A lot of people have at this point have heard about the rentacoder.com and elance.com type websites. These are online marketplaces where software buyers can pay software coders to create desktop and web applications using an auction system similar to ebay. A software buyer places his requirements on to the site where coders review the requirements and make bids on the work depending on how much they are willing to complete the work for. At a glance this seems like a good service, where buyers can get good value from the competeing coders while freelancers get a steady stream of work, but is it ?
I would say there are yes and no answers to that question depending project type and size..
The first important point to note about these services are the profile of programmers and freelancers that registered on the site. Because the sites have an international audience projects will tend to get lower bids from developing and countries. This means that projects generally get awarded to the lower bids, and it is through this system of jobs generally going to emerging countries that coders from developed countries do not participate in the bid auctions. At these sites there will typically be a lot of bids from countries such as India, Romania, Pakistan and Sri Lanka occasionally there will be bids from developed countries such as the United States or Ireland. This does not mean however that the work will be sub standard and cam be quite the contrary in fact with countries like India having some of the best software engineering schools in the world.
One of the main consequences of using offshore development teams that are not native English speakers is communication, and even when English is the native language, dialects can vary a lot depending on location. A lot of the time this obstacle can be overcome by using written forms of communication such as email and messenger, however this becomes impractical on larger projects. One of the more important aspects of the written forms of communication used in these services is that they can be used by as evidence by site mediators should the project go into arbitration. This is however dependant on the site approved messaging forums being used as opposed to external email/messenger.
Another important point to note about the coders on this type of service is that they are often individuals with other full time jobs which gives them limited bandwidth for their freelance work, having said this a lot of the bidders are companies with multiple coders, (or at least claim to have multiple coders!. The elance service seems to have many more companies make bids than individuals making bids. I suspect this bias is brought about by the expensive subscription fees charged by elance, companies with a high turnover of work/revenue seem to favor this site as the fees are a flat monthly rate compared to a % of the profit, which is the model employed by rentacoder.
A point to note when placing a job on one of these services is the level of technical expertise held by the poster. If the person posting the job does not at least have some grounding in software development/engineering, then this can lead to problems. One of the main complaints from coders on the site are that software buyers provide ambiguous or unrealistic requirements. This can lead to the job being ignored by coders or worse still the job is won by a coder who fails to deliver due to the non-specific requirements. If the job goes into arbitration before the job is complete then the buyer risks losing money due to the software vaguely meeting the buyers written requirements, but not delivering on what the buyer actually wants.
So in summary this can be a good service which provides low cost software, however there is still some risk a s discussed above. One of the main deciders of whether or not to use one of these services is the size and complexity of the projects, if it is a large and complex project i would say hire a local developer/team where you can at least have some face to face meetings. Similarly if you do not have knowledge of basic software development processes then i would hire a systems analyst or similar professional to at last help you with the requirements. But if you have a smaller project where you know what you want and failure of the project will not cause you/your company with substantial risk, then I would say go for it 
So whatever you decide, good luck with your software endeavors !!
