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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."
Is it only me that gets frustrated when my calls are piped over to India? I'm all for globalisation and outsourcing but when basic customer service suffers it serves only to frustrate customers, or me at least.
I've lost count of the number of times I've literal just given up and hung up while trying to do simple tasks over the phone like notify change of address or query a bill.
The 3 companies I've had particular problems with are Amex, Dell and Apple.
"The turnover is high, and the competition for good people is strong."
My company is currently using Indian developers to augment our in-house staff. Every time the offshore company presents someone to us that cuts the mustard, we end up having to rotate someone else on after that person bolts for another company in India three months later. We keep getting told that demand is so high for QUALITY Indian developers that no one can keep them. They keep bouncing from outfit to outfit, getting salary bumps with each move. It's second hand information obviously, but it certainly does synch with what we've experienced.
Not sure how the subscription model for time.com works, but I have been able to access all stories in the Cover article without a subscription:
Bombay's boom
Hooray for Bollywood
India Awakens
My lost world
Worth a read.
An Indian-American Hindu committed to non-violent thought/speech/action alarmed by the global explosion of radical Islam
India is going through a tech boom similar to the U.S. tech boom in the 90's. Qualified computer-related experts are demanding higher and higher salaries and jumping to whatever company is the current high bidder. As the wages go up, the rest of India's economy booms. India is beginning to take on many of the good and bad aspects of the U.S. economy. With most of its over 1 billion people in povberty, China can out compete India easily on wages. Training just 1% of that number with technial support produces a 10,000,000 strong workforce. The process of U.S. jobs migrating to India will happen to Indian jobs over the next 5-10 years as China becomes the outsourcing destination of choice.
What are the major requirements for locations to which you want to outsource tech jobs?
- A stable power grid (if it's not there, build a small one yourself)
- An oversupply of labor with high population growth (to keep that oversupply rolling)
- A sufficient percentage of English-speaking workers.
The rest is training and, for large companies, will pay off quickly. I'm sure I've left off a couple items, but African countries, Indonesia and other PacRim countries, and SE Asia are where tech labor outsourcing is heading next.
This is a positive for these countries (standard of living will increase) and, in the long run, a positive for the US and other western powers (greater influence in those areas, long-term economic benefits).
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
It's happening now. I live in Indianapolis, and there are already three companies here who are getting on that trend. One thing they point out is that prices for land and housing are 1/2 to 1/3 of what they are in, say, Chicago, and that while wages here aren't THAT much lower, they are lower. The labor laws are also pretty much the same as elsewhere in the US, plus there are nice little junkets like Colts games, the Indy 500, etc. Indy isn't the only place seeing this, either.
Of course, over time, as wages adjust, ... but hey, that's just how the world is.
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Yes, making money is obviously important, but it doesn't preclude doing the right thing.
As an example, the Fortune 500 electronics company that I work for does most of its R&D in the US, but there are also R&D centers in other countries, mostly from acquisitions. It does most of its manufacturing in the US as well, even though it could get away with doing the job much cheaper in emerging countries, particularly China, where environmental rules are pretty slack and labor costs are much lower.
We've got at least one fab in China, true, but it meets US safety and environmental standards. I'm sure that the pay is not what it is in the US, but if the pay there is like the pay here, it's above the national average for the job.
Here in the US, we regularly win awards for going well above and beyond governmental requirements for environmental safety. We've got a fairly green operation, as much as possible, considering what it takes to do what we do.
The company has established a well-funded charitable foundation that supports education and arts in the community and around the country - and even in the big tech downturn when we were losing billions of dollars a year, it was able to give away millions of dollars each year.
And the thing is, we're not particularly different from most other large companies. So the "make money at any cost" mantra is getting pretty tiring.
-h-
The cost of living and the wage are only one factor of the cost of an ousourced worker.
You have to add the cost of duplicating power infrastructure because too many companies have moved in and the utility grid cannot cope. Current brownout+blackout rate is 20%+ during daytime and growing.
You have to add the exorbitant communication costs which will only grow up due to basic supply and demand laws. The fiber under the Gulf is still the same, there is no new coming up and demand has grown several times a year. The Eastern route is not looking any better because there India competes with the growing demand from China and other countries. 256Kbit there will buy you several E1s in the UK or the US (at the same contention ratio).
You have to add.. add.. add...
At the end of the adding all the numbers a worker in India will come up to less then US or EU costs in terms of salary and considerably more as far as infrastructure is concerned. From there on the overall numbers depend on how the work is organised, but I am not surprised at a company pulling out from India. There are plenty of other places around the world with comparable salary rates and considerably better infrastructure.
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What's interesting to note here is that the Indian government played a big role in the quality of life expansion.
Take a look at Mexico in contrast. 2 years ago, illegal immigrants sent around 12 billion dollars back home. This was more than twice the highest foreign investment in Mexico. Last year, they sent back an estimated 17 billion. This was the second highest income for the entire country of Mexico; mexican oil brought in the highest income, but not much higher.* Yet Mexico remains dirt poor, despite the huge influx of cash they're receiving from El Norte and their illegal migrant workers. Ultimately, Mexico's government is to blame for the consistent failure to raise standards of living.
It really makes you wonder just how much damage corruption does to a floundering Third World nation. It also makes the point that throwing money at a problem won't even begin to solve it most of the time.
*Paraphrasing Dilip Ratha, World Bank senior economist
Just shows, how lack of proper details about a situation can manifest itself into prejudice. Caste system in India is a non-entity in the way it used to be. The reserved castes (earlier called lower castes) now get active affirmative with as much as 70% of some colleges purely earmarked for them. Publicly distinguishing people based on caste can get you to jail
The caste system does not violate human rights, and commenting on an issue without understanding it just makes people look asinine.
The cost of living and the wage are only one factor of the cost of an ousourced worker.
This is a very important point.
We have a lot of people in India doing contract stuff for us where I work. The price for the contractors is relatively low, but there is a *huge* infrastructure cost required to let them do the work. There's the data connection costs that you mention, but also things like VPN gear, terminal servers, MS CALs (our enterprise agreement only covers employees, not contractors), plus all of the staff work here to ensure that everything can be done reasonably securely.
That's just the concrete costs. There are additional ones that are harder to measure. Things like the potential costs related to misuse of our data by people in a foreign country, or the costs of supporting applications that may have been written by a completely different team or outsourcing company.
I have seen some good work come from the contractors, but IMO they don't provide any savings worth the effort of sending the work to another country. It seems mostly like another big corporation Monopoly money game where they make it look like saving money by transferring the cost to another division.
"...always new atoms but always doing the same dance, remembering what the dance was yesterday." -Richard Feynman