Posted on 07/04/2007 7:48:01 AM PDT by TigerLikesRooster
Rising wages prompt firm to pull out of India Image search firm Riya will consolidate operations in the U.S.
By Tash Shifrin, Computerworld UK
July 02, 2007
Image search firm Riya is to pull its research and engineering operations out of India to consolidate in the U.S. due to rising wages in Bangalore.
The company, which is behind visual shopping Web site Like.com and specializes in image recognition software, had maintained offices in both Bangalore and the U.S. despite the difficulties of being based in locations 12 time zones apart because low wages and a strong pool of talent in India meant the company still saw a significant return on investment.
But in his company blog, Riya chief executive Munjal Shah, said: "Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first five years of his career to get from 1 percent to 10 percent of his equivalent U.S. counterpart.
"He then jumped from 10 percent to 20 percent of his U.S. counterpart in the next 1 year. During his time with us (less than two years) he jumped to 55 percent of the U.S. wage. In the next few months we would have had to move him to 75 percent just to 'keep him at market.'"
Shah added: "In general this wage inflation is really good for my employees and great for India."
But the increase in Bangalore wages had "destroyed the ROI" that was the rationale for maintaining the otherwise difficult two-continent operation. The company has now moved to consolidate its engineering and research work at its California headquarters.
In his blog Shah predicted that other firms with similar offshore operations would also face problems as wages rose. "I do believe that other startups in Bangalore will see the same issue in 12-24 months," he said.
Shah noted that unlike Silicon Valley employees, staff in Bangalore did not value stock options highly, preferring a boost in cash wages. This, and the fact that Riya was seeking the most highly qualified staff in the area "increased our exposure to wage inflation", Shah said.
The costs of having two offices so far apart was "significant", he said, with staff having to make late-night conference calls and then returning to work late the next day because of tiredness.
"We were all travelling 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," he said.
But loss of that return had prompted the U.S. consolidation. Riya would see a fall in headcount in a bid to keep overall payroll costs the same before and after the move, Shah said. "Because wages are still higher in the U.S. we couldn't bring everyone."
Ping!
bttt
What I was referencing.
Throw in the fact that EVERY outsourcing operation I have either dealt with directly or heard of indirectly was subpar, and all of a sudden American operations start looking good again, even to beancounters.
This is inevitable. We’ll be seeing more of this as wages contrinue to rise astronomically in India.
The company I work for has an Indian engineering shop in Bangalore and Chennai. Four hundred + “engineers” and they produce nothing. Nothing. Aerospace firms design warplanes with fewer engineers, and these guys can’t write a line of code that will even compile. They’re kept around because an executive VP is Indian and has stacked the deck. The board is starting to question his questionable numbers.
Let's hope so.
BTTT
Seems like a number of freepers, including myself, called this years ago. Business will do what’s good for business.
We don't need no steenking protectionist laws.
To all those who make excuses for outsourcing corporations (American workers make too much money, expect too much for their work), this undercuts the case they make.
De-outsourcing of call centres is happening across the board in the UK. Just baout every major player outsourced to India and now just about every TV advert claims ‘UK Call centres only’.
In my experience, the people working at Indian call centres were well-educated and profesional, but the language barrier was too great. Whilst the average Brit can deal with the huge range of accents from Aberdeen to Cornwall, an Indian taught RP English cannot.
Software is one of America’s strongholds with our massive number of programmers. And large numbers of extremely intelligent and creative individuals in the field.
I believe the same thing is happening in the U.S. That’s how support is now being sold to the enterprise environment. “U.S. support centers”.
One would think this was magic or something...
It is the process of moving operations that are off shore, back to the US. It is happening in small but growing numbers.
Is this really a surprise to anyone?
China is still cheaper... and then Ethiopia? CHAD?
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