Offshore Salaries: Vietnam Is Cheapest, But India Is Still A Bargain

If offshore outsourcing is driven primarily by the search for cheap IT labor, then Vietnam could become the next hot spot for far-flung software development. The Southeast Asian nation has the least-expensive IT labor among all offshore destinations, according to a study released Wednesday by outsourcing consultants neoIT.

For an average annual salary of $3,276, companies can hire entry-level Vietnamese programmers and help-desk staffers, neoIT says. A Vietnamese IT worker with two to three years experience will command about $5,400, while a manager with five to eight years experience is paid about $8,500.

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

What's surprising about neoIT's findings is that India, where offshoring has boomed over the past several years, remains one of the least-expensive destinations despite skyrocketing demand for its labor. Entry-level workers in India earn an average salary of $5,443 and midtier workers about $8,400, while experienced managers pull in roughly $13,100. India still has "an abundant supply of competent labor" to keep prices in check, neoIT says.

That may be why some U.S. businesses that use offshore software developers are sticking with the country 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, an emerging offshore competitor to India, is actually already more expensive than its rival. Entry, midlevel, and experienced IT workers in the People's Republic earn average annual salaries of $5,460, $8,800, and $13,730 respectively.

And the most expensive offshore destination? It's Singapore, where midtier workers earn $38,000 and managers take home about $60,000 annually.