WG,
I don’t think this article is well-researched. It just showed the worst case scenario to prove its point. It’s an exaggeration.
Offshoring never cost $10K per year and 20X less. That’s another exaggeration. The thumb rule of offshoring (contracting work to another company) is typically 3X. For example, instead of hiring an engineer with salary $150K you can offshore with a cost $50K. But thing can more complex than that because you don’t offshore one engineer’s work. You do project-wise. Same rule does not apply for companies who open their own office there (e.g. Microsoft, Google etc). Their overhead could be more because they are investing from US dollar there.
Due to fall of dollar, let’s assume it is 2X now. So what?
Needless to mention that India, just like China, manipulates its own currency to make dollar higher and keep it attractive for offshoring and exports.

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In order for offshoring to work these people need to be less than half of US salaries, because it is not a productive proposition trying to hire engineers offshore.
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Actually it is lot less than that.
PayScale stat. Engineers with 5-9 years of exp earn 417K (US $10K). There is no doubt engineers earn lot less there. Main cost of offshoring is overhead, because it requires additional manpowers – just to manage offshore projects and additional process with a place halfway around the world (logistics, communications, infrastructure, security etc).

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But anyway the stupid companies tried it and it sort of half worked and now it is too expensive and they need to pull these jobs back in, and THAT, more than anything else is why rentals are so high now- I think anyway.
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In dot-com bust, there were enough “stupid companies” went under water. There is no doubt that there are enough “stupid companies” who are going busted on offshoring. Offshoring requires good strategy and process. Company that has no offshoring strategy will burn its finger no matter how cheap offshoring deal it gets.

Anyway, this whole offshore idea was hatched by a bunch of finance wonks anyway. Its a bad way to do business unless the dept that is offshored is totally compartmentalized. You can’t build great engineering products with no proximity to your workers, that is obvious. And anybody trying to manage this way realizes it immediately.

WG,
Above example does not make too much sense. You will get some idea if you read all the comments below that article.

Worked with them extensively, I do agree that they do not worth half the salary of SV employees. Some of them are exceptionally bright, but those ones are already here.

Workers from China have a good chance of filling that void if it happened that Indian eng are overpriced. They are actually better trained, only barrier is English.

(this is from 2007 and prices have risen- DRAMATICALLY- since then)

Then Indian salaries soared.Last year, Shah paid his engineers in India about half of Silicon Valley levels. By early this year, it was 75%. “Taking into account the time difference with India,” he says, “we weren’t saving any money by being there anymore.” In April, Shah shut down the Bangalore office…
http://venturebeat.com/2007/07/03/hiring-staff-in-india-no-longer-worth-it/

there are thousands of articles like this – but you have to dig for them and I’m not going to bother- I just went straight to ventureweb and looked.

the thing is, you don’t get the same productivity out of these offshore relationships. For a while offshoring was moving UP the food chain against higher and higher salaries and now it is moving DOWN the food chain so that callcenter and a few other areas are all that is being considered. Of course for the companies that already moved their business over there, they will stay but new ventures aren’t bothering and thats a fact. Ask any VC.

My company has 1/3 employees in India. I know the market is white hot there, but your number is obsurd.

Anon, this is true but what is happening is that Indian salaries are rising to US levels so it is not deflationary to US salaries. The whole offshoring boom moving software to India is over. It now costs over $60K per year to hire in India. Not even close to being worth it. This is one reason the rental market in the BA is on fire again.

I think offshoring engineering jobs to india was always a bad idea and didn’t pan out for most companies that tried it. Thats what happens when you get a finance weenie making decisions about “building great products”. You wind up with a whacked out scheme like- ~lets move R&D to india and wait for all the GREAT products to come rolling in!!!~ LOL. Microsoft was a huge offshoring machine for Vista. How did that work out.

Anyway we will have a better president in a few mos and that might lend some stability to the dollar which is half of the reason indian salaries are so high. But I really think that demon of offshoring has passed. The companies that never did it, like Apple and GOOG, prospered way more than Dell and MSFT who tried it.

Lol, you really don’t get it, do you?

No really. It’s not like anyone already living in Palo Alto is going to move to South SF to be closer to the job.