if one is looking for $10-20 hourly developer, certainly the result will likely be what you've experienced.

Big IT Indian firms usually will choose one or two highly talented developers for a project team and others just hop around them. Usually these projects aren't also very engineering-intensive and becomes boring once the base framework is created for creative folks. Good devs don't stay longer in a company at least during initial years simply they're in good demand and gets double the package with every jump. Eventually they'll make it to Indian subsidiaries of US companies like Microsoft/Google or, they'll start their own expert consultancy/product companies.

For the record I've worked out of India exclusively and have charged up to about $100 hourly rate from my US clients. I've gone through above process - my last job being at Microsoft India (2011-2016)

When developing nations that are primarily known for their cheap products start creating competitive high quality products what happens is that they start charging just as much as every other developed nation. That same dynamic plays out with Indian software developers.

If they can deliver X amount of value they can also charge X for their service. This means if you hire an Indian for $10 an hour you're going to get value equivalent to $10.

Since productivity per member drops as you increase team size you can't just hire a bigger team to get yourself out of this problem. The true number of developers that your project needs is probably constant and quite low.

If you hire cheaper but less experienced developers then it might simply take 6 times longer to finish the project than if you had hired an Indian developer that charges $60 per hour. This is usually where the project fails. Managers expect the project to be done in 6 months but this estimate is based on competent developers with 3 years of experience, not beginners who are working on their first project and first need to gather 3 years of experience to adequately finish the project.

Really the only way you can get a real bargain is by hiring someone, letting them gain experience without giving them a raise. The difference between market rate and actual developer salary is where you save the most money. The tricky part is creating a environment in which people want to stay.

India has quite a way to go to break that boundary. The IT industry in India is basically a giant demonstration of the Dead Sea effect. The most talented engineers from India have been leaving the country in droves for decades. The local industry has a deservedly terrible reputation, which motivates more local talent to leave, further degrading the local labor market, which further incentivises people to leave...

I think the most promising signs for the local industry is that it’s starting to produce some rather successful home grown startups. Which are much more likely to attract local talent than the outsourcing body shops are.

You get what you pay for. That holds true everywhere.

Umm... 20$ an hour, meaning 3200$ a month, would be quite a nice salary in a lot of Europe (Greece, Bulgaria, Romania, Poland, ...). You get people with BAs or MAs in comp science who have been developers for 2-5 years.

While I'm sure some will say that 3.2k is ridiculous in country X, I personally met people in all of the above countries working for less while being more experienced.

20 USD/hour is not what developer earns, but what you pay for developer time. Overhead (buildings, managers, computers, toilet paper), sales commissions, taxes, and off time and eats big big part of that money.

I've seen rate cards for quite a few bpo providers and major it body shops, and unless it's like an extreme case (Chennai and one or two other cities), the devs are getting slightly less than 10% of their billed rate, the rest being overhead.

Hell, I look at the delta between what my firm bills me out for and what I take home, and it's about 12% of my fully loaded day rate.

I've seen two type of compensation schemes during my agency years: ~60% take home, but zero during my downtime and around ~15% when I was salaried developer, which make sense as utilization of around 60% was expected.

The rule of thumb used to be, total costs = what you pay them * 1.5 to cover that stuff.

So 3200 becomes $4800 (or just under $57k a year) - that's still a good deal given what you'd get.

I've worked with eastern and central European developers and some of them are phenomenal (the skill breakdown is about equivalent to UK devs as a pool maybe tending towards them been slightly better but there will be some element of selection bias in that, language barrier is the biggest hurdle, many of them speak/write good English - my partner is Hungarian and her written English is at least as good as mine) but when the tiniest miss-understanding on requirements is costly during development and potentially devastating in production that really starts to matter.

I think you are misunderstanding what the $20 refer to. They are what the customer is paying to the company for a single billable hour. That money is not only used to pay the developer but usually the rest of the company too. Sales, marketing, accountants and other employees that aren't directly assigned to a project or are waiting for their next project will have to be paid from that billable hour as well. You can call them greedy or whatever but usually they get away with a 50% cut or sometimes more. Ok, now you are left with $10 which represents the labor cost + office space + equipment needed by the developer himself. So the employee gets paid $6.66 per hour before taxes but the customer is paying $20 for that.

Indeed. The starting salaries of fresh grads in (Wipro/Infosys/TCS/etc.) has been stagnant at INR 300,000 to INR 350,000 / year for the last 10-15 years. Converted to USD this is: ~ 4000 - 4700 / year.

20 USD / hour * 8 h/day * 21 days/month * 12 months = ~ 40,000 USD / year.

Of course, experienced ones don't receive that might higher salary either. About 5 years of experience would probably get you around double to triple the starting salary.

I guess that is the reason why there is interest in outsourcing to Eastern Europe. Case in point being EPAM Systems. Indian IT consultancies might have huge operations but they are not the only show in town.

Yes, and we collaborated with a few dozen EPAM developers on some projects at my last full-time corporate job, and all of the ones I worked with (both the in-person EPAM teammates and the remote ones) were very sharp people who definitely enjoy technological endeavors. As development firms such as EPAM gain traction, I expect some of the massive Indian firms will lose ground.

Right. I'm counting on that to happen. This should force the hands of the Indian firms to innovate or perish. That should be very interesting to watch.

Eastern Europe is in a wierd time where it has the infrastructure, market access, and human resources of a rich country, but much lower cost of living and pay.

That isn't sustainable - we will just see things equalise with Germany and then where is the competitive advantage? So cutting costs by pushing technical work to eastern EU isn't sustainable, at least in the 10 year time frame.

I am sure EPAM and the tech industry there will adapt to the shift but they will not be as the new Infosys.

The developer you're getting from the big IT consultancy is likely getting only 15-20% of what you're paying for him.

Definitely! I'd love to earn $3200 a month here...

I don't mind much about the wage gap between countries when I do local work, but it gets ackward when working with remote teams.

Like I may earn $20k/yr here for what my teammates abroad would be making $100k/yr.

These are IT agencies though, competing in a global market. Not individual salaries.