January 2nd, 2008
Is Bangalore no longer a cost-saving location?
Posted by Phil Fersht @ 10:29 am
Categories: Business Process Outsourcing, IT Outsourcing / IT Services, Offshoring and Captives, Outsourcing Locations
Tags: Apu Sengupta, Bangalore, IT Outsourcing, Offshoring, India, Phil Fersht, BPO
My good friend and former colleague at the Yankee Group, Arijit “Apu” Sengupta (pictured) - who is now CEO of outsourcing quality improvement software firm BeyondCore - alerted me to a startup that reverse-offshored its development team from Bangalore back to the US:
“Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to ‘keep him at market. Once the salary rises to 75% of US salaries, the overhead cost differences between India and the US would overwhelm the financial viability. Consider the additional overhead of managing two offices, flying between the two centers, dealing with the cultural differences. The costs of having two offices, which are twelve time zones apart, is significant. People in both offices frequently had conference calls at 10pm and midnight every night (as a result the office in the US didn’t get started until noon sometimes or people rolled in tired). We were all traveling constantly. Development and communication moved slower due to the distance and teams.”
For more on Apu’s story, go to the CIO Magazine website
Phil Fersht is an acknowledged and well-recognized industry analyst and advisor across Business Process Outsourcing (BPO) and IT services worldwide. See his full profile and disclosure of his industry affiliations.
