India too expensive?
inflation-sinks_1.html> Wage inflation sinks offshoring for one startup
Riya.com’s decision to pull up stakes in India shows that for = aspiring startups, offshoring isn’t all its cracked up to be By Carmen Nobel
May 29, 2007 The outsourcing and offshoring of software development work has = become such an ingrained part of the technology industry in the U.S. = that stories about it no longer rouse the public’s interest as they = did even a few years ago. That means the only way to gauge the growth = of the phenomenon is by watching the bottom line of outsourcing = giants like India’s Wipro, which recently reported a 41 percent jump = in revenue in its latest fiscal year, and the heated debate in = Washington over the number of H-1B high-tech visas that the federal = government grants. But the runaway growth of offshoring has created its own problems in = countries like India, where a substandard infrastructure and stiff = competition for talented workers has changed the economics of setting = up shop outside the U.S. The decision to hire a staff in India “wasn’t even a second thought” = when Munjal Shah, CEO of Riya , was laying the groundwork for his = visual search startup back in 2004. (Riya is part of InfoWorld=92s = Month of Enterprise Startups feature.) “At 30 percent wage rates [the ratio of an Indian salary to a U.S. = salary], it still was worth the communication overhead, the travel, = and the late-night conference calls,” Shah recalls. Those were the good old days. Today, wages in India have risen so = much that maintaining development operations in Silicon Valley and = India no longer made sense, forcing Riya to make what seems like an = unusual decision: In April, the company nixed its Bangalore = operations and consolidated operations back in the company’s Silicon = Valley headquarters. In the end, the cost advantages of lower Indian wages did not = outweigh the efficiency losses that came from maintaining some 35 = employees in two offices, 12 hours apart, Shah said. […]