Insourcing? Now There’s a Concept!

Here’s something interesting.  I was just reading a blog article written by a guy named Munjal Shah, the CEO of a company called Riya.  In this article he describes setting up an office in Bangalore, India, in 2002 for a company called Andale, “because,” as Shah explains, “India provided us with a less expensive pool of talent than Silicon Valley did.”

This is the same, very familiar reason given in recent years by countless companies for their need to control costs by outsourcing their IT work to overseas markets.  But guess what.  If Riya serves as any sort of useful barometer of the outsourcing situation, then that tide may be turning.

Here are a few excerpts from Mr. Shah’s article:

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.”

[. . .]

However, this huge run up in the wages has destroyed the ROI I referred to earlier.  So today we decided to consolidate all of our engineering and research efforts back to our HQ in California.  We are relocating many of our key folks back to the US, but there are some that we are not bringing back.  Our goal was to keep the payroll costs the same before and after the move. Because wages are still higher in the US we couldn’t bring everyone.

Interesting turn of events, is it not?  It brings to mind the efficient market theories and visions of the ol’ inverse supply and demand curves, establishing market equilibrium, that I had to burn into the grey matter in Economics classes.

Articles such as this one are quite welcome and encouraging to out-of-work IT people in the States, among whom I am one (although I did have what I thought to be a productive interview today; we shall see where it leads).