Software cost only has a small influence in the general picture, although the Indian and Chinese VFX companies using unlicensed software gives them even more of an edge than cheap labour by itself does.
That 12h per frame has remained more or less constant for the past years, they'd rather have more details than speed it up =) (I suppose modern hardware can render Toy Story today in real time and even more)
But the cost of artists reflect the cost of where they live, pick a less expensive city in the US and you can probably match UK/New Zealand
Of course, it can't be NullPointer, Wyoming but in a bigger area it shouldn't be a problem
e.g. SPI send all their Roto to India, they've just moved all their comping and lighting to Vancouver, it's mainly just R&D that's in Culver City now.
That's probably going to happen more and more now - instead of having dedicated Roto departments, it'll be outsourced as a way to cut costs.
Today, I can do professional VFX in a "cheap" computer (of course, you want to shoot for the high end), together with software easily acquirable.
Compare that to the beginnings of ILM for example.
This smells much more of bad business plans + companies tolerating studio's abuse (payment delays, overstaffing to meet deadlines, etc)
" In order to compete, VFX houses in Southern California have to charge way less, leading to slim-to-none profit margins"
Aah there you go. The absurd of housing prices (and everything) in California. Like you need to be close to your customer in this times of internet and FedEx, you can set shop in Seattle maybe and cut your costs