Vietnam May Be Cheapest, But India Is Still A Bargain

If the search for cheap I.T. labor is what drives offshore outsourcing, then Vietnam could become the next hot spot for far-flung software development. It boasts the least-expensive IT labor among all offshore destinations, according to a study that outsourcing consultants neoIT released last week.

Vietnamese programmers and help-desk staffers can be hired for an average annual salary of $3,276, neoIT says. IT workers with two to three years' experience earn about $5,400, and managers with five to eight years' experience get about $8,500.

However, there's a limit to what companies should expect if they send work to Vietnam. The country "is hampered by the scarcity of professionals competent enough to handle complex IT applications and processes," neoIT says. That could lead CIOs searching for a bargain to South Africa, the second-cheapest outsourcing destination in the study, where midlevel IT workers earn about $6,000 a year.

Nevertheless, most still will probably turn to India, which remains one of the least-expensive markets. Entry-level workers earn an average salary of $5,443 and midtier workers about $8,400, while experienced managers pull in $13,100. India has "an abundant supply of competent labor" to keep prices in check, neoIT says.

That explains why so many U.S. businesses are sticking with the country for offshore development despite an emerging range of options. "India is doing a great job producing talented graduates, so at present we don't see the need to go anywhere else," says Marc Hebert, executive VP at Sierra Atlantic Inc.

China is an emerging competitor to India but is actually more expensive today. Entry, midlevel, and experienced IT workers there earn average annual salaries of $5,460, $8,800, and $13,730, respectively.

The most expensive offshore destination? It's Singapore, where midtier workers earn $38,000 and managers $60,000 annually.