This was a question asked by a person I was talking to from craigslist, whom is starting a forum for unemployed freelance developers.  You can visit the forum at http://phoenixfreelancing.proboards.com/

The following are just my opinion on the subject.  I have heard more horror stories than success stories about using 3rd world countries for development. 

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Question:
"How do I compete with the Indian Developers as a struggling freelance developer"  asked by Jimmy

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Although the competition is rough because of the Indian developers,  there are major draw backs in using those companies.   Anyone serious about the success of their website should not be using those companies in fear of losing their startup money for the website.   I’ve been in business for almost 3 years now and I have not been effected by those so called “developers”  I call them scam artists.

Here are some steps you can take to beat out the completion:

Step 1:  Satisfaction
100% satisfaction,  this alone speaks for its self and no one will be able to get that from a developer half way around the world.  Indian developers do not care about the quality of their work,  they  don’t care  about the customer and they certainly do not care about the website idea.   All they care about is doing the job as fast as possible taking as many shortcuts as possible.  This is how they make money,  by short cutting the system of development.  They produce less than the minimum quality work which at a later time a customer will want some modifications and the web work that was done, will be more or less worthless.

Step 2:  The template
Template websites are increasing in popularity because they can be applied to a CMS.    But they can  also be a developers worst nightmare.  When someone comes to me with a template,  I frown upon it and recreate it properly.  Most templates use poor HTML markup, we’ll at least that is what I have seen and are not really worth using.  It would almost be like downloading a “pre-existing”  flash document.  And anyone that does flash development know's that dealing with someone else’s .fla file is a royal pain in the butt.    Templates are bad,  and your customers should know that it takes just as much time or more to fixes someone else’s crappy work than it would take you to build it right the first time.

Step 3:  Turn down the work!
I know that times are tough,  people often accept work on the premises that they need money in a bad way.  I use to operate like this and it has caused me nothing but heart ache.   You find yourself in a situation where your taking on work and your just not getting paid enough money because you cut your cost to compete with some Indian developer.   Let me tell you from a small website development firm,  that the juice is not worth the squeeze.   Turn down the job and find a bigger fish.  They are out there and they are worth the wait.   Of course it’s all a judgment call, but proactively speaking,  If  you find yourself cutting your rate and quoting a project for 20 hours when it should be for 40.  You’re going to waste your time and lose your mind in the process.  The main thing here is that you need to realize that if you take a job that is not worth your time to develop your not spending time finding the job that is more than worth it.  I have in the past taken on a job that was under budgeted and over on hours by 20 – 40 hours,  which means that in those 20 – 40 hours I could have found paying jobs that would have made me 10 times the amount of money that I made from the one job.    I think you get my point here,  just turn down work when it is not profitable.

Step 4:  Find your rate and stick to it.
Don’t’ settle for less than your worth.  Think about how much you need to make, as a freelancer you need to review your bills and expenses .. find the break-even point and definitely tack on some extra money  to find your rate.  This is what I’ve done in the past and it has worked out really we’ll.   Don’t budge from your rate just to get a gig,  someone more serious about a project is out there ready to appreciate the hard work you put into website design and development.

Example Self worth  Calculation:
If my bills are $3600 a month  Then I need to bring in at least $6600 in sales just to break even.  This is mostly because  your going to get half up front for a deposit and the other half of the job you’re going to get upon completion of the job.   Give it some real thought here,  plan it out appropriately.    So automatically double the amount,  so now we are at $6600  .. take that and divide it by 160  ( roughly amount of working hours in a month )  That is $41.50,  now what I do is add a buffer.    The buffer for each person is optional as to how much you want to profit above the break even point.   I usually add $15.00  /hr  to the rate that I come up with.    So in this case “rounded”  we are talking about $55 an hour just to be a stable working business with bills of $3600 a month.
Do not budge from this!  I warn you,  if you do your going only one direction and it’s down.

So with all the above said,  don’t try and compete with the Indian Developers,  there is no real completion there.  The people that choose to go with those companies will get burned in the long run and they will have nowhere to turn but to you.