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Apple's Bangalore Plans Fuel IT Outsourcing Debate

By Gene Koprowski MacNewsWorld ECT News Network
Mar 17, 2006 11:01 AM PT

Apple Computer's announcement last week that it plans to open a new call center in Bangalore, India, has stirred the debate, once again, over outsourcing of high tech U.S. jobs.

Apple's Bangalore Plans Fuel IT Outsourcing Debate

With the move, Apple joins Dell, which last year opened a call center in India amid much criticism, and IBM, which is increasingly moving jobs to the subcontinent and has said it may employ as many as 50,000 workers there in the coming years.

"Apple has gained millions of new customers in the last year and we are building a call center in India to help meet our growing service and support needs," said Steve Dowling, an Apple spokesperson.

No American Jobs on the Line

Apple tried to put the best face on the project, saying that though it was building a facility in Bangalore in which to locate the call center, it isn't planning to cut any existing American jobs.

Its U.S.-based call centers in Austin and Sacramento will continue to grow, Apple said, and the Banagalore facility will be staffed by local Apple employees. Apple claims the level of service will be the same as that which is provided by its other call centers.

It is expected that Apple will initially have 1,500 people in India, with 3,000 workers by the end of 2007.

Apple is following the lead of many other PC and electronics firms that have set up call centers in India. The "commoditization" of computer industry jobs is a reality that all workers must acknowledge, George Black, president and CEO of RSA, a Houston-based IT management firm, told MacNewsWorld.

Apple competitor Dell, which opened its third Indian call center last spring, has been heavily criticized for poor customer service, however.

Cost Savings Less Than Expected

Apple's move is seen as a cost-cutting option, though its business has been growing. In the fiscal year that ended last September, Apple's revenue was US$13.93 billion, up 68 percent from the year earlier.

A recent report from research consultancy Gartner disputes the idea that outsourcing technology jobs just to save money is worth the risk.

A survey conducted by the Stamford, Conn.-based firm suggests that many CIOs are primarily focused on "short-term savings" rather than long-term business profitability, which may be costly for companies in the long run.

Overall, attitudes toward outsourcing contracts tend to be positive at the outset of a project, but the satisfaction level often drops as it progresses and strategic goals are missed, Gartner found.

In the survey of 945 IT professionals, more than 50 percent of the respondents expected to see significant cost savings through outsourcing. However, fewer organizations said outsourcing would actually make companies more competitive in the market.

"One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs along with requirements for customized services," said Allie Young, research vice president for Gartner.

Many Jobs Outsourced to Americans Abroad

Interestingly, many of the jobs being outsourced to India are actually being taken by American expatriates.

The National Association of Software & Services Companies, an industry trade association in India, estimates that there are over 30,000 U.S. expatriates working in Indian IT and outsourcing companies -- three times the number reported two years ago.

All told, there are an estimated 50,000 foreign nationals working in India, with over 12,000 registered at the IT hub Bangalore, where Apple is opening its new call center.

This number is set to increase dramatically. Evalueserve, a Delhi-based company that provides consulting and research services to corporate clients, reckons that outsourcing firms in India will need more than 160,000 workers with excellent foreign-language skills by 2010.

The Indian education system will generate only 40,000 graduates with the required proficiency. Evalueserve predicts that foreigners will make up the difference.

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