Rolling back offshoring

For some companies, offshore development, particularly in India, is losing the financial advantages it once had. Software developer wages in India are overall about 30% of what they are in the US, but top performers are able to demand 50% to 75% of US salaries, with 15-30% annual increases, according to this story.

"If you're a startup and you're doing a lot of iterative design and you constantly need a higher level of agility, you might find [offshoring] more burdensome than the cost differential is worth," said Fran Karamouzis, a research vice president at Gartner who specializes in outsourcing issue.

On the other hand, "If you can give the Indian team things that are clearly delineated that they can own and drive on their own, then it works out pretty well," said Pejman Roshan, cofounder and senior director of marketing at Agito Networks, a wireless technology startup in Sunnyvale, Calif. that outsources software coding to a services firm in Bangalore.

In addition to the communication challenges introduced by different cultures and a 12-hour timezone difference, multiple power outages every day eat into efficiency of Indian teams.