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."
The US is in a wage battle with India? This is a good story but I suspect an isolated one. But I will hope for the best. Whenever I get India callling a customer service I hang up, even if they tell me they are in Georgia
“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.”
Heck, I’m Canadian and English is my native tongue, and I have difficulty understanding a lot of Brits - a lot of you guys talk like you’ve got a mouth full of marbles. Still easier than understanding what a lot of my colleagues in India are saying, though.
1%? That's amazing. I had seen some huge disparities in compensation for onshore and offshore for software activities, but I hadn't seen 100-to-1.
“It is the process of moving operations that are off shore, back to the US. It is happening in small but growing numbers.”
And what has the cost off all this off-shoring and re-shoring been, I wonder. Costs in laying off all those domestic employees in the first place, and hiring Indians, and training them, and then replacing them again with new domestic employees. What were the indirect costs to the companies of losing experienced workers who actually knew the businesses and their products? Will anyone hold the moronic executives who hatched these plans responsible? I’ll not be holding my breath.
Business world frequently behaves like a buffalo herd. The collective intelligence of herd of seemingly intelligent execs and gurus is lower than a single buffalo, as long as they are driven by mob psychology.
ping
I too refuse to talk to someone I cannot understand, most of the time I recognize that it is English they are attempting. I am almost never able to make them understand what I want nor do I understand what they are saying. In frustration I now just hang up and call back hoping to get someone different. There are companies that I no longer use because of this problem.
Thanks for posting. Interesting. Quality work from quality people costs money. Witness China.
He is paying off his family no doubt.
During the last year of the group we had started using some offshore (India) help. This offshore help ws part of a US company and was extremely professional and innovative. Later I asked the US CEO of the company for a quote on developing a new version of our software. “Six months, no, make it closer twelve to be safe, to develop the software. Cost about $100K” was his reply.
“So, if I expect 12 months and $250K, I’m safe?” I asked.
“Absolutely!”
Was this hype or “promise them anything to get the contract”?
No Way! This company had the best references (verified) from previous customers that I have ever seen. Customers like major utility companies and US Military departments. Our own experience with them was outstanding.
Bottom line: Find good people/suppliers at a competitive price, wherever they live, and give them your business. I live in the South. Ages ago textile jobs moved here from New England, to take advantage of “lower wages in the Third World”. Now we have BMW, Mercedes, Honda and Michelin coming in because they can get a good product for less than the cost of doing business in Germany, Japan or Detroit.
Must be the teeth. ;-)
Yes, the nepotism is breath-taking.
My experience with foreign call centers is that they are polite and patient, but out of their league. I must explain things many times before it is really understood. They are just not on our wavelength. The typically poor sound quality of the connection doesn’t help either.
Your post reminds me of Thomas Friedman’s book, he said you can’t stop the game; global trade, so instead play by the rules of the game. And build yourself up with lots of skills and flexibility to play.
For an area or nation I look at it like if you have a lot of talent in a sector its always going to be a strong economic base. Sure it might boom and everyone is jealous for awhile.. then bust and people are crying about wage cutbacks, but look at the average wealth creation it brings over time.
India is creating nice bases for its economy
Where are they goin’ now? Zimbabwe?
Chad is left hanging.
“Theyre kept around because an executive VP is Indian and has stacked the deck.”
There’s a lot of this. Some of the Indian guys I’ve worked with are quite open with their ‘manifest destiny’ attitude - that India is the future, Indians are the best, America and Americans have already had their time.
To this end they hire, support for promotion, and network with other Indians, while we blather about diversity. Granted this bites them in the -— because the real trick is to get the best people, not the best people with brown or white skin *or* some artificially ‘diverse’ mix.
Also just to be clear, this is *some* Indians, not all by any means, but a little sub-culture that one has to watch out for.
Will anyone hold the moronic executives who hatched these plans responsible?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Probably not, it is just another example of someone conjuring up a plan that sounded great in theory but nobody bothered to figure what the real world results would be.
Thanks, Happy Fourth of July!
I was once at MTT-S and there was a research group from Georgia Tech, who gave a presentation on a “novel” microwave up converter. They were 4 white guys - all graduate students - who gave that talk. That was the most incompetant design I ever seen in my life - it consumed 5 times the die area, consumed more power and worse of all their design barely even worked. They took a 500K grant from NASA for 2 years and all 4 got their MS degrees based on that crappy work, which an average Indian undergrad student from IIT could’ve done in a month.
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