Substantial difference in employee wages remains one of the main reason for US companies to go offshore. And thus the question of rates comes up often and yet, finding an answer to it remains a never ending straggle. The last few years thrown a few new dimensions in the salary picture making the rate discussion even more ambiguous and complex (I’ll expand on this point shortly). So I was quite excited when an outsourcing advisory firm sent me an offshore pricing guide. Unfortunately, the guide turned out to be rather shallow filled with dubious statements such as: India tends to be inexpensive, due to the huge labor pool; Russia/Ukraine/Belarus tends to be more expensive, due to high education and skill levels; South America tends to be expensive, due to similarities in time zone, language, and culture. Oh, well, no easy answer.
So what really goes on in the world of offshore rates in year 2014?
First, let me expand on the topic of “new dimensions”. Well, they are not new, they just became far more pronounced and in many cases the pivotal factors – changing compensation landscape driven by the ability of people to land first class jobs. Top ISVs and cash rich technology companies like Google or Microsoft took a very simple approach to offshore salaries – “we don’t care where you live, we care what you can do for us”, and just in a few years, that turned offshore recruiting on its head. For example in India 50 lakhs (that’s roughly $100K) a year salaries are no longer unheard of.
50 lakhs is also about 10 times an average salary of a software developer working for company like Tata or Wipro which averages depending on skill between 400,000 and 600,000 rupees a year (1 lakh is 100,000 rupees). At this point only a few chosen ones can get this kind of money, you have to be far above average in your IQ, live in one s/w hubs, and be lucky enough. Such an incredible hike in the upper bar naturally established a new frame of reference and much higher expectations. Good developers are no longer afraid of asking for twice the salary they could get a year or two ago.