Friday, July 06, 2007

Rising wages prompt firm to pull out of India

But the increase in Bangalore wages had "destroyed the ROI" that was the rationale for maintaining the otherwise difficult two-continent operation. The company has now moved to consolidate its engineering and research work at its California headquarters.

In his blog Shah predicted that other firms with similar offshore operations would also face problems as wages rose. "I do believe that other startups in Bangalore will see the same issue in 12-24 months," he said.

Shah noted that unlike Silicon Valley employees, staff in Bangalore did not value stock options highly, preferring a boost in cash wages. This, and the fact that Riya was seeking the most highly qualified staff in the area "increased our exposure to wage inflation", Shah said.

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