By Stephan Manning.
It is almost ironic. Some years ago many U.S. and European firms started offshoring IT, finance and accounting, software testing, engineering work and other services to India, China and other developing countries mainly to cut labor costs. Now, most of these firms struggle with retaining qualified workers abroad, after having cut thousands of jobs at home. According to various reports by the Offshoring Research Network, employee turnover remains one of the most persisting problems facing firms with offshore operations. Why is that? Well, many firms complain about ‘wage inflation’ in offshoring hotspots (see Plunkett 2014 report). But is that the whole story? Compared to Silicon Valley software engineers, most counterparts in Bangalore, India, still earn only 10-20% of salaries in the Bay area (see Payscale, article by Tam). So are firms unable or unwilling to retain workers offshore?