Like many freelance entrepreneurs, I’ve avoided Elance the last few years. For those of you unfamiliar with the site, it’s basically an online marketplace for professional vendors like writers, designers, Web developers, coders, and other service-oriented folks to bid on projects for clients around the world. Freelance writers flock to the site to bid on everything from blogging jobs to grant writing projects to business plan development. Vendors can be from anywhere in the world, from the U.S. to Bangalore to Manila to Shanghai.

It sounds like the perfect place for a creative entrepreneur like me to spend some time in, especially since just about everything is done through the site, i.e., bidding, project management, client interface, and payment. Elance gets a percentage of the fees that buyers give to vendors, even instituting an Escrow system whereby buyers can deposit funds through the Elance Escrow account and not have to release it to the vendor until the latter has completed the work to the buyer’s satisfaction. There have been complaints from vendors about losing payment or dealing with nightmare clients, but for the most part, it seems to work fairly smoothly. Like that other great online marketplace, eBay, there are definite downsides to the site, but for many freelancers around the world — especially those who live in remote areas with a tiny client base — it can be a godsend.

Unfortunately, however, that same open accessibility to any entrepreneur around the world is what hinders many U.S.-based freelancers from taking advantage of the site. When you’re competing with a writer from India or the Philippines for jobs that pay no more than $5 or so an article, press release, or blog post, for example, it can be difficult to earn even a decent part-time income on it. Who wants to write 10-50 articles of 500-750 words a piece for $20-50 a week, if that much? That number of articles alone is a full-time job, with the rewards barely enough to pay a single utility bill. Money-wise, you’d be better off working at Starbucks. At least you’d get health insurance benefits, even for part-time work.

There will always be a group of truly professional buyers who understand that you get what you pay for, and that paying someone $1 a blog post is asking for a lower quality of work than paying someone $50 a blog post. I’m not saying that the folks in Mumbai or Manila are guaranteed to offer poor performance, as there are plenty who provide excellent service and work. However, because the majority of heavy Internet users are in the U.S., hiring someone who is familiar with American culture and society only through what they see on TV and read in the newspapers is a wholly different experience from hiring someone from within that culture. I know that there’s a newspaper out in California that has outsourced their content (of local City Council meetings, no less) to Indian writers, but that weird exception aside, I still stand by my conviction that writing is very culture-specific, and content that is written from an outsider’s viewpoint is subpar to that written by someone intimately knowledgeable about the target group, culture, organization, or agency. If you simply want the facts, perhaps outsourcing to an outsider is appropriate, but then what do we have journalism for? I could just go directly to the City Council’s Web site and download the minutes myself. I want analysis and critique and can only get that from someone on the ground.

So I’ve avoided Elance specifically because I refuse to compete on price when it comes to offering my services. It’s one thing for Wal-Mart to do that, but then again, I don’t generally shop at Wal-Mart. Competing on price may work for the short-term, but that’s no way to earn a decent living. Plus, you’ll always have people who look at your work rather skeptically, the same way I look upon Wal-Mart’s discount wares, i..e, if it’s really that cheap, it’s gotta be crap.

Recently, however, I had an opportunity to rethink my aversion to Elance. Not as a vendor, however, but as a buyer. That’s right: rather than being the writer begging for scraps, I’m now the client picking from a number of low-cost service providers.

It’s one thing to outsource something as complex a project as journalism — which, while the barriers to entry aren’t necessarily super-high like, say, rocket scientist, still requires a certain advanced skill level — but quite another to do so on something mundane and relatively simple. In my case, I needed a transcriptionist.

I’ve been doing my own transcription for years now, and while I’m quite good at it — I type a minimum of 100 wpm with an average 2% error rate — it’s quite possibly the one thing I hate the most about freelancing. It’s tedious to have to go over the same interview with my recorder, spending hours that I could use to market my business or work on something I’m actually getting paid to write. I’m not paid to transcribe, but to craft a good article, press release, proposal, or whatever for my client.

I did look into hiring a virtual assistant or transcriptionist a year or so ago, but the rates I was being quoted would have amounted to surrendering at least 50% of the fees I was getting from my editors. It wasn’t worth it to me, and since I still consider myself in the launch phase of my business (even though it’s been a year), it made more sense to do the work myself rather than pay someone a huge chunk of my fee to do it for me. When I’m only making $75 an article, for example, I wasn’t too keen on doling out $40 of that just for a transcript of an interview.

Well, the other day it dawned on me that — duh — why can’t I use Elance to find a reliable transcriptionist? So I logged on to the site and started poking around. The site is very user-friendly to buyers, allowing you to search for particular specialties (Transcription for me, but you can also find UNIX programmers, virtual assistants, PayPal specialists, graphic designers, etc.) and even narrow your query down to Country of Origin.

I did a quick search of transcriptionists, then narrowed it down to vendors based in the Philippines. I thought, Well, if I’m going to hire someone from a developing country, I should at least help out my fellow Pinoys and Pinays. I chose three vendors, two of whom were relatively new to Elance and who hadn’t yet won a project. None of them charged over $5 an hour.

There were actually several vendors who offered their services for $3/hour, but the Wal-Mart analogy kicked in, i.e., Do I really want to lowball a project that’s such a significant part of my article writing? $5/hour seemed to be a good average among the transcriptionists on the site, and I figured, Well, I could try it out for one project, and if it doesn’t work out, I would only be out $5.

Only one of the vendors responded to my bid; she had been on Elance for a few months but had not won a project. She’s a professional transcriptionist in her day job, so it seemed a good fit. Plus, there was just something about her photograph, you know? In her picture she seemed professional and trustworthy. I know, I know, it’s hard to tell anything about anyone simply from a photo, but sometimes you just have to go with your gut.

I awarded her the project and asked her to transcribe a 16-minute interview that I had conducted over the telephone. Within two hours of receiving the audio file, she emailed me to let me know that she was done.

Yeah. Color me shocked.

I quickly perused the file she sent, and with the minor exception of a couple of misspelled words, it was perfect. She had already asked me about unintelligible parts of the audio file, so I knew to expect time stamped segments that she couldn’t catch, but there were relatively few of those. The fact that she had it done in what I consider record time — especially since it was in the middle of the night in the Philippines — was proof enough for me that I had found a winner.

I’ve since had her complete a dozen or so more interviews, and each time she’s nailed each and every deadline. When I have her transcribe a particularly problematic interview (lots of background noise, for example), or if I have a really tight deadline, I double her pay and am more than happy to do so. At $10 per audio hour, that’s $20 — still a bargain when you consider that U.S.-based transcriptionists often charge several times that for the same audio file. She doesn’t always hit every single word on the page (e.g., she wrote “scroll” instead of “sprawl”), but her accuracy rate is about 95%, which is perfectly acceptable to me and my needs.

I know that some will argue that I’m contributing to the outsourcing of valuable U.S. jobs, taking away work that Americans can do and handing it over to underpaid foreign workers. It’s a valid argument. But as a small business operator in a very, very competitive environment, I simply couldn’t afford to grow my business without such inexpensive labor. Very few small businesses can, especially those that are in the creative markets. I, too, am competing against qualified, cheap professionals from overseas. I’m using whatever tools are at my arsenal — free or cheap open-source software, cloud computing, Elance — to maintain my business and still offer high-quality services.

Is it for everyone? Small businesses might appreciate the chance to hire contract workers for their IT, graphic design, and yes, writing needs at very affordable rates. Is it guaranteed to work for everyone? I concede that I may have gotten lucky on finding my super-duper transcriptionist. An article I read in a recent issue of BusinessWeek featured one Elance buyer who was burned by the IT guys he hired through the site from India. He forked over $750 and received mediocre work in return; essentially, they just “tweaked some sample designs.” He complained to the Elance folks and was able to get his money back. He did try again, however, and found another firm that charged him $1,000 and did excellent work. The firm is based in — guess where — Oregon. Of the new firm, he says, “It was a match made in heaven.”

I might try my luck again at bidding for projects on Elance as a vendor, but for now I’m very, very happy as a buyer. As my business grows, I hope to pay her more, and perhaps even hire a virtual assistant. Someday.