When evaluating new offshore locations one of the key metrics is financial savings.  For most operations, the primary driver of cost savings is lower wages or labor arbitrage. To help illustrate the relative position of key locations we have compiled salary data across a number of countries, job titles and experience levels.

Methodology

The key source of salary data (base salary excluding bonus) is PayScale, one of the leading salary benchmarking services.  Our methodology included converting all currencies to US dollars, making adjustments for high wage inflation and mismatched job titles/ experience levels, and then conversion to a 100 point index where US salaries = 100.

Junior Offshore Resources

Generally speaking, you find the highest cost difference with junior resources.  Therefore labor arbitrage opportunities are greatest if you can build a delivery pyramid with a broad base i.e. lots of junior resources and few senior resources.

Figure 1 below illustrates the relative wage rates for junior technical resources (software engineer/ developer with 1-4 years experience). Countries in Asia take most of the low cost spots where base salaries for junior resources are about 10%-20% of those in the United States.  India is almost 15% of the US while China is 20%.

Wage Index for Top Outsourcing Locations (Junior Resources) - Figure 1

Sources: PayScale, XE.com, Offshore Advisor

Relative wages vary in Latin America and start at about 20% in Argentina and go as high as 35% in Brazil.  Eastern European countries are in the middle of the pack ranging from 20%-30%.  At the high end are Canada and Israel, at about 80% of US salaries for junior resources.

Senior Offshore Resources

Illustrated in Figure 2 below are the relative salaries for Senior Developers and Project Managers with 10-20 years experience. As noted above, the salary differential is much lower with more senior resources.   The lowest salaries for senior resources are about 20% of the US vs about 10% for junior resources.

Note that salaries for senior resources have significantly more variability than those of entry level resources and care must be taken when drawing conclusions from average data.

In general, the ranking of countries by senior resource salaries is similar to that of less experienced personnel.  India ranks slightly higher, reflecting the shortage of senior technical and management resources.  Similarly, senior resources in China are in extremely short supply and salaries are about half that of the US.

Wage Index for Top Outsourcing Locations (Senior Resources) - Figure 2

Sources: PayScale, XE.com, Offshore Advisor