[jimbokun]

"I might agree with expensive/inexpensive but who says US developers are more skilled than others?"

I would suggest it's more that the highly skilled developers in, say, India are not cheap enough to make the outsourcing worth it. Here's a WSJ article making that argument:

http://online.wsj.com/article/SB118342455118256110.html

"Last year, Mr. Shah paid his engineers in India about half of Silicon Valley levels. By early this year, it was 75%."

[alecco]

The seat value is usually as much as salary, if not more. I bet it still was less than 20% than in Silicon Valley (for sure at cost of social unrest and different infrastructure, but strictly money it is cheaper.)