“Wages in India have risen to the point that offshoring development operations no longer makes sense for one high-tech company” according to a May 29, 2007 article by Carmen Nobel in Infoworld “Wage Inflation Sinks Offshoring to One Startup.”
“Indian software development shops have been the workhorse for countless high-tech firms and U.S. enterprises for more than a decade. But steady demand for development talent is erasing some of the cost advantages that offshore development outfits have enjoyed, according to a report by Gartner. In fact, the wage rates for Indian software engineers will reach between 40 to 50 percent of Silicon Valley wages by 2008 with the gap continuing to narrow after that.”
“Wage increases for Indian engineers averaged 15 percent from 2005 to 2006, compared with a 3 percent average increase for U.S. engineers, according to a recent Gartner report.” With additional communications and coordination costs from managing groups so far away in addition to the higher wages in India, the country is not as cost-competitive as previously. US companies are looking at offshoring to China, Vietnam, Russia, and other Eastern European countries, or returning the work to the US.
Are your competitors offshoring? If so, how it is affecting their cost structure and their effectiveness? If they are being pressured to offshore by funders, it may not be positive for them.