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IT Salaries Are Soaring 12% to 15% a Year in Bangalore

 
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Computerworld
Interesting bits:
"the cost differential is shrinking" and that the Indian labor advantage will hold up for only another two to three years"
Midsize companies bringing things back in...
"a number of $100 million to $1 billion companies found that the headaches and costs of managing outsourced projects sucked out all the savings from cheap Indian labor."
{my comment: perhaps that just means using cheap L1 visa labor on site, rather than going out to Asia }
"Corio's Chaddha points out that any deal with an Indian outsourcer needs to add back 15% to 25% of U.S. labor wage rates just to manage the complexity of the agreement."
 
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Hi,
The more I read into the "India" outsource/offshore stuffs, the more I lower my respectation for those people. If they are so smart with so many educated young people, why their countries not invest into them by creating the environment that foster those countries economic prosperities. The approach those countries taken now are no more and no less than those countries in Africa, only interest in hands-out.
Do not jumping too soon, I think salaries increased is rigged to wipe out the local competitions. The link provides a glimpse of "hickup" in an overall project progress action minutes.
For US IT gurus, I think you should take a closer look at the following link. On the surface, the article talks about too many un-neccessary executive titles. But beneath the surface, you see alot people jump into the safer ranking. What's about you?
http://www.msnbc.com/news/951506.asp?cp1=1

Regards,
MCao
 
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I rather doubt it. Before the "Christmas present" of wage differentials starts wearing thin, we'd have to see world salaries all within a range that offshore expense was routinely at least 50% of onshore. I think that the only way to get that out of inflation is to wreck the economies of the countries currently benefitting, and likely drive the work to even cheaper countries. I'm going to be cynical here and suspect that this is just a smoke screen to try and calm the concerns of people who see their jobs and the economy which is based upon them go spinning down the drain.
BTW Matt, all those "Chief xx Officers" are just the "Flat Corporation" in action - all the VPs got axed in the 1988-91 recessions, so they use fancy titles in lieu of more substantive perks now.
I don't know why you think countries like India and China aren't benefitting from all the cash flowing in - They both have ambitions in space and recent news indicates that in times to come, some of that IT talent is going to start seeing some serious use for domestic projects.
 
Matt Cao
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Hi,
I'll be brief because I have to fly out for corrective action mission investigated.
China and India strategies are quite different and I am not over there to come up with a first hand obervation. China are more into creating infrastructure and its study the capitalist ways to conduct market. Outsource/offshore is more of a consultant gloried business. Modern industry trend indicates China creates company, makes it into full function, then aligns it into OEM or CEM with westerner companies. Software is new to her, but the operations still fall into the same model making widget. Financial industry is new territory for her so she is willing follow India approach as long as she learns all the intricacies of that industry. We must remember China still a communist country. If she is not careful, financial industry could topple the stability of that country political system. China history is counted by centuries so whatever changed in political system, we have to expect in term of century too.
Regards,
MCao
 
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Originally posted by Matt Cao:

The more I read into the "India" outsource/offshore stuffs, the more I lower my respectation for those people. If they are so smart with so many educated young people, why their countries not invest into them by creating the environment that foster those countries economic prosperities.
............
............
...China history is counted by centuries so whatever changed in political system, we have to expect in term of century too.


Knowing Indian history is equally old, would you believe its possible for these 'educated young people' to change things overnight?
India is a billion strong country, and the smart and educated youth that the west is now talking about is just a tiny little fraction of the whole population. However, the exposure the IT industry is setting many examples to rest of the population and the pace and professionalism of doing business is catching on, and slowly getting noticed at other sectors as well. Sooner or later, we expect more tech-savvy ministers and a better administration to match that of the Western standards (which are quite good and desirable, I should admit!)
 
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From Computerworld:

U.S. companies should be taking a closer look at Egypt, Jordan, Lebanon and elsewhere in the region for outsourcing work. Countries there have set up low-tax zones for foreign companies and have a surplus of trained, English-speaking technologists.


This makes sense. But how large is the labor pool of 'trained, English-speaking technologists'? Not as large as India and China I'll bet. There is a limit on how many high-quality people who can quickly come up to speed in any country. If the programmer pool is infinately expandable, riddle me why US or UK employers cannot go to any MacDonalds and offer the counter staff $10 an hour to do programming? This applies as well to India, China, or the Middle East. Wages may be cheap now, but with the expansion of Indian offshoring, a rapid rise in the market price of skilled Indian IT workers was absolutely predictable.

With the world competing for cushy U.S. IT jobs, you'd think that low-cost labor was your biggest concern. It's not. Computers are. Task automation is a bigger threat to IT jobs. Corio's Ottman says, "We want to automate labor out of the equation as much as possible." A competing ASP, Surebridge Inc. in Lexington, Mass., has an internal program called Project 55 with the goal of running applications 55% less expensively than companies could do themselves. While offshore labor savings are part of the difference, automation can make a bigger difference.


In the short term, yes. During my career I've seen System and network managers go from managing small numbers of computers to managing server farms for a productivity increase of 1000% percent to 10,000% percent. In the long term I think automation will make administrators in the US more competitive with admins in India, because the increase in productivity will make labor cost a smaller component of total costs. We have seen this in the US factory sector where a drop in labor costs as proportion of total costs from 30% of the total to 10% of the total has made the US a very good place to do manufacture.
I'm not as sure about automating programming completely as Ottman seems to be talking about. We're already getting very impressive programming productivity increases from tools like Struts and HTML editors like Dreamweaver, but automatically-generated code tends to look .... Generated. Uninspired.

Or maybe you should just go to a smaller company. Laurence Bunin, CEO of Handshake Dynamics LLC, a New York-based management advisory firm, says, "The big trend in the midmarket is a dramatic shift to insourcing." He says a number of $100 million to $1 billion companies found that the headaches and costs of managing outsourced projects sucked out all the savings from cheap Indian labor. Corio's Chaddha points out that any deal with an Indian outsourcer needs to add back 15% to 25% of U.S. labor wage rates just to manage the complexity of the agreement. For a large company or an ASP that can spread the costs over many users, the management overhead isn't as big a burden. But for midsize companies, it's a pain. As a result, says Bunin, his clients are bringing their applications back in-house. And cost isn't the only reason. For midsize companies, information management can be one of the biggest competitive advantages, as their application needs are highly specialized. That means offshore outsourcers are best used for commodity operations.


This is what transpired during the last outsourcing boom which occured during the early 90's. The costs of managing remote operations was greatly underestimated. If you don't manage a project either at home or offshore, you end up with crap. The incremental costs (in both time and money) of managing a project offsite are very considerable.
I see companies who have been unable to succeed with delivery locally turn to offshoring as a solution, and I ask what makes them think they can do it better in India? Perhaps the costs of a failed project in India may be 50% lower, but it seems to me that the proper solution in this case is not to develop at all! If you have major project management troubles offshoring your projects is only going to lower the chance of success, modest as they might be....
 
Tim Holloway
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The Middle East is indeed an untapped resource. However, it's not going to be a walk to make another India of it. Firstly, without checking for certain, I don't know that the salary levels are going to be as low. While Egypt and Palestine are impoverished, many other countries in the region are quite prosperous.
And, of course, there is Palestine. Anyone who thinks they can make that problem go away just by offering people IT jobs is a fool. Before you can make any real progress there, you'll have to take steps to efface the pre-existing resentments of the populace. That's going to take more than just money.
Automation, like offshoring, is a "silver bullet" solution. They can trumpet it all they want, but so far, no one's ever been able to invent an automated software system that could handle the incredible complexities of everyday life. Which is why, historically, automation has been a net job creator.
Having reread this article in more detail, I'm still of the opinion that it's a "comfort piece" written to soothe the alarms of those who are worried that some of our recent business practices may have unforseen consequences.
Interesting assertion I read the other day: "Markets are very bad at determining costs". I think the front end of the quote was "Markets are very good at determining prices", but I forget. May have to track it down again.
 
Matt Cao
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Hi,

Originally posted by Ashok Krishnan:

Knowing Indian history is equally old, would you believe its possible for these 'educated young people' to change things overnight?


No doubt Indian have been in that region for ages but India only existed for 60 years or more. I do not expect those young educated people change India overnight. I only question and doubt the approach that they represent the rest of Indians are well plan out and effective. Yes, in the immediate term it looks like a new wealth forming in India, but it more like a bubble wealth.

Originally posted by Ashok Krishnan:

India is a billion strong country, and the smart and educated youth that the west is now talking about is just a tiny little fraction of the whole population. However, the exposure the IT industry is setting many examples to rest of the population and the pace and professionalism of doing business is catching on, and slowly getting noticed at other sectors as well. Sooner or later, we expect more tech-savvy ministers and a better administration to match that of the Western standards (which are quite good and desirable, I should admit!)


What examples? Hands-out? India needs to create infrastructure or the environment for all her industries not just IT. As I mentioned earlier, the outsource/offshore from the westerner POV, IT industry in India POV is nothing more than glorify consulting business. They are not even close as subcontract because they have not experience try to market their products to the world before they aligns themselves with western companies. As Tim Holloway puts it, a "silver bullet" solution.
You may said I am bias, why a western company could create a consultant business but Indian's cannot? Western countries are over developed countries, western consulting companies formed catering to specific weakness of those westerner companies. India have not in the First World league but those young educated people already create a shortcut strategies. I just wish your people think harder and deeper but then again it very difficult to think when you hungry.
Regards,
MCao
 
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What examples? Hands-out?


Umm....Sabeer Bhatia, Founder of Hotmail(IIT Delhi), Vinod Khosla (IIT Delhi) Co-Founder of Sun...Vivek Ranadive CEO of Tibco ...there are many more but that should answer your question.
 
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Originally posted by Bhushan Jawle:

Umm....Sabeer Bhatia, Founder of Hotmail(IIT Delhi), Vinod Khosla (IIT Delhi) Co-Founder of Sun...Vivek Ranadive CEO of Tibco ...there are many more but that should answer your question.


All three Americans btw, who achieved success upon arriving in the United States. Smart people exist all over the world, successful people exist more readily in climates that foster success.
 
Bhushan Jawle
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You are right that they are all Americans, I was talking about people with Indian origin who have set examples for others to follow, these people are talked about in India a lot (from what I hear from my friends in India)
India does need to improve on infrastructure and from what I have heard steps are being taken in right direction.
 
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The Middle East???
No way! They are paid handsomely by foreign petroleum companies. They also have four wives to entertain or are busy trying to score four of them. They get not motive and time to do programming.
Don't worry about them.
Paul
 
Ashok Mash
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Originally posted by Matt Cao:
Hi,
What examples? Hands-out? India needs to create infrastructure or the environment for all her industries not just IT. As I mentioned earlier, the outsource/offshore from the westerner POV, IT industry in India POV is nothing more than glorify consulting business.
.......it very difficult to think when you hungry.
Regards,
MCao


I agree with your view in general, that the Indian IT industry is yet to do any major innovative development. But I think the answer is simple enough - our target audience. As long as our target audience (rich client base) is the West. If China was a rich country, Indians would still be doing the job, since we wouldnt know how businesses work in China. It will take another decade or so for Indian market to grow rich enough to consume a considerable chunk of Indian IT talent.
When it comes to setting examples, the relatively small size (compared to rest of India, that is) of the Indian IT talent is also another deciding factor.
Meanwhile, its clear that like many others, you believe that India is a big mass of impoverished people, and a few hundred thousand programmers. That's not the case. The following extract from an article might sound rhetoric as it comes from an Indian, but they are just facts.
• Fifteen of the world’s major automobile manufacturers are now obtaining components from Indian firms.
• Just last year, exports of auto-components were $375 million. This year they are close to $1.5 billion. Estimates indicate they will reach $15 billion within six to seven years.
• Hero Honda is now the largest manufacturer of motorcycles in the world—with an output of 17 lakh motorcycles a year.
• One hundred thousand Indica cars of the Tatas are to be marketed in Europe by Rover, under Rover’s — brand name.
• Bharat Forge has the world’s largest single-location forging facility — of 120,000 tonnes per annum. Its client list includes Toyota, Honda, Volvo, Cummins, Daimler Chrysler. It has been chosen as a supplier of small forging parts for Toyota’s global transmission parts’ sourcing hub in Bangalore.
• Asian Paints has production facilities in 22 countries spread across five continents. It has recently acquired Berger International, which gives it access to 11 countries, and SCIB Chemical SAE in Egypt. Asian Paints is the market leader in 11 of the 22 countries in which it is present, including India.
• Hindustan Inks has the world’s largest single stream, fully integrated ink plant, of 1 lakh tonnes per annum capacity, at Vapi, Gujarat. It has a manufacturing plant and a 100 per cent subsidiary in the US. It has another 100 per cent subsidiary in Austria.
• For two years running, General Motors has awarded Sundaram Clayton its ‘Best Supplier Award’; the volumes it sources out of India are growing every year.
• Ford has presented the ‘Gold World Excellence Award’ to Cooper Tyres.
• Essel Propack is the world’s largest laminated tube manufacturer. It has a manufacturing presence in 11 countries including China, a global manufacturing share of 25 per cent, and caters to all of P&G’s laminated tube requirements in the US, and 40 per cent of Unilever’s.
• Aston Martin, one of the world’s most expensive car brands, has contracted prototyping its latest luxury sports car to an India-based designer. This would be the cheapest car to roll out of Aston Martin’s stable.
• Maruti has been the preferred supplier of small cars under the Suzuki brand for Europe. Suzuki has now decided to make India its manufacturing, export and research hub outside Japan.
• Hyundai Motors India is about to become the parent Hyundai Motors Corporation’s global small car hub. In 2003, HMC will source 25,000 Santros from HMI’s plant in India. By 2010 HMI is targeted to supply half a million cars to HMC.
It was only in 1999 that HMI got its first outsourcing contract and already, in 2003, 20 per cent of its sales will be what it supplies as an outsourcing hub. It is exporting cars to Indonesia, Algeria, Morocco, Columbia, Nepal, Sri Lanka and Bangladesh.

• Ford India got its first outsourcing contract in 2000. Within 3 years outsourcing accounts for 35 per cent of its sales. Ford India supplies to Mexico, Brazil and China. The parent Ford is sourcing close to $40 million worth of components from India, and plans to increase these in the coming years.
Ford India is already the sole manufacturing and supply base for Ikon cars and components. These are being exported to Mexico, China and Africa.
• Toyota Kirloskar Motors chose India over competitive destinations like Philippines and China for setting up a new project to source transmissions as this option proved more economical.
• Europe’s leading tractor maker, Renault, has chosen International Tractors (ITL) as its sole global sourcing hub for 40 to 85 horsepower tractors.
• Tyco Electronics India bagged its first outsourcing contract in 1998-99. So successful has it been that components and products others have contracted from it already account for 50 per cent of its total sales. It supplies to the parent, Tyco Europe.
• TISCO is today the lowest cost producer of hot-rolled steel in the world.
• TVS Motor Company has been awarded the coveted Deming Prize for Total Quality Management. Many of the largest of organisations, even American ones—like GE—have not managed that recognition yet!

If you care to read news sources other than the ones that focus on IT or Hollywood, you would come across a lot more instance which might help to clear this wrong impression of India - land of snake charmers, saints and computer programmers - that the West believes!
I rest my case!
Ashok.
PS: Source of article* Extracts from this Article.
 
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I love you Ashok!
I have not yet read the entire post, but I'll do that and I promise I'll add my inputs as someone from India (let me finish work first!), for I see not many Indians are posting their POVs.
- Manish
 
Al Newman
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Meanwhile, its clear that like many others, you believe that India is a big mass of impoverished people, and a few hundred thousand programmers. That's not the case. The following extract from an article might sound rhetoric as it comes from an Indian, but they are just facts.


Actually it was my impressing that India would be included in the middle rank of countries in terms of per-capita economic statistics, and of course in the top rank of countries in terms of aggregate statistics.
It seems to me that India may have a per-capita income as high as $2000 a year by now. Certainly more than $1000 per-capita. Which is well more than the real economic basket case countries.
While there still exist poor people in India (even very poor people), they are fewer than they were 10 or 20 years ago, many fewer. When was the last time anyone heard of famine in India? An loooonnnngggg time ago, 30 or more years ago.
[ August 20, 2003: Message edited by: Alfred Neumann ]
 
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US is really very rich country.
 
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hmm Now you want somebody to write against your statement?right?
 
Tim Holloway
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Well, it's true, but, like your signature, 1/2 true = 1/2 false. The US is rich in absolute dollars, but counterbalancing that is that it costs so many more absolute dollars to live here, and thus requires a higher absolute salary.
It gives us an advantage when it comes to buying things at world prices, which is virtually anything electronic. And somewhat of a help where there are regionally-inflated world prices, such as in imported food, clothing and transportation.
Conversely, it's a disadvantage when competing for salaries on regional prices such as dwellings and locally-produced food.
 
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