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Indian Tech no longer for startups that does sophisticated Technology

I was reading a front page article on Mint and I could feel the extend of the truth in the article. It is a well known fact that American Companies are the major driving force behind the success of outsourcing boom in India. Silicon Valley, in particular, has helped Indian IT companies with a humongous amount of outsourced technology related works. The lure for Indian Technology workers is the low-wage, which is about 1/4th of their counterparts in the Silicon Valley.

However, of late, the salaries of experienced and highly skilled technical engineers have soared multiple folds. This rise have ranked Indian High Tech Engineers almost at par with their Silicon Valley counterparts in terms of compensation. According to studies, it is revealed that such skilled Indian Computer Engineers are paid almost 3/4th of the American Engineers.

Thus, looking at the time-difference and the distance (of the clients in United States), not to forget the frustration of the American Investors and higher executives, it makes less and less sense to do sophisticated Technology works in India. It may be noted that such type of sophisticated works are mostly done by Startups and midsize companies, from the Silicon Valley. The earlier advantage of outsourcing such works to India no longer benefits the small quality oriented companies any more. Studies have found that the wage inflation rate for engineers in India is about four times than in the United States.

As a result of the wage rise of the highly skilled workers in India, many Silicon Valley startups and midsize companies are keeping the tech jobs to themselves instead of outsourcing to India. They are considering bringing in key developers from India to Silicon Valley and have their development done there along with the American Engineers. It is speculated that the rise in wage of the quality oriented high tech workers is perhaps one reason why Apple put off their plan to open a development office in India (Bangalore).

However, as for the low-tech, low-skill *PO segments (read KPO, BPO, CPO, DPO and all other POs), India is still the desired destination and is still on the rise. United States Tech companies continue to outsource such basic works like software coding to Indian outsourcing companies like Infosys, Wipro, TCS etc. Some of the big US giants who are expanding their low-tech work-force in India includes that of Cisco, Google, Adobe.

With the huge influx of companies asking for most skilled Indian Computer engineers, the US-India compensation gap reduces as a result of the induced competition. The majority of the not-so-skilled Indian workers still remains which comprises of about 3/4th of Indian Computer Engineers. These low-skilled workers are said to have no proper language proficiency, no cultural fit and no practical skills to work at multinational companies.

Rafiq Dossani, a scholar at Stanford University’s Asia-Pacific Research Centre who recently studied the Indian market, found that while most Indian technology workers’ wages remain low — an average $5,000 (around Rs. 2,00,000) a year for a new engineer with little experience — the experienced engineers that Silicon Valley companies covet can now cost $60,000 to $100,000 (roughly between Rs. 25 lakh to Rs. 41 Lakh) a year. He concluded, “For the top-level talent, there’s an equalization.”

So, for a large swathe of Silicon Valley — Startups and midsize companies that do sophisticated tech work — India is no longer the premier outsourcing destination. Though such work contributes just a fraction of the Indian outsourcing cache, they have been the early catalyst for the growth of India’s Information Technology.

Mega-corps like Infosys, Wipro and TCS have braced up to do more of the sophisticated works. However, analysts says that most of these companies derived more than 50% to 60% of their revenues from the basic services such as software coding and tech maintenance and support.

In a not-so-surprising event, Riya had to interview more than 70 candidates just to hire 6 highly skilled developers for their Bangalore (India) office. It may be noted that they have shut down their Bangalore office at the time of writing this article.

Many Indian-American entrepreneur who tried to do startups in India seem to have bad-taste experiences and have decided to stay back in the States than try to understand the plethora of hiccups that plagued them while setting up a remote office in India.

16 Comments

  1. Amazing -- now that they have to pay a living wage, suddenly India has "lost it's charm". So the tech companies are really no different than sneaker or clothing manufacturers -- they'll look for the cheapest labor, and quality be damned. And THAT's why software is constantly being updated and "improved" -- it wouldn't be necessary if they got it right the first time. But when you pay people a tenth of what they are worth, you will get a tenth of what they can do -- for the same reason that buttons come off of cheaply made shirts. AIB

  2. Amazing -- now that they have to pay a living wage, suddenly India has "lost it's charm". So the tech companies are really no different than sneaker or clothing manufacturers -- they'll look for the cheapest labor, and quality be damned. And THAT's why software is constantly being updated and "improved" -- it wouldn't be necessary if they got it right the first time. But when you pay people a tenth of what they are worth, you will get a tenth of what they can do -- for the same reason that buttons come off of cheaply made shirts. AIB

  3. A misrepresented article stolen from Internet to attratc American contacts. Ask this dude called Brajeshwar, that what he thinks about TCS, Infy or other Indian giants, are they just coding? and nothing else, Brajeshwar himself dont know much anout coding and has a bad name among many developers in Mumbai...

    He always try to gain atention and this is what he tried with this article as well...

    No comments on Alan's comments. He is motivated by Brajeshwar's stolen article and perhaps some patriotism.

  4. A misrepresented article stolen from Internet to attratc American contacts. Ask this dude called Brajeshwar, that what he thinks about TCS, Infy or other Indian giants, are they just coding? and nothing else, Brajeshwar himself dont know much anout coding and has a bad name among many developers in Mumbai...

    He always try to gain atention and this is what he tried with this article as well...

    No comments on Alan's comments. He is motivated by Brajeshwar's stolen article and perhaps some patriotism.

  5. Hi Brajeshwar, this is a great site! I have been going through some of the articles, and I like what I read.

    As for the current article, I do agree that outsourcing is a function of the amount of money saved by the company. However it is not easy for hi-tech companies to find an alternative to India, if for the only reason that the number of technical professionals produced by India far outnumbers those produced by the US. So even if there is a 20% salary difference that translates to savings for the US based company.

    However I also agree that outsourcing works best when the relatively low tech work is outsourced. No company really wants to outsource the really high end stuff, maybe except a few. I did hear that IBM India has filed far more patents in 2006 than IBM US has...

  6. Hi Brajeshwar, this is a great site! I have been going through some of the articles, and I like what I read.

    As for the current article, I do agree that outsourcing is a function of the amount of money saved by the company. However it is not easy for hi-tech companies to find an alternative to India, if for the only reason that the number of technical professionals produced by India far outnumbers those produced by the US. So even if there is a 20% salary difference that translates to savings for the US based company.

    However I also agree that outsourcing works best when the relatively low tech work is outsourced. No company really wants to outsource the really high end stuff, maybe except a few. I did hear that IBM India has filed far more patents in 2006 than IBM US has...

  7. @Shantanu
    Yes, very true and my article does says that there is no threat to the actual outsourcing (or rather the majority outsourcing) that India receives. It is learnt that China is ramping up its technical people by including English as one of their primary language but that will take time. India is already way ahead in this competition and China will take some real effort and time to catch up. So, I believe India is still a safe place for outsourcing of the low-tech but bulk works.

    And Thank you for your kind words.

  8. @Shantanu
    Yes, very true and my article does says that there is no threat to the actual outsourcing (or rather the majority outsourcing) that India receives. It is learnt that China is ramping up its technical people by including English as one of their primary language but that will take time. India is already way ahead in this competition and China will take some real effort and time to catch up. So, I believe India is still a safe place for outsourcing of the low-tech but bulk works.

    And Thank you for your kind words.

  9. @ Anoop Felix
    > A misrepresented article stolen from Internet to attratc American contacts.

    I presented the article in a perfect light with no hidden clause with appropriate credit to the article where I read about the phenomena. And definitely no, I don't need to write articles on my blog to attract American contracts. My blog has less and less to do with the types of works me or my team does. Honestly, I'm extremely sad that we're too tied with projects that I've been rejecting projects or diverting them to other developers/companies for the past one year.

    > Ask this dude called Brajeshwar, that what he thinks about TCS, Infy or other Indian giants, are they just coding?

    I think you missed some points in the article, there are figurative indications that majority (more than 60%) of the actual revenue comes from "just coding" works by these Software Giants. Nonetheless, they do sophisticated work and they are able to take on a total software life-cyle of big clients but that is new, upcoming and less in number right now.

    > Brajeshwar himself dont know much anout coding and has a bad name among many developers in Mumbai.

    I am really sorry but I don't really get the meaning of this. Do you mean, I am notorious as a bad coder in Mumbai? It will be a folly on my part to defend myself regarding coding here; if you mean coding as in ActionScript-ing in Flash (as that is what I do primarily) then perhaps you should know that I start coding when majority of Flash designers/developers don't even know that coding can be done that extensively in Flash (read the Flash v5.0 era).

    Anyway, this is a funny statement but I like people talking bad of me, I just feel flattered.

    > He always try to gain atention and this is what he tried with this article as well…
    > No comments on Alan’s comments. He is motivated by Brajeshwar’s stolen article and perhaps some patriotism.

    Alan was commenting from a developer's perspective as far as I can interpret and I see no wrong with that. He is right with his notion from his (and most other developer) stand-point. I didn't reply to him as his comments was more of an addition to my article. "Attention"? Come one, don't be jealous!

  10. @ Anoop Felix
    > A misrepresented article stolen from Internet to attratc American contacts.

    I presented the article in a perfect light with no hidden clause with appropriate credit to the article where I read about the phenomena. And definitely no, I don't need to write articles on my blog to attract American contracts. My blog has less and less to do with the types of works me or my team does. Honestly, I'm extremely sad that we're too tied with projects that I've been rejecting projects or diverting them to other developers/companies for the past one year.

    > Ask this dude called Brajeshwar, that what he thinks about TCS, Infy or other Indian giants, are they just coding?

    I think you missed some points in the article, there are figurative indications that majority (more than 60%) of the actual revenue comes from "just coding" works by these Software Giants. Nonetheless, they do sophisticated work and they are able to take on a total software life-cyle of big clients but that is new, upcoming and less in number right now.

    > Brajeshwar himself dont know much anout coding and has a bad name among many developers in Mumbai.

    I am really sorry but I don't really get the meaning of this. Do you mean, I am notorious as a bad coder in Mumbai? It will be a folly on my part to defend myself regarding coding here; if you mean coding as in ActionScript-ing in Flash (as that is what I do primarily) then perhaps you should know that I start coding when majority of Flash designers/developers don't even know that coding can be done that extensively in Flash (read the Flash v5.0 era).

    Anyway, this is a funny statement but I like people talking bad of me, I just feel flattered.

    > He always try to gain atention and this is what he tried with this article as well…
    > No comments on Alan’s comments. He is motivated by Brajeshwar’s stolen article and perhaps some patriotism.

    Alan was commenting from a developer's perspective as far as I can interpret and I see no wrong with that. He is right with his notion from his (and most other developer) stand-point. I didn't reply to him as his comments was more of an addition to my article. "Attention"? Come one, don't be jealous!

  11. I am not completely agree with you ! the main reason of recent Shut down of the Riya's Indian product hub is not only the wage inflation. On the ground level the time difference makes the call. Development goes slowly because the offices are twelve zones apart and people need to take calls on midnite on both end; which inturn makes an adverse effect on productivity. No startup can afford it !

    Indian Product Companies (IPC) could make a positive sense out of it as they needn’t to spend much time to make calls and decision making. They could save both money and time and keep the wage inflation constantly going unless their employees are not grabbed by giants like google and amazon !

  12. I am not completely agree with you ! the main reason of recent Shut down of the Riya's Indian product hub is not only the wage inflation. On the ground level the time difference makes the call. Development goes slowly because the offices are twelve zones apart and people need to take calls on midnite on both end; which inturn makes an adverse effect on productivity. No startup can afford it !

    Indian Product Companies (IPC) could make a positive sense out of it as they needn’t to spend much time to make calls and decision making. They could save both money and time and keep the wage inflation constantly going unless their employees are not grabbed by giants like google and amazon !

  13. Interesting article Brajeshwar. :)

    To Anoop felix: all those big indian software companies you talk about produce shitty code. they are big because they make money writing silly scripts and code. That doesnt make them technically superior. I can understand why true hitech startups wouldnt want to offshore to India. I have personally seen programmers from IIT and elsewhere unworthy of that title. Get off it pal. India isnt as technically superior as you would like to think. Just because there are a million java script kiddies who copy and paste code from the net or elsewhere as opposed to the few but brilliant programmers in the west does not make us superior. we stand on the shoulder of giants, remember that. And I hope and am glad that US companies do not shift the real meat of software development to fucking gloating indians.

    :)

  14. Interesting article Brajeshwar. :)

    To Anoop felix: all those big indian software companies you talk about produce shitty code. they are big because they make money writing silly scripts and code. That doesnt make them technically superior. I can understand why true hitech startups wouldnt want to offshore to India. I have personally seen programmers from IIT and elsewhere unworthy of that title. Get off it pal. India isnt as technically superior as you would like to think. Just because there are a million java script kiddies who copy and paste code from the net or elsewhere as opposed to the few but brilliant programmers in the west does not make us superior. we stand on the shoulder of giants, remember that. And I hope and am glad that US companies do not shift the real meat of software development to fucking gloating indians.

    :)

  15. Nice article.

    All the comments got some elements of truth but only told differently.

    Here are some of my own opinions.

    The main aim of business is find ways to lower the cost,so that burden will not go the end user's head.So outsourcing is not evil.

    Software is upgradeable, patchable and bug-fixable, that's why it is better to build one quickly and release it than waiting for the perfect one to release only find that the market has been absorbed. See bad marketing.

    Maybe those who pay they think its one tenth, but those who get think it is sufficient considering the expertise level and cost of living.That's why outsource works.

    The article is not stolen as long as its source is mentioned or credited.Good attempt as you made us read it here and saved some of our time.

    A person's coding/developing/programming reputation (whatever that is) should not put any weight on what he wants express unless he/she is speaking about some technical details.Please do not spam, unless you do not have got to say something that's got a bearing on the main topic.

    If someone has a blog(I do have one),it truly means that he/she is trying to attract attention.There is no harm in doing so.Please start your own blog, start publishing your ideas if you want be a voice in this coding world and yes get 'Attention'.

    Businesses that outsource know very well about what can be outsourced.It will be foolishness to think that they will outsource everything including some high end stuff.We can at least try to develop something here on our own and show them the potential.Any thoughts.

    Actionscript was not considered as language, but now the future of web apps are going to depend upon it. A bright time is coming for ActionScript 3.0 programmers. Believe me, I am getting offers as a Flash/Flex/ActionScript 3.0 programmer which was unthinkable a year or two ago given my background in designing.
    And this is happening because very few started extensive coding in Flash and shared the experiences and built the communities progressively.The benefit is for all to share.

  16. Nice article.

    All the comments got some elements of truth but only told differently.

    Here are some of my own opinions.

    The main aim of business is find ways to lower the cost,so that burden will not go the end user's head.So outsourcing is not evil.

    Software is upgradeable, patchable and bug-fixable, that's why it is better to build one quickly and release it than waiting for the perfect one to release only find that the market has been absorbed. See bad marketing.

    Maybe those who pay they think its one tenth, but those who get think it is sufficient considering the expertise level and cost of living.That's why outsource works.

    The article is not stolen as long as its source is mentioned or credited.Good attempt as you made us read it here and saved some of our time.

    A person's coding/developing/programming reputation (whatever that is) should not put any weight on what he wants express unless he/she is speaking about some technical details.Please do not spam, unless you do not have got to say something that's got a bearing on the main topic.

    If someone has a blog(I do have one),it truly means that he/she is trying to attract attention.There is no harm in doing so.Please start your own blog, start publishing your ideas if you want be a voice in this coding world and yes get 'Attention'.

    Businesses that outsource know very well about what can be outsourced.It will be foolishness to think that they will outsource everything including some high end stuff.We can at least try to develop something here on our own and show them the potential.Any thoughts.

    Actionscript was not considered as language, but now the future of web apps are going to depend upon it. A bright time is coming for ActionScript 3.0 programmers. Believe me, I am getting offers as a Flash/Flex/ActionScript 3.0 programmer which was unthinkable a year or two ago given my background in designing.
    And this is happening because very few started extensive coding in Flash and shared the experiences and built the communities progressively.The benefit is for all to share.

Comments are closed.

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