Consider Bangalore, one of the current hubs of the outsourcing phenomenon. Cheap knowledge workers have made it a very attractive location for American companies looking to find ways of reducing their labour costs.
But as Fortune (the article might be behind a sub wall so go buy the mag) reports this is changing:
office rents in Bangalore now rival those inmany midsized American cities, according to Ton Heijmen, senior advisoron offshoring at the Conference Board in New York City. And the Indianlabor market is less of a bargain nowadays. Multinational techcompanies such as Dell, Intel, and Microsofthave built big development centers in India during the past few years,sparking a talent war that has driven Indian tech salaries from around10% of U.S. wages in 2000 to perhaps 20% today. "It's like SiliconValley in 1999," says Mark Heesen, president of the National Venture Capital Association in Arlington, Va. "People are constantly hopping from company to company for more money or stock options."
An 80% discount on engineering talent mightstill sound like a great deal—and emerging offshore tech destinationssuch as Vietnam and Ghana are cheaper still—but much of that advantagedisappears once you factor in high offshore attrition rates and lowerproductivity
Not only is India experiencing this but China as well. I spoke to a senior executive recently who had just returned from a trip to China where his company had built a plant in the Shanghai area.
He told me that he regrets choosing the Shanghai area because not only is land becoming ferociously expensive but the competition for talent is equally fierce.
"people don't stay in jobs more than six months" he said. "they leave for more money". "we should have built our plant in the interior where there is less competition for talent"
He also told me that he believes China's cost advantage as an economy will disappear in no more than 5 years.
And I agree with him.
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