A friend of mine sent me this analysis of the Indian outsourcing industry. While it looks attractive to those chasing cheap prices, there are serious pitfalls. Read for yourself:

" If you want to know the exact names of companies, give me a call. In
terms of rates, I finally got them down on following terms:
* £88/day which equates to ~$20 per hour since Indian engineering
day is ~9 hours per day or 176 hours per month.
* same rates for both on-shore or off-shore development. We pay
fixed amount for travel, hotel and meals while they are on site.
* no rate increases for 2 years
* blended rate ie no distinction between Project Manager, QA engineer, technical architects, etc.
* 30 day notice to break the contract for any reason
* final veto power on team provided by the vendor
* ability to replace a team member immediately if it is not working out, etc.

Since I am looking at setting up my own operation ie , I also
collected data from Indian headhunters on how much engineers are getting paid in India in different cities. Some of that information is included in the
PowerPoint as well. (NOTE: AVAILABLE BY REQUEST--charlie)

Things to watch out for:
* depending where your company is based ie London, SF, Austin, etc.
you will get quoted different rate for off-shore engineers. Even people
I know quoted me hire rates once they learned that I am working in London :)
* bait and switch -- typically project managers/leads that you talk
to while evaluating a vendor have 10+ years experience, are fluent in
English and accents are understandable. They almost are always IIT grads or
have worked abroad at some point. However, once you sign on, the story
changes :). I had to push very hard and rejected a lot of candidates before
I got the ones that were really good."

Interesting. Read on.

" * product experience vs enterprise solutions -- most of the large
vendors have not worked for "product companies." They are not aware of
product life cycles, release schedules, etc. They have, however, done a lot
of work on solutions that are deployed internally within companies, hence are
not aware of developing products for multiple markets, customer, etc.
* you will not find "Product Managers" at any of these companies.
* remember that the Indian software industry is about 10 years or so old.
So finding experienced staff ie 10+ years is hard.
* most of the big vendors want to give you staff with 6 months to 2 years experience.
* smaller and mid size companies typically have more experienced staff 3 to 5 years.
* the best and the brightest of the off-shore engineers are more interested in using latest and greatest technologies so talk to them about what they want to do, especially if you want them for more than a six month project.
* not all those who are working in software development in India went to a 4 year engineering school so test them for their problem solving skills.

If you have any questions, do not hesitate to contact me.

Regards,
(name withheld for privacy)"