25) Will India Be Undercut by China?

The United States' growing demand for offshore services in India is raising labor costs. Although the income of Indian technicians are usually greatly lower than the averages in U.S., the increasingly narrowed payment gap combined with other uncertain factors are causing many American corporations to reconsider the expenditure saving to be achieved by offshore outsourcing.

Because of the abundance of engineers, historical ties to western countries, dominant advantage of large population speaking English, and its comparatively low-cost labor, India quickly became the main software outsourcing country for the U.S. It is quite explainable that salaries in India would steadily rise with the demand increase for offshore service. The expanding IT market has prospered in India and subsequently, the living costs more in several regions of the country.

The rise of labor cost in India could make many U.S. IT firms take into consideration other countries where salaries are much lower. As a matter of fact, even a number of Indian businesses have switched their own project into China.

Just as the situation in India, China's universities foster more bachelor degree holders in engineering than those in the States. However, China's rate of salary increase for IT industry jobs was only half of those of India's. U.S. payment rose by 3.3 % to 3.5 %, which were the smallest increases rate ever recorded as an annual survey result about American IT positions, according to Hewitt research.

Another region growing more attractive for offshore outsourcing is Eastern Europe. Recently, a research released a report assessing that the average salary of a specialist university graduate from Romania is $6,500 per year working on software development. Another option is Russia, which produces more bachelor degree graduates in engineering than in America. The labor cost is quite competitive, and India's IT labor cost rises to a even higher price.

India's IT industry may fall into a hopeless situation because of the following reasons:

India's special unique culture and education mechanism may nurture risk-taking.

Perspective about India as a technological centre will not be restricted to offshore outsourcing services. A number of Indian company experts have the idea that political transformations over the past 10 years have helped their industry. India now counts more upon itself and could thus develop technologies independently, rather than just provide services to those American companies and those from elsewhere.

In the past few decades, innovation has taken place in India in which it successfully opened itself to other countries and investment from abroad. All of these have lead to many development opportunities as well as job openings for local IT workers.

Political changes can also negatively influence India's global business and restrain further increases in wage.