do the work, and will probably liaison with the client.

Oh, and of course there are the people doing the work.

So the person who finds the work must understand that he can't have the whole $25000 to himself, because he can't do it ALL. Possible, but cutting corners can be quite impractical in the end.