[pash]

This is the easiest and most foolproof option. But reverse fleitz's chronology: first get another offer, then go talk to your boss.

Edit—To imsofuture's point below: Yes, come to your employer with another offer that you would actually take, but with a real preference to stay (otherwise, just go). Ask for a raise, and if the discussion doesn't go anywhere, describe the decision you face between more money elsewhere and a preference to stay if the money were not a differentiator.

This is not extortion, and a reasonable employer will not treat it as such. It is the way you find out what you're worth and get paid commensurately. Changing jobs is not the only way to get a raise, and it's certainly not the best way—for you or for your employer.

[imsofuture]

Don't do this. Well, do this, but don't use your offer as a negotiating chip -- use it as a backup plan if you don't get a raise.

You will be the first up against the wall if you accept a counter offer to stay.

[joezydeco]

Not up against a wall. You'll be out the door as soon as your replacement is trained. You'll probably be the one doing the training, too. And then instead of your income going up, it'll go down to zero.

[rhizome]

Have either of you witnessed this happening in real life? There's always a comment to this effect in every "raise" question I've ever come across, but never have I seen any proximate information.

[waltgoldberg]

It definitely does! Take it from someone who's been responsible for giving the layoff list to HR as well as being a small business owner. Business leaders look at developers as a commodity. Why do you think so many companies still hold Java in such high esteem?

[rhizome]

I don't doubt that out-of-band raises can put someone over the cost-line such that they'd get the axe at layoff time, but I think that's different than the company gunning for them as soon as they give a raise in response to a cherry-pick offer to the employee, to be actively hiring for this person's replacement ASAP.

[joezydeco]

First hand, it happens. Not every CEO is a wonderful caring person, and some can get very vindictive when it appears that an underling is threatening the operation of their company by (in their view) holding the job hostage for more cash.

[imsofuture]

Yes, first hand. Don't do it :)

[tsotha]

I agree with this wholeheartedly. And anyway it's not necessary. First you get the offer. Then you go to your boss and say "Look, I'm not really happy with my current situation. The market supports a larger salary than you're paying me."

That's a threat, sort of. But it's veiled enough that your boss can give you a raise without feeling like you forced his hand. He can give you a raise without it being step one in a two step plan to get rid of you.

If he doesn't... well, then you take the other offer.

[jamesfordiv]

Check out the good book "Getting Past No" (the follow-up to "Getting to Yes") - this is called having your BATNA - Best Alternative to Negotiated Agreement and will help your position even if you don't have to bring it up, just having it in your mind could boost your confidence and help you ask for what you want