I am not an economist or a CIO, but I called this one 5 years ago. It seemed pretty obvious that wage inflation (even then) would quickly make India less of a bargain. At that point your choice is to find ‘the next cheap place to develop’ or pull your operations back to the US. This is exactly the sort of thing that happened with Ireland before India was all the rage.
The other lesson that people have learned in outsourcing to India is that while the upfront cost appears attractive, the fact that you are going to have 5x or 10x the amount of re-work means the overall cost is much higher that doing the work in house. So that enticing $30 a hour work done offshore (versus $100 onshore) becomes more like $150 to $300 once you factor in the extra cycles to fix all of the low quality code you receive and the delays to your project by having work done 12 time zones away.
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