| Vietnam's Star Rises, While India's Is Questioned |
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With Marc Hebert, EVP of Sierra Atlantic and a former board member of the principle IT lobby group (ITAA), through which Hebert helped lobby the federal government to maintain and expand the free market in offshore services. Question: NeoIT's latest salary report revealed that emerging offshore hot spot Vietnam is coming in as the least expensive area to do business and Singapore arrived as the most expensive. Can you talk a little about the results of this salary report? Hebert: It's not surprising that Vietnam has the lowest IT salary levels. In fact, there is a whole host of other countries waiting in the wings behind Vietnam that will emerge in future year studies. I'm thinking of Pakistan, Indonesia, and even someday Nigeria, Egypt, Iraq.... The possibilities go on and on, and actually finally seem likely to happen in our lifetimes. The most striking result of the study, however, is that after five years or more of double-digit salary increases, India is still one of the lowest-cost offshore locations. Question: The NeoIT report showed Indian IT salaries ranging from $5,000 to $13,000, and predicted that these salaries would move upward. Where does this wage hike and increased competition from places like Vietnam leave India in the offshoring marketplace of the future? Is it losing ground? Hebert: India is not losing ground because the supply of good IT skills is increasing rapidly and the productivity of IT work in India is also increasing, keeping down total cost. Given its high offshoring share today (up to 70 percent), India will undoubtedly lose some share in future years to China and others, but will remain the leading offshoring country for the foreseeable future. While places like Vietnam are emerging as lower-cost players, the skill levels and productivity levels in Vietnam are no match for India for anything but low-level work. India's challenge is to maintain its push to higher value as it gradually cedes the low-level work to other countries. Question: What do you see happening to the overseas salaries in the IT offshoring arena and how do you see these changes affecting the way U.S. companies use offshoring in the future? Hebert: IT salaries in the hot markets—India and China—will keep increasing at double-digit rates. Salaries in the other markets will increase only modestly over the next few years. However, India and China will maintain their momentum in offshoring because of productivity improvements that will offset salary inflation, keeping the total cost of IT work competitive. I don't see the relative market shares changing much over the next three years, at least. In the longer term, as the low-cost providers like Vietnam grow their skills and competence, they will become more competitive and offer a wider range of options to U.S. and European companies. That will benefit the whole world, ultimately. Competition in a climate of global economic freedom is a powerfully good thing, and that's where we are headed. |
