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Apple puts BPOs on tenterhooks

Apple Computers' decision to close down its Bangalore centre has sparked an introspection in Indian BPO industry.

india Updated: Jun 13, 2006 16:12 IST

Global iPod major and computer maker Apple Computers decision to shut down its new Bangalore centre has sparked an introspection in the Indian BPO industry, which however, for now has shrugged off the move as a one off incident.

The maker of popular iPod digital music players and sleek Mac computers has been at the forefront of the Indian outsourcing market in the recent past -- first it announced its grand foray into the country and then went packing within a matter of three months.

In between, Apple granted some major outsourcing contracts to Indian companies, including a deal with HCL Infosystems under which the Indian IT firm would provide widerange marketing and service support for iPods.

La-affaire Apple has left the Indian business process outsourcing market perplexed and the industry players are groping over possible conclusions -- whether Apple is acting as a doomsayer or indicating a further bloom in the market.

While the closure of the Bangalore centre, which was estimated to have more than 3,000 employees by next year, has come as a big shock for the industry, Apple's decision to continue with its existing outsourcing contracts to HCL Infosystems and Transworks has come as solace.

HCL Infosystems and Apple announced late last month a strategic alliance under which HCL would provide complete marketing and support services for Apple iPods in India.

Around the time of the HCL deal announcement, Apple issued an internal memo that it was shelving its plans for a full-fledged customer support facility in Bangalore.

However, the decision was limited to Apple's captive operations in India and the company has not expressed any intention to downscale its outsourcing operations to other third-party vendors or its marketing and distribution contracts with Indian firms.

Apple also has a voice service outsourcing contract with Bangalore-based Transworks since 2004, which is still in effect.

Apple had inaugurated its own customer support operations in Bangalore in a grand ceremony on April 17. After starting with a 30-member team, the Bangalore facility was estimated to employ more than 1,500 workers by the year-end.

While, companies like HCL Info and Transworks have nothing to worry for now, the sacked employees who were part of Apple's grand Indian plans are an angry lot.

A sacked employee said that there was no prior warning and the company suddenly announced one day their work was going back to the US.

All the employees at Apple's Bangalore centre went through training at Transworks after being recruited, while some of them were about to go to the US for further training when the news of centre closure broke out.

However, what intrigues the industry most is the statement from Apple at the time of announcing the shutdown -- which said they have re-evaluated their plans and decided to explore opportunities in other countries.

Apple's CEO Steve Jobs is well known for his aggressive business strategies and whichever country provides him best values, he would go for that, an industry source said.

However, the industry players claim there are really no reasons to worry as Apple has reasserted its faith in the country's outsourcing industry by continuing its contracts to domestic third-party vendors.

They said that the whole affair indicates towards further strengthening in the sector, as more global companies might go ahead with outsourcing their businesses to third-party domestic vendors, inspite of establishing their own support centres in India.

The third-party outsourcing makes more sense as the industry is based on the pillar of finding better cost-effective solutions, they claim.

There are also comparisons being drawn to world's leading PC maker Dell, which had scaled up its India operations in 2003, fueling speculations that global confidence in the Indian outsourcing market was set for a plunge.

However, the speculations were short-lived as Dell went on a major expansion drive in the consequent years and the company currently employs nearly 15,000 people in India, as against a workforce of 6,000 in 2003 before it decided to downsize its Indian operations.

Apple's decision comes amid fears that the fast growing salaries in the Indian BPO sector and an overall tightening labour market would put a brake on the growth momentum.

However, these concerns have failed to discourage new outsourcing businesses being grabbed by India-based BPO companies so far, which is even evident from the recent Apple-HCL deal, the industry players said.

According to the latest industry data, the IT-enabled outsourcing industry in India continues to enjoy double digit annual growth rates for customer support services.

While the rise in BPO market wages have placed India above the bottom on the global outsourcing price radar, the growing sophistication and expanding support infrastructure indicates towards further growth potential left in the industry, the industry players said.