India grows up:
The costs of having two offices, which are twelve time zones apart, is significant. People in both offices frequently had conference calls at 10pm and midnight every night (as a result the office in the US didn’t get started until noon sometimes or people rolled in tired). We were all traveling constantly. Development and communication moved slower due to the distance and teams. However, all of this was worth it so long as the ROI was there.
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Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to “keep him at market.”
A good post on some of the difficulties of outsourcing. Also a good illustration of how economics is suppose to work. If labor is underpriced in India and the market is opened labor rates should rise to a level where they are equivalent (given productivity… differences). Don’t be lead to believe all labor prices in India have experienced anything like this. Those areas where the value to cost difference was largest is where rates increased a great deal in a short period of time.
Related: IT Outsourcing Slowing – Google India not Finding Enough Engineers – The Power of Silicon Valley
September 6th, 2007 at 9:53 pm
Hey John,
Such are the effects of Globalization. If it was a boon for the wages in developing countries, it is a bane for wages in developed countries.
But the overall result like what you mentioned at my blog is positive. Ultimately, consumers benefit and when they benefit, so does the companies providing the goods and services
Cheers
James
May 8th, 2008 at 8:44 am
Another thing I like about the original article is the positive view the investor has of manufacturing in the USA…
June 6th, 2008 at 12:58 pm
I am doing this the other way around . I want to get an office in ShangHai, yet I am currently living in Boston. Imagine the difficulties of that time zone difference too
The thing is, offices are definitely cheaper than Silicon Valley.