Seeking to keep its low-cost advantage, boost new product development and supply fast-growing markets,Dell plans to double the number of people it employs in India.
Over the next three years, the company expects to grow its workforce there to 20,000. For Dell, the move could be an effective way to fend off competition from other low-cost PC makers, including China-based Lenovo and others — but it is likely to open a new chapter in the ongoing debate overoutsourcing jobs to lower-cost overseas locations.
Large Talent Pool
Dell, the world’s largest maker of personal computers, has had some difficulties in the past as it outsourced work to India and elsewhere, at one point answering complaints about shoddy customer service by pledging to bring back to the U.S. some telephone support jobs it had shipped overseas.
On Monday, however, Chairman Michael Dell said the company would expand both its customer support and its research and development arms in India and establish manufacturing operations there over time.
“We will ensure a major recruitment push in engineering talents,” Dell said during a press conference in the southern city of Bangalore. “There is a fantastic opportunity to attract talent, since 20,000 engineers graduated in 2005 in India.”
The company plans to double its research and development engineering staff to 600 within a year, expanding its focus beyond software to include hardware such as servers, storage devices and PCs. Dell’s India division filed more than 140 invention disclosures in the software arena last year alone.
Dell also plans to add a manufacturing facility in the country sometime in the near future, though specific plans or a location were not announced.
Market Growth Eyed
In the past, the focus of Dell’s India efforts has been on providing support for global markets, especially in the area of support for U.S.-based customers, leveraging India’s lower-cost English-speaking workforce in the process.
The expansion, however, will focus at least as much on capturing more sales within India, where Dell is believed to have single-digit market share and where PC demand is expected to begin growing rapidly as costs come down to prices the general population can afford.
Establishing a local manufacturing operation would be critical to such a push, since Dell is competing against domestic Indian PC producers in that market. Dell said the India-based push would focus on enterprise products as well as PCs.
Dell already has several overseas computer-manufacturing plants, including facilities in Ireland, which it uses to supply the UK and European market, and China. Over time, some of the production for meeting those markets may also be shifted to India, Dell acknowledged.
For instance, the fast-growing areas of Eastern and Central Europe — including many former Soviet countries that are rapidly emerging as capitalist economies — would logically be supplied from India.
“The kind of investments that have occurred in China, Taiwan, Singapore — we would really like to see this in India,” Dell said. He also prodded the Indian government to pave the way for that expansion, adding: “One of the real threshold events will be for the government to essentially decide to establish an industrial policy to create capital-intensive manufacturing.”
New Chapter, Old Debate
The outsourcing issue came up again recently when Apple said it would open an India call center, employing some 1,500 people initially and doubling that number within two years.
Dell, meanwhile, has been at the center of the debate over outsourcing several times in the past and is likely to find itself there in the future. That’s because Dell needs to use its international reach to keep its most distinctive advantage — its low-cost direct sales model.
While that model helped Dell overtake Hewlett-Packard as the world’s top PC maker and was a driver in IBM’s decision to sell its PC unit, Dell’s cost advantage is seen eroding as it faces more overseas competition, most notably from Lenovo, which jumped to the third-largest PC maker after buying IBM’s PC line last year.
Dell still has the best supply chain management practices in the PC industry and strong customer focus that has helped it withstand the competitive threats so far, Gartner analyst John Enck told the E-Commerce Times.
Moving into India, he added, serves several goals, not only reducing costs in some areas but also giving it access to new, fast-growing markets.
“Dell’s biggest challenge is sustaining growth over time,” he said.
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