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Why Apple Backed out from India?
rmunaval writes "BusinessWeek reports an interesting article on why Apple might have backed out from India. The prime reason being, India has grown at a much more rapid rate than expected and is no longer the cheap destination for the companies. It grew at an astonishing rate of 9.3% last quarter."
With IBM CEO announcing $6 Billion for expansion in India, which also included setting up worldclass IBM Research centers, I think it was a bad move by Apple. IBM CEO & executives are much more experienced and powerful in the corporate world than Apple executives are. When Bach's player hits the road, Jobs will be forced to move Cupertino to Bangalore or he will move to Benaras ;-)
First, the BW article speculates... the author doesn't really know. So was it high wages? Was it something else? "We" don't know yet.
However, there are several issues with setting up in India that probably make it less attractive for Apple.
1) Worker loyalty: while all tech workers probably seem like mercenaries these days, it is even more so in India's white hot tech areas. The workers will leave for what we, in the U.S., would consider miniscule salary differences.
2) Worker training: Indian workers are often broad brush trained in "popular" technologies - finding software engineers trained in non-Windows, non-Oracle, non-SAP, or non-J2EE tech is probably much harder to find at a cost effective salary. Again, this is an issue in the U.S. too, but more pronounced in India and many other non-U.S. technology boom areas.
3) Best of the best: Apple is small (workforce numbers) and tends to follow the hire the best of the best (even if they don't give them the best of the best resources to work with). Those that are really good are probably already working in the U.S., or would not find it all that hard to make it into the U.S. The number left of the best of the best in India probably aren't much cheaper these days (one would often have to be 4:1 to 8:1 cheaper to outweigh the below).
4) Big costs (not just money): Apple doesn't have huge projects that require a thousand or thousands of engineers on a single project that might be able to amortize the costs/issues of temporal and geographical displacement. Apple has most of its software engineering done in Cupertino, and it would take a big shift to deal with significant outsourcing or remote development.
5) Core strength: software engineering is Apple's bread and butter, it is what differentiates the hardware, it is its own profit center. Messing with this too much is not a good idea. Apple can't treat this as a commodity item on a balance sheet.
6) Expansion deals went through in CA: Apple bought a large data center and has plans to build another campus in CA - and the review of those deals going through probably meant that this Indian effort doesn't make sense for Apple right now.
None of this particularly means anything with respect to India, India's tech boom, IBM in India, outsourcing to India, etc. This is merely Apple's evaluation on whether or not it makes sense for Apple. These issues have been there, will continue to be there. It is strange that Apple started and effort but then pulled out, but that is better that they are contantly critically re-evaluating rather than what we've seen from some other U.S. companies that have staked huge efforts on "hot trends" that some CIO/CFO/CEO reads in a trade mag, rather than doing true critical analysis. Going to India may make sense for lots of companies, but certainly not to the level we've seen it lately.
I mean, aren't most songs just Beatles ripoffs anyway?
Why yes, 'Master of Puppets' is obviously derived from 'Lucy in the Sky with Diamonds.' I'm not sure about 'Jesus built my Hotrod', though.
"We returned the General to El Salvador, or maybe Guatemala, it's difficult to tell from 10,000 feet"
With rising affluence, what people consider a living wage also rises much faster than subsidence level wages. The wage for the average day laborer might only have gone up a bit, but what middle class workers such as programmers or engineers would like to earn is probably rising much faster. For them, a living wave now probably includes being able to buy a cell phone, maybe a scooter or car, a bigger apartment, a few nights on the town,... And these things are likely not that much cheaper than in the US or Europe because they cater to a relatively affluent group of people.
Some of my Indian (in the US) coworkers joked that the rents for a/c apartments with working plumbing and other amenities in Mumbay were actually higher than what they paid in a mid-size college town in the US. Yes, you could rent a carboard shack for $5/month, but nobody who can afford not to would.
i was in India this april, and took my family out for dinner, the day before i left for US to an upscale restaurant. for a group of 10 people, i paid around 900 Rupees, which came to $19, the same that i spent last night when i went out to eat here in US. It is not right that the quality of life in India is not as good as here. i.e., if you earn in US and spend it in India it is great. but if you earn in India, then that meal we had was a luxury. it is very complicated. the hype about these high paying software jobs is very rampant in India and everybody wants a share of the pie(and i don't blame them). but the problem is sometimes i worry whether Indians is also going the same direction as US. i.e., abandoning the manufacturing sector(which is very vital for a good industrial growth) and giving more importance to the service sector. just like Apple major companies have their high end solutions R&D labs in US, so in reality there is not much value added here. it is sometimes sad that the young engineers are flocking the software industry than the traditional industries. it is about time, we had a reality check
In a lot of the developing world, they are skipping conventional and expensive and now old-fashioned ast century tech infrastructure roll-out and going to the next generation tech, decentralised (and alternative energy, solar, etc) electric power and wireless networks instead of fixed wires. Here is an article on what India is doing to bring electricity to the 1/2 billion people that don't have it yet.
http://www.dawn.com/2006/06/14/int6.htm
And just because apple puled out doesn't mean any number of other tech giants aren't going in. Intel, IBM, MS, HP etc, etc are all dropping serious folding cash into India right now. Apple is one of the few that *aren't*. Apple has pulled some lame biz decisions in the past, this is probably one of them, IMO.
The difference is that in China it's the government doing the abuse, while in India the government has been fighting actively to get rid of the caste system.