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Cost of Operating A Software Development Firm In Shanghai, China
July, 2002
The primary incentive to offshore software development from
US to
One
All currency related numbers in this report are expressed in US dollars. The currency exchange rate between Chinese RMB and US dollar is around 8.28.
Even though a recent national survey states that the average
annual salary for “computer related” jobs in
This study shows that renting 4,000 square feet “international standardized” office space in Shanghai, China, costs $96,000 per year, that is about $2.00 per square foot per month, comparable to the Bay Area in California. If including asset management fee, utility charge and Internet access charge, the total infrastructure related cost is $141,000 per year.
This study finds that other than the cost mentioned above,
there is no other significant “hidden” cost to operate a foreign business in
Business taxation varies based on the products, location and
ownership of the business. The majority part of business tax is business income
tax, which is normally levied at 30%. For foreign owned, hi-tech,
export-oriented companies, the income tax would be 15%. If the company is
located at so-called “development areas”, the company can have 100% exempts for
the first two years and 50% exempts for the next three years from income tax,
starting from the year when the company becomes profitable. Note that business
income tax only applies to companies that have sales income inside
All software developers hired in
Rank |
Years of
Experience |
Qualifications |
Qualified
Positions |
1st
Tier Engineers |
5 or
more |
Expert
in OOA/OOD/C++ Fluent
in System Level Design Fluent
in Development Process Leadership
and Communication Skills Managed
one or two cycles before |
Architect Team
Lead Project
Manager System
Analyst |
2nd
Tier Engineers |
3 and 4 |
Fluent
in OOA/OOD/C++ Understand
Development Process Been
through one or two cycles |
Life-cycle
Object-Oriented Development (from analysis to testing) |
3rd
Tier Engineers |
1 and 2 |
Fluent
in C++/Java Understand
OOA/OOD |
C++/Java
coding Testing |
The characteristics drawn here are based on author’s general
understanding of the level of skills and experiences of software engineers in
Office Manager is responsible for human resources, accounting activities and other daily works. He or she shall be well connected in the local city so that the office can run smoothly with minimal interruptions. Ideally, he or she shall have human resource background.
IT administrator handles all the IT issues such as software upgrade and network administration. He or she will not be responsible for the software build system or SQA.
In
Position |
Monthly
Compensation Per Person |
Annual
Compensation Per Person |
Annual
Benefits Per Person |
Annual
Cost Per Person |
No.
Of People |
Monthly
Compensation for the Group |
Annual
Compensation for the Group |
Annual
Benefits for the Group |
Annual
Cost For the Group |
1st Tier(s) |
$2,500 |
$30,000 |
$12,000 |
$42,000 |
3 |
$7,500 |
$90,000 |
$36,000 |
$126,000 |
2nd Tier(s) |
$800 |
$9,600 |
$3,840 |
$13,440 |
6 |
$4,800 |
$57,600 |
$23,040 |
$80,640 |
3rd Tier(s) |
$400 |
$4,800 |
$1,920 |
$6,720 |
6 |
$2,400 |
$28,800 |
$11,520 |
$40,320 |
Manager |
$1,000 |
$12,000 |
$4,800 |
$16,800 |
1 |
$1,000 |
$12,000 |
$4,800 |
$16,800 |
IT Admin |
$500 |
$6,000 |
$2,400 |
$8,400 |
1 |
$500 |
$6,000 |
$2,400 |
$8,400 |
All |
|
$11,435 |
$4,574 |
$16,009 |
17 |
$16,200 |
$194,400 |
$77,760 |
$272,160 |
Information used in the projection comes from the interview
with the CEO of one successful e-commerce company in
Infrastructure cost as used here refers to the cost of
office space, Internet access and telecommunications. It does not include the
IT cost. The personnel part of IT cost has been included in the capital cost
(see the previous section). The equipment part of IT cost varies depending on the
business activity and requirements. The branch office in
During the past several years,
Item |
Cost per Sq Ft per Month |
Other
Unit Cost |
Cost per Month |
Cost per Year |
|
Note |
Office Space |
$2.00 |
|
$8,000 |
$96,000 |
$1.66 ~
$3.30 per sq ft per month |
Office
built based on international standard |
Management |
$0.30 |
|
$1,200 |
$14,400 |
$0.20 ~
$0.35 per sq ft per month |
Including
cleaning and security |
Parking |
|
$100/car |
$200 |
$2,400 |
$75 ~
$150 per car per month |
Based on
two cars |
ADSL |
|
$150/line |
$300 |
$3,600 |
|
Dynamic
IP, 512 KB |
DDN |
|
$350/line |
$700 |
$8,400 |
|
Dedicated
Data Network (kind of VPN), 128 KB |
Utility |
|
|
$350 |
$4,200 |
|
Electricity
and water |
Telephone |
|
$50/line |
$1,000 |
$12,000 |
|
Based on
20 lines |
Total
|
|
|
$11,750 |
$141,000 |
|
|
Information used in this projection comes from the published
materials in