Offshore developer rates or how flat is the world?

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.

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Bookshelf Revised

As with any topic a number of books covering offshore outsourcing could be intimidating. To simplify a task of picking a few “must-read” books, the books that delivers most value, I’ve chosen about 20 titles that give you the best bang for a buck. That list was created a few years ago and needed some refresh work. Naturally my own book had to be added to the list, plus I found a few more very helpful books. Let me mention a couple that are worth considering:

  • Software without Borders: A Step-By-Step Guide to Outsourcing Your Software Development By Steve Mezak. It’s a solid pragmatic guide for offshore outsourcing. The book offers plenty of practical advice in areas such as vendor selection, keeping control of the engagement, SDLC, etc. Written by experienced S/W professional / outsourcing advisor the book is indeed a step-by-step guide. In some areas it overlaps with content of my book, in some it offers more information, e.g. it offers a mode detailed approach to country selection, and goes in a great deal of details about packaging requirements for transferring them to offshore team. Some of the material in the book is a bit outdated and it misses a few critical points related to traps and pitfalls of outsourcing but with $10 price tag and lots of helpful info it could be a great addition to your library.
  • If you work for a large company and offshore outsourcing is a major portion of your job than Outsourcing Professional Body of Knowledge – OPBOK Version 10 is a “must have”. Modeled after famous PMBOK the books goes in great depth on many topics that are particular important for large outsourcing initiatives.
  • And of course Tim Ferriss’s “The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich.” This book is a definitive guide on “outsourcing your life”. While this book has very little to do with professional offshore outsourcing I found it very helpful in several aspects and generally fun reading. Plus the volume of dopamine that reading the book will infuse in your brain is astonishing and probably can only be challenged by pinterest or instagrams of this world ;)

To simplify navigation I put the reference to the list (organized as Amazon book store) in the main menu of the blog – just click on Bookshelf and add ‘em all to your shopping cart, well, at least the first one :)  Note: in the same store you will find my book-lists on a few other topics such as Management, Leadership, SDLC, Negotiations, and others.

Blogroll Revised

I’ve been off my blogging duty for almost a year; needless to say the blog has lost some of its pooling power, traffic, and most important its up-to-date-ness. And even though my focus has never been on “current affairs” and most of the content here is not very time-sensitive I owe to myself and the audience some serious housekeeping / refreshing. The first task is to revise the blogroll – most permanent battery of links on the topic. Unfortunately some of the blogs I used to enjoy are no longer active and some do not even exist anymore. The good news is that some of the old-timers are still going strong, and there are a few new ones with interesting content.

So RIP “Go East – Outsourcing to China”, “Offshore Outsourcing Center”, “Offshore Outsourcing to China”, “Offshore Outsourcing World Blog”, “Shared Services & Outsourcing Network”, “Software Sweatshop”, “The Dao of Outsourcing”… These blogs no longer exist or have moved on to a completely new topic. Sadly, a lot of casualties; and some really interesting material is no longer available.

It looks like a few blogs are dormant or reached the end of life such as “Services Shift by Robert Kennedy” but given that some good data / info is still there I may keep some of these links.

And the good news is that nature abhors a vacuum and thus we have an opportunity. Either my blog will become wildly successful again or we’ll see even better blogs coming up soon enough.