software outsourcing

A blog related to software development company and offshore software outsourcing

Tuesday, June 28, 2005

Software outosurcing and Offshore India

Software outsourcing to India has continued to grow in last few years. This growth is driven by many factors. Cost saving is not the only factor for software outsourcing. But it is the major factor in outsourcing. There are many factors which are contributing to cost savings in India. One of the most important issues is difference in salary of a programmer in Europe or in US and a programmer in India. Indian programmer gets less then 25% of the salary of a US programmer. This is the main factor which is driving software outsourcing to India.

Offshore India

Software companies belong to knowledge based industry. Unlike traditional brick and mortar industry, here, it is not required to invest heavily upfront and there is no material cost in running production. So majority of the cost is the salary. It contributes anywhere to 60-80% of the total expense of any software company. So when a company hire programmers in US, cost of software development shoots up to 60-70%. That is why 'Offshore India' is more preferred. Many companies prefer to offshore their development works to nearshore destinations like Canada instead of offshoring to India. But that offshore outsourcing generally reduce their cost saving to nearly 50%. Asian countries are considered preferred destination for offshore outsourcing. While Eastern European and Latin American countries and Canada is considered good for Nearshore operations. In future, high-end services will move to nearshore or onshore while low end services will be done at offshore and specially in India.

In India, software developer doing offshore software development generally gets 15 to 25% salary rise now a day depending on his importance in projects. While in US, a programmer gets yearly 3% increment approximately. Although, salary rise in India is very high, difference between salary of Indian programmer and a programmer in US is such a wide that, cost saving will continue to be a major factor in software outsourcing.