[algoshift]

Multiple reasons for this:

First, too many stories along the lines of "I built this app for $1,000 in India and it is making me $50K per month".

Second, kids who don't know how to value their time who'll work like slaves for $2,000.

Third, bad programmers who deliver product cheaply enough, however, the underlying code is an absolute mess. They charge nothing, throw it together and move on.

Fourth, people tend to come up with an idea of what it is that they want to pay for something and try to fit that something to that number. When it comes to software that's like the square-peg -> round-hole problem. I've been to countless meetings where the other side says things like "We'd like to do this for no more than $10K" ... and then they describe an intense six-month, four-person job.

You can always try to educate. Sometimes that works. It can be painful. What you don't want to do is be the educator and have someone else walk away with the work for less (even if it is 1%) than what you would charge. So, don't invest any time unless you know that there's a really good probability of getting the deal.

[rpwilcox]

Ever watch the tv show "pawn stars"? At least once an episode there's some guy - with no idea about what he has - walk in with an idea that they're going to sell some piece of trash for $5,000. When the bosses actually look at the piece, they offer $100. the guy leaves the shop hurt because "it's gotta be worth more than that", in spite of the fact that they don't know antiques or don't know how to run a basic business.

Same thing I think happens with programming. "I have this idea, and I know (somehow) that $500 is a fair price, in spite of the fact that they are neither technical people or... ever commissioned custom development before".

So, it's not just software development...

[sirrocco]

> Second, kids who don't know how to value their time who'll work like slaves for $2,000.

That's not always the case - if you manage to work $2000 /8h/day/month in my country , you're already being paid in the top .. 10% programmers.

Money has a different value based on location.

[uptownben]

> Money has a different value based on location. I have a hard time understanding the mentality behind statements like that. While currency may have different values based on location, time, effort, knowledge, experience shouldn't be so different in value. Don't you agree? I don't want to single out any countries, but just as an example, let's say American developers typically charge ~US$100 per hour, why would Indian developers charge US$15.00 (or vice-versa) for the same work? Doesn't that kind of "race to the bottom" simply de-value the profession and make things harder all around? If you have made the investment of getting educated, learning the technology, learning the business and can produce; you should be charging and getting paid accordingly, depending on the market, not your local currency or local minimum wage. When dealing with your local market, you will need to take local rates into consideration, but I don't see any reason to apply local rates and limitation to an international (Internet) market. I would genuinely like to know if I am completely off base, and if anyone has more insight on this.

[biot]

You can live like a king in India for a few thousand dollars a month. In San Francisco, you'll be lucky to pay your rent. As a result, those developers in India are happy to ask for less if that results in them getting the work since $2K/month in India buys them the same (or better) lifestyle as $2K/week in San Francisco.

Besides which, they're competing against all the other workers in their country. If someone charges $50/hour and gets a lot of work for a similar skill set as you, wouldn't you try charging $45/hour to get the business? If the supply of workers is high and the demand for those workers is low, it does become a race to the bottom. Additionally, they must charge less than their American counterparts because of the inconvenience of being in a timezone where the start of the day in India comes after the end of the day in the US, the language/culture barrier, legal considerations (if someone rips you off, you have better legal options available if they're not half a world away with a foreign court system), and so on.

I'm sure if they could still get the work and charge more they would. However, consider an American-based company wanting development work done. If they have a choice between a $100/hour American worker and a $100/hour Indian worker, odds are very good the American will get the work for all the above reasons.

[ashishgandhi]

I'm from India (currently in NYC though) and if you ask me - the USD 15 (say) buys the same bread in India as USD 100 (say). Hence the USD 100 in the US and USD 15 in India.

Cost of education is less in India (and so is the quality if you ask me, but that's not the point and I'm not inclined to discuss this in detail right now). Good developers in India do exist and tend to have learned things from costlier sources BUT have not paid the cost to use them (read piracy).

So in summary, in India the over cost of things was low to begin with and less money (in USD terms) can buy more. So it's a combination of PPP conversion of money and lower cost (even if purchasing power is taken into consideration) of attaining similar skills. What also drives down rates in India is more competition (high population density) - esp. from the spagetti-coder market that operates alongside the quality coder market.