Sunday, July 01, 2007

Indian Engineering Centers Moving to California

No joke:

The rising cost of paying engineers in Bangalore has prompted at least one Silicon Valley start-up to save money by closing its Indian engineering centre and moving the jobs back to California.

While this “reverse offshoring” remains unusual, it points to a broader belief in the US technology industry that the savings that drove software engineering jobs to India’s technology capital are quickly eroding., a search engine company that uses image recognition software to find pictures on the web, took the step of closing in India after seeing the wages of top-level engineers in some cases rise close to US levels.

“Bangalore wages have just been growing like crazy,” Munjal Shah, chief executive, complained in a blog post. In the next few months, would have had to lift the salary of one of its Bangalore engineers to 75 per cent of the US level, even though the same engineer earned only 20 per cent as much as an equivalent US-based worker two years ago, Mr Shah said.

It's almost as if there's this crazy... international labor market -- and higher value skills and greater value added lead to higher wages. And then when companies no longer save money by locating jobs abroad, the potential actually exists for them to return to the US.

The notion that offshoring or outsourcing ever constituted a major threat to the US labor market -- let alone US prosperity -- was always overblown. People always fear that companies will go wherever they can to cheaper labor. But the US has huge advantages over other nations in lots of areas -- transparency, low taxes, English proficiency (more or less), great infrastructure, skilled workforce, and proximity to the world's largest consumer market. Companies have a hard time rejecting those advantages; the wage difference needs to be awfully great to overcome them.

You might well ask (as the rest of the world does) how they can hope to compete with the US.

1 comment:

control valves said...

Nope, they can't.