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There must be something unusual about Shah/Riya's case; there is no way on earth engineers in India get paid about 75% of what their US counterparts make. I dare say the 25% figure is still the norm for almost every development hot-spot in India apart from maybe Bangalore where it might be higher.

This is absolutely absurd. I can't believe it. Can we have references that Riya closed down its offices in Banglalore.

Mind you, if Indian professionals start getting salaries 75% of the ones we get in Silicon Valley each and every Indian,yes you heard me right, will leave the US and get back to India.
Only the ones born and brought up in US will remain.

This 75% figure makes me laugh. I still make deals with American firms at 10$/hr for a mid level skilled software professionals. Make it 12$/hr and I might loose that deal !

75% sounds too high based on our experience...

One cannot generalise about the whole market from the data gathered from a startup that cannot attract/manage employees at the right cost. Though this may be true for high-end engineers (PHds from Stanford/MIT) who may have returned to India, it is definitely not true that a normal programmer/software engineer is 75% of the US cost. I would love to have been employed by Riya!!! :-)

@ Harshal

Buddy, even U.S.-born Indians will start leaving for India. The only people who won't move are the ones who are too afraid of the Wild West atmosphere in India and need to have their frappa-mocha-latte every 10 minutes.

I remember reading Shah's blog a while back... It was also the topic of discussion at lunch for a few days ;)

Riya wanted the best of the Engineers available in India. Which translated into a lot of IITians. That is like trying to win a war fought solely by Generals.

If I remember right, Shah also mentions that "one" of his Engineers was being paid nearly 75% of what a Valley engineer would get paid.

While, it is certain that salaries are on the rise in India, it hasn't reached the 75% mark for "all" engineers. But, it will sooner or later.

In the higher end of technology there is an acute talent shortage, and that might be the real reason, for Apple and maybe Riya to have quit India...

I worked at Mirapoint where the founder (of Indian origin but educated in the US and resident here for long) built a world-class engineering organisation locally. Engineers loved working for him, the customer support org was intelligently outsourced (primarily) to and Indian company, the sales people loved him and customers liked him too and our product portfolio and customers and revenues grew even through the "tech freeze" of 2000-2003.

New management brought in by a VC pushed all development to Persistent Systems in Pune, India. We haven't come up with any new products since as the Indian org only does bug fixing and porting and does a poor job at that. They showed us some capable engineers at first and a few months into the project, moved them to other projects and replaced them with junior engineers. Mirapoint's CEO and management team and the VC remain blind to the opportunity they have fumbled. All th good engineers have left (to Google and others)

I met Munjal Shah at a convention in the valley and spoke about this. Yes, his policy was to hire the best engineers from the top schools (IIT's) and with at least 5 years of experience.

I personally worked for a startup in India 6 years ago, before moving here. I think a lot of startup founders that have never been to India do not really understand how to make it work.

Since I've been there and done it - i.e. started in India and then managed an India team for 3+ years from here in the US, I can say that there are a few things you have to do to make it work:
1. Hire bright and young people, many people are great programmers even when they are not very experienced. I was and knew others as well. This helps great with the cost as well as the attitude that a startup needs.

2. Make sure the people can communicate well in English - I cannot stress this enough. Culturally, Indians do not speak up - hire the ones that are not afraid to do so.

3. Have someone that has been there manage your team. Or get the best person (or best 2-3) there up here and have them work with the team from the US. They understand the culture there, and will adapt to things here quickly (you are getting the smart ones right?) and be able to bridge that crucial gap.

4. Email communication does not suffice. Be in constant touch via other means, IM, phone, web conference. Be "very very very" clear in your communication - set concrete expectations.

5. Keep the team there updated with what's going on with the business - it is very easy to get secluded when teams are such far apart.

These are my top 5 recommendations. I have several others (effectively motivating offshore teams, communication pitfalls etc. come to mind) which I'll save for a blog article on effectively managing outsourced teams. In the meantime if you have a question or are struggling with this, email me - iamyoohoo [at] yahoo dot com.

Munjal hypes up things. i have been reading his blog often, and he makes it sound like he is doing something which is earth shattering. I am sure there are other reasons why their India dev center did not work. I have experienced finding, retaining and communicating from US is hard. I think one has to understand this before going to India and address these problems right away.

The reason was - not enough value for the money he had to pay. Add some more and he would be able to get someone in his US team.

Value is obtained by learning how to hire efficiently and how to manage that team efficiently. Strategy and management makes all the difference between failure and success of an offshore team. Big vague words as they may seem, there are a few things for these that can be done quickly that can get this fixed 80%.

It is totally and absolutely incorrect that everyone in India is now getting 75% of US salaries - that statement is totally incorrect. Also is incorrect that hiring staff may not be worth it - there are hundreds of successes even today. It just means that it has become more challenging than 5 years before to get the right people with the increasing competition and higher pay expectations and be able to generate enough value to clearly demonstrate the benefit of having an offshore team.

H1-Bs (aka cheap labor) also don't result into productivity.

This may be a politically incorrect statement, but it is a fact. Instead of 10 H1-Bs I would much rather hire 1 qualified full-time employee.

@HARSHAL,

$10/hr for a skilled worker!! Skilled workers can command much higher than that.

This also shows a huge problem. Some of these body shops (aka outsourcing firms) are exploiting skilled software professionals.

Offshoring of software development to India is no longer a no-brainer decision - the cost has gone up significantly and so has the overall quality and capabilities of the engineers...

Software product startups typically require engineers at the higher end of the spectrum, so it's a different ballgame than the "masses of asses" approach that a larger IT organization can afford ;) As mentioned by some of the posters, esp "Al", it is certainly feasible to build a very productive and creative sw dev team in India at costs that are lower than the US...

In Riya's case, the indian engineers with "$75K salaries" had advanced oveseas degrees and competing US job offers (PhD from France for Mr Dalal mentioned in the article and job offers from Google etc). That's the top 0.01% of the engineers, 99.9+% of the engineers in India get paid much lower. And, salaries are often 20-30%+ lower in towns not named Bangalore (or Bangaluru;).

The WSJ article has generalized the unique situation of Riya's top tier engineers and some of the news stories triggered from this article (incld some TV stations) seem to indicate the $75K to be normal salary in India.

Here's the full article if you forgot to renew your WSJ subscription:

http://www.moneyweb.co.za/mw/view/mw/en/page94?...

I can say with absolute confidence that Munjal Shah doesn't know what he is talking about. I have built teams in India - no, not $X/hr services teams - but as part of real product companies. I have gotten enormous value, and some really dedicated motivated teams.

As an earlier poster put it, it all comes down to management. Munjal has just demonstrated perfectly well how not execute an India strategy. It is immaterial that he has ethnic Indian background - I have known white Americans who have succeeded in building outstanding teams in India, and I have known Indians who failed miserably. Management, vision, culture, strategy - all of those things matter. Here is a hint: have you enabled a system in which your team in India can operate with complete self-respect and self-confidence?

On the contary I think H1-B's who gets paid the same wage as any other employee here demonstrates that they are good if not better than locals. I have seen H1-B's work harder , smarter and faster, They work like that because our great immigration system has developed sophisticated methods to chain them with the carrot of "Green Card". They are the best possible employees that a company in USA can expect. Also *some* of them do take lower wages though most of them can switch employers by doing a H1B transfer. Plus they give social security taxes - the benifits of which they are not entitled to because of their temporary status - therefore we can enjoy those funds when we are old. The best thing therefore in my view for us is to let H1B's come and let the competition develop in my backyard rather than in the monkeyland.

I think Riya's failure might also have had to do with the nature of its product. When I first read about them, I thought their chances of success was slim (automatic face recognition is an extremely difficult problem). Some friends I spoke to (in Bangalore) also had the view that Riya was overhyping its technology and pretending they had solved a very hard problem. Just because they are a Silicon valley startup doesnt mean the best in India want to work with them.

I wonder why WSJ is wasting it's space and energy covering about some small venture funded company ( with no direction :), yeah they changed thier plan twice ).

That 75% seems to absurd for an average Indian engineer. May be Phd's and IIT Comp/Electronics grad's demand and deservce ( may be even more , around 125% of US sal levels period ).

Didn't people listen to NRN's comment that he asked his son to keep Stanford/Harvard as a backup if doesn't get into IIT's.

Bottomline just because he went wrong in his execution ( the Indian team) he can't complain that India is not cheaper etc.

Read the comments and you'll see the backlash against his statements. Riya hiring the folks they hired and then coming to the conclusion that they should bail out of the COUNTRY is like somebody coming to the US, hiring MIT/Stanford engineers and saying "sorry, the US isn't for me".

75% does sound high. However, I have a friend living in Bangalore (who left Ohio) and he says that what is happening is that engineers hear that one person is getting more so they jump ship or simply ask for more. As an aftereffect of B-lore being so popular as a base, the cost of living has risen drastically, too. This is fueling demands for higher rates.

Apparently, though, some Indian companies having been outsourcing some work to China, and Indian workers are moving there. I unfortunately didn't record any reference URLs, but these are tidbits I've read elsewhere in the past year, or received from friends.

IBM gearing up to lay off over 100000 American employees and hire in China & India.
What gives?

Yes I have also read Munjal's blog, few months back. I know Munjal from Andale, where he raised 70 mil and then in Riya where he raised 20 mil.
I see Munjal as a failure in both the business. Today like.com earns 2k-3k per day from affiliate clicks. My experience is that building up such a business is easy and dose not need 20 mil. I am sure many in Andale (aquired by Vendio) will belive this, you must have heard that Mujual was thrown out from Andale by the board of Directors.
Now some more incite into Riya's Bangalore office-

- The 1st person to be hired was Head of india office and She was a HR/Admin in Andale. There was something fishy about a HR/admin being placed as the head of an IT/technology company, when this news 1st broke. She never could lead a team of engineers and most of the folks fooled her.
- More the 50% of the employees were hired from Andale. I story one of the employee who was hired was getting salary of 9 lakh and his offer at riya way 17 lakh.
- There were 2 system admin and one of them left. The one who was left bargained with double the salary what he had.
- Munjal and most importantly Azhar use to come to India, but most of them where found in pub and talking about women etc,...
- Munaj and the HR lady started the concept of WORK from home. And the folks freak out big time in bangalore. I know one of them has a alternate business. He use to earn 14 lakh from Riya and runs a Restaurant in Bangalore. well he said me, he works from home. Munjal should understand that work from home dose not work in India .
- I heard that Munjal use to change his business plans over a single day. The way he changed the idea to close the Bangalore office. He hired 3 folks on monday and board meeting was in Tuesday. By Next monday Munjal was in india (Bombay) with Azhar and the HR lady.(not sure what they were doing there ;-). And tuesday they broke the news to shut down the office.

well that all i have to say. Munjal is a good story teller so the less we belive him is good.
thanks

Wow ... Running multiple cross-cultural R & D centers is an art. Very obvious that Shah couldnt make it work. Lot of good tips are mentioned here by other folks. Would like to add two more
1) encourage/put a process in place for India engineers to visit the US for short periods and regularly. Account for this in your travel budget.
2) Do not build entire engg/R&D in India. This is a recipe for failure. Do not outsource blindly as well. India co's need a lot of hand holding.

I totally disagree with the decision Mr. Shah made. IMHO Indian operations are well worth the investment if you know what you are doing.

I have been involved in outsourcing and running Indian subsidiaries for companies in USA for a long time.

I set up a brand new subsidiary for a software company in Seattle a year and a half ago in Pune India. We currently have 30 software engineers in the office, have not lost a single employee in one year and average salary is $12.5K (3-5 years experience). Although salaries are going up due to demand, in my experience Indian operations are well worth the investment. We operate our subsidiary at 15% of the US cost.

Here are a few things I would like to share -

1. Find right location– forget Bangalore, Chennai, Mumbai and Hyderabad. Too much competition and high cost of living. I have been using Pune as the preferred location very successfully.
2. Make Indian operations part of your global operations - This means constant communication, frequent visits, involving the employees in the big picture. I personally make 4 trips to India each year and spend 4 weeks each time. We have others in our organization traveling to and from India all the time. We use phones, emails, IMs and video conferences on regular basis. Communication is the biggest challenge and it required extra effort.
3. Hire carefully - Our VP of engineering and I personally hired all the employees and we are very picky. We get the employees involved in hiring the new team members. We also have a “buddy bonus” – we are getting great new employees through this program. The quality of work produced in India is as good as the one we produce in our US office – but it takes some time and requires a development process that everyone follows. Unless absolutely necessary, hire local candidates. Family plays very important role and out of town candidates tend to leave if there are problems with family (sick parents).
4. Treat them well - We must treat employees in the India offices well. We offer them same benefits as our employees in the US office. They have Xboxes, parties; flex hours, comp time, cricket team, rewards program and bonus program based on the length of the employment. Although money plays a very important role, many professionals are looking for great company to work for, great technology, on-going training, chance to visit US, great management.
5. Expand over time - We started with small development, QA activities a year and a half ago; today we develop 60% of all our software in India including design and architecture, QA, support (7X24).
Feel free to contact me – Ranjit_mulgaonkar@yahoo.com

I don't know WTF you guys are talking about? With 7 years of IT exp I am getting $24k now here in India. I know companies at Indore that have programmers working for as low as $2.5k. You are comparing bunch of demanding IITians with other (probably as bright if not more) graduates. How many IITians does India produce every year compared to Engineers/Computer Graduates from other schools? Shitty rumors!

Munjal Shah wants to create "waves", news stories and precious publicity all without spending a cent. I do not know why he shut down the India office but his reason seems too melodramatic. There are tons of startups shifting their operations and it seems to work out well. I dont think even IITians take home 75% of their US counterparts, maybe he paid one of the returning PhDs a $75k and assuming such PhDs get a mere $100k, he made up the statement. Anyway it cost him all the money, (but the WSJ article was worth it i guess) and I hope he gave the leaving employees a good deal.

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