Average wages for workers in Eastern Europe are way higher than $500/mo, never mind software engineers. Poland is $1,400, Hungary $1,200, Bulgaria $1,100, Romania $1,600, Lithuania $2,200, Estonia $2,000, Latvia $1,700. If you assume that software engineers will earn at least double the average wages of all workers, you're looking at $2,200-4,400 as a base. Paying 3x that to get the top people would mean $6,600-13,200/mo. Ultimately, you'd be paying $44-88/hour to execute your strategy.
Countries like Bulgaria and Hungary are both in the EU allowing workers to travel to Germany, France, etc. to get jobs. They aren't trapped behind immigration laws that don't allow them to move to places with higher salaries.
Even if you look at India, $10/hour wouldn't get you the best engineers. Mediocre engineers are earning that after a few years experience. Maybe you'll say that you'll pay triple that and that $30/hour is still cheap. Sure, $54,000/year is a cheap software engineer, but I think the best engineers have better options than being seen as a cost savings for some American company.
Frankly, it isn't necessarily about the money itself. It's about the attitude. If a company sees software as a cost center to be optimized/cut, their software will be crappy. If you're just focused on cutting costs, it's not just about how much you're paying engineers per hour. It's also about whether you let your engineers work on something that makes the product better, but might not be strictly necessary. For example, maybe there's a process the customer has to go through and many do it wrong because it's confusing. Will you let them spend the time to re-write it? Or will you say that it works so you don't want to spend money on that and customers will put up with it?
In theory, you could have more engineers and allow them to do more if they were cheaper. I've found that (in practice) when companies are looking to optimize salaries like that, they're also optimizing the time spent on things as well. They don't see their software as a strategic advantage to be invested in. They just see a cost center to be cut and that won't just be salaries, but also hours worked.
It also creates a crappy atmosphere where workers often don't care about getting things done beyond what they need to keep their job and not get yelled at. You're looking to work the system for yourself and minimize costs and they'll get a similar attitude where they try to work the system and do as little work for you as possible.
I'm not saying that you couldn't create a great company in Eastern Europe or India - they exist. But I think if your attitude is one of outsourcing a cost center, you won't get what you're looking for. Pay is relative, but it's higher than you think and you don't want to fall into the trap of just thinking that software is a cost center.
Plus, you don't even have to go that far to get cheaper engineers. You can pay half of what you pay Americans in France or Germany.
Countries like Bulgaria and Hungary are both in the EU allowing workers to travel to Germany, France, etc. to get jobs. They aren't trapped behind immigration laws that don't allow them to move to places with higher salaries.
Even if you look at India, $10/hour wouldn't get you the best engineers. Mediocre engineers are earning that after a few years experience. Maybe you'll say that you'll pay triple that and that $30/hour is still cheap. Sure, $54,000/year is a cheap software engineer, but I think the best engineers have better options than being seen as a cost savings for some American company.
Frankly, it isn't necessarily about the money itself. It's about the attitude. If a company sees software as a cost center to be optimized/cut, their software will be crappy. If you're just focused on cutting costs, it's not just about how much you're paying engineers per hour. It's also about whether you let your engineers work on something that makes the product better, but might not be strictly necessary. For example, maybe there's a process the customer has to go through and many do it wrong because it's confusing. Will you let them spend the time to re-write it? Or will you say that it works so you don't want to spend money on that and customers will put up with it?
In theory, you could have more engineers and allow them to do more if they were cheaper. I've found that (in practice) when companies are looking to optimize salaries like that, they're also optimizing the time spent on things as well. They don't see their software as a strategic advantage to be invested in. They just see a cost center to be cut and that won't just be salaries, but also hours worked.
It also creates a crappy atmosphere where workers often don't care about getting things done beyond what they need to keep their job and not get yelled at. You're looking to work the system for yourself and minimize costs and they'll get a similar attitude where they try to work the system and do as little work for you as possible.
I'm not saying that you couldn't create a great company in Eastern Europe or India - they exist. But I think if your attitude is one of outsourcing a cost center, you won't get what you're looking for. Pay is relative, but it's higher than you think and you don't want to fall into the trap of just thinking that software is a cost center.
Plus, you don't even have to go that far to get cheaper engineers. You can pay half of what you pay Americans in France or Germany.