Out of India: Apple’s Outsourcing Woes
Apple is considered to be a front-runner in many areas of technology, usually predicting trends and innovating to stay ahead of its technology. Recent moves by the company have left many international financial analysts wondering if Apple is as prescient in business trends as it is in consumer technology.
Only three short months ago, Apple Matters writer Darcy Richardson had checked the pulse of the Internet and beyond on the then-recent news story that Apple was opening a technical support center in Bangalore, India.
The plan, announced in March, was to have a 3,000 employee technical support center in India to support Apple’s operations. In the midst of a nation-wide debate about outsourcing, it seemed that Apple had clearly seen the benefits and made a move to cut costs while exploring new markets abroad. Or so we thought.
Earlier this month, Apple quietly closed the Bangalore facility and sent the 30 recently hired employees packing. All plans of expanding the center have been canceled, but Apple has decided to maintain a sales presence in the country.
The sacked employees had little prior notice, and had only recently been trained. There had also been talk of training in the United States.
This single move by the company has sparked debates across India and other parts of the world as to whether this is the start of a trend in business process outsourcing or just a one-off event. Of course, Apple still maintains outsourcing contracts with Indian companies for local support and other technical services, the move out of the country has little precedent and is being viewed closely. Also, there has been very little official word about the issue from Apple so far.
The issue gained frenzy when Intel announced that, as part of worldwide cost-cutting measures, they were going to cut their presence in India significantly. Intel currently has a few thousand employees in India. Recently, Dell also reduced its operations in the country after reaching a high of 15,000 employees recently. Apple has cryptically indicated that it is “re-evaluating” its options and may explore other countries. In the world of business and finance, when people or corporations of power and influence say as little about such an important decision as Apple has here, it creates widespread market speculation. This move in particular, has sparked a debate about the long-term viability of India as a business process outsourcing location. As wages, quality of living and expectations rise among the IT workers of India, it may no longer remain as lucrative a move for outside companies to come in. Other countries may present a better alternative. Of course, analysts with a more optimistic view of the outsourcing future of India point to the fact that third-party outsourcing is still strong and Apple has many contracts with local companies that are still alive and well.
It is entirely possible that the move out of India may not be related to costs at all. Apple faced backlash from many quarters when the announcement of outsourced technical support hit the news media. For a long time, Apple’s technical support has differentiated itself from the competition and many people saw this as a step in the wrong direction. Apple’s closure of its Bangalore office may also be in order to salvage its reputation—for the most part, it is a premium consumer product company with expensive products and cannot afford to turn customers off due to inadequate customer support. While there is no evidence that Indian customer support is inferior to that of anywhere else in the world, the perception of an outsourced technical support is a lot worse than the reality. And for Apple, perception may be more important that reality.
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Comments
With all due respect, Devanshu. You couldn’t be more off base with your assessment. I think despite “perceived” savings. More and more technical projects, and on-going technical support endeavors will continue to creep their way back to the U.S.
It has NOTHING to do with any perceived lack of ability on the part of support engineers, or other engineers. But rather that ultimately the cost of supporting the infrastructure necessary has led many to reassess. Plus, consider that everyone “hears” about one project or another that succeeded via outsourcing. But it’s always an “I read it somewhere…” that never seems to be traceable. Conversely, we don’t hear about many of the ultimate failings of outsourcing efforts, simply because of a basic human failing. Shame. Embarrassment. Name it what you wish.
The fact is that no one who banks on outsourcing, and fails, is ever going to step up and admit it publicly. No one wants to be the first to publicly, and under scrutiny of the media, admit that their outsourcing effort failed. And, of course, not many in the media have even truly been pursuing such a storyline. God forbid !
I think it speaks better of Apple ( and yes, I’m being optimistic here, but since you article was spun rather that way, I’ll counter spin ) that they realized that they DO have a market brand that resonates well with the customer who will spend money for a product that nicely meets their goal.
Frankly, in regards to DELL. I personally own a Dell Laptop, as well an Apple AlPB. I can tell you in the 3 years I’ve owned the Dell, I’ve refrained from calling tech support for anything. Specifically because when I received mine initially, it had a faulty keyboard, and I couldn’t get a straight answer out of anyone to get the issues resolved ( even though I had on-site support ). Guess where the tech support calls for that Dell were being handled ? I don’t think I even need to give you the answer.
As for the AlPB, I had a problem upgrading from Panther to Tiger. Do you know that the girl ( wherever you are, April, you’re ok in my book ), stayed on the phone with me just to determine what in heavens name was happening ? For an HOUR.
Yes I paid a little more for my AlPB than I did for my Dell. But I doubt you’ll ever get THAT kind of customer service from an outsourced tech support center. And that, Devanshu, is why I think Apple stepped out of India.
Disagree if you will. But I think my next PC will be a MacBookPro, and I just described why.
Marcelol, I have not proposed anything in my article that is my assessment. My article is a review of what the possible reasons and possible ramifications of Apple having pulled out of India. Much of this has been culled from other sources- US press, US analysts, blogs, Apple sites, Indian press and Indian analysts. I shed light on many theories behind Apple’s move, none of which are entirely my own (though I do have ideas about which ones are correct). This article was filed under the “News” section of this site, not opinion. This comment, however, is my opinion.
I have in fact heard of many first and second hand stories of success through outsourcing; mainly financial benefits. And while the we (the US) may have better engineers on average today, other countries will catch up at a lower price.
Technical support is a tough one to outsource because the caller expects familiarity- in language, tone, local jargon- and is dealing with a real person. Your experience with Dell was unfortunate, but outsourcing companies will get better. Their livelihoods depend on it. Other services (other than tech support) can be much more easily outsourced because engineering is the same everywhere- for the most part, it does not require local knowledge, spoken language skills and so on.
If there is a nationalistic pride in buying American and shunning foreign products in services, that is fine. But it would serve us better if that pride is focused on making/keeping American products/services better than anywhere else in the world.
Apple sell a premium “experience”. I imagine that Steve Jobs decided that a Bangalore call centre was inconsistent with the experience he had in mind for Apple users. Look to the Apple stores and their kid-glove treatment of customers. If Genius Bar = Apple, then Bangalore = Dell/HP.
The relocation of services to India is a decision that could only made by accountants. In my experience, IT companies do well when they are run by salespeople and dismally when run by accountants, despite the initial bounce that hard-nosed accounting decisions can bring to the share price.
Steve Jobs is the uber-salesman. Everything Apple is doing is about customer satisfaction. Gorgeous products, amazing packaging, “destination” storefronts, on-hand genius support… Where does Bangalore fit into this?
I disagree. A company’s livelihood doesn’t necessarily depend on whether it should, or must, outsource. I’m heartened to see that freedom of speech is alive and well here, and that at the same time whenever someone makes a comment like the one I’ve made, that immediately the old FUD ( that’s Fear, Uncertainty, Doubt, that anyone familiar with Microsoft-ish tactics should be familiar with me ) mud-slinging of “nationalistic” attitudes get brandished about. Nothing in what I said even whiffs of nationalism, it’s an argument based specifically on first hand ( second-hand, etc. are totally non-applicable ) experience. I’m not of buying non-USA products and services, and many of things I do buy are. It’s funny that invariably when someone, ANYONE, makes a valid case for why outsourcing ( when used strictly on a cost-per basis ) simply doesn’t make sense in the long run ; the proponent will drop the “national” card.
No one here’s deriding a software engineer in bangalore’s desire, or moreso RIGHT, to make a living, and provide for his family. That being the case, when someone here in the US makes the same case, they have to be subjected to some sort of “call into suspect their intentions” statements. My comments weren’t a statement of national pride, Devanshu. I respected your opinions, despite being responded to with rhetoric. Whether you think your article was more opinion-based than market info based, is your business.
Try a little less defensive approach to responding to differing points of view. It’ll leave a better impression.
@marcelol, my comment on nationalism wasn’t directed at you. I should have made that more clear; and if this sounds defensive- and leaves you with a bad impression- I’m sorry for that as well. I was probably anticipating a comment (from you or someone else) on national pride when I made that remark and clearly jumped the gun.
I appreciate a differing point of view- in fact, if you re-read my comment above, I do not actually disagree with what you have said so far. In any case, I don’t think outsourcing is the perfect solution for every company, but I do grant that it may work for some. The only point I would like to make is that as costs abroad get more competitive and their services improve, the world will seem like a much smaller marketplace.
I would never want any of my comments or articles to generate FUD- these comment threads may not be the best method of judging content+intent+direction of remarks. My mistake.
@sydneystephen, I think you make a fantastic point. A foreign service center may not be consistent with the Apple experience. In fact, a US Mac user may expect US “Genius” support and similarly an Indian Mac user may expect Indian “Genius” support.
No worries, Devanshu. No offense taken in any event. I do see some benefits for some enterprises in outsourcing, don’t misunderstand me. What I think has happened is that the “horde mentality” has somewhat taken over the accounting-led companies in the U.S ( and elsewhere, of course ) where the almighty bottom line ( even if it is only in the short term ) is seen as the panacea to a companies problems.
Even so, as I understand it, even countries that have served as the first tier outsourcing market have had their own share of issues dealing with outsourcing. Such as when some banking officials in India began a strike because certain bank functions were outsourced to, either the Phillipines or China, I can remember which.
I think what we should draw from all this debate, which is healthy, don’t let anyone tell you otherwise, is that making decisions one way or the other precipitously, everyone ends up paying for it. And that, is at the core of the point I was trying to make.