Plans for an Indian tech support center have been scrapped. A cautionary tale

Apple CEO Steve Jobs has long had a thing for India. After work- ing at game developer Atari (ATAR ) in the mid-'70s, Jobs took a break and backpacked around the subcontinent in search of spiritual enlightenment. Upon his return to the U.S., his more capitalistic instincts took over, and he and Steve Wozniak launched Apple. Today, of course, the seeker-turned- billionaire enjoys a reputation as one of the most successful entrepreneurs and savviest marketing minds on the planet.

I can hire Java guys Bangalore with 3-5 years of experience for $3K a month, and that includes facilities, a PC, network, etc. He may not be brilliant, but he is cheap. Cost of employment there is $36,000 a year. Cost of employment on his American equivalent would be well over $100,000 a year. Most every article I see on outsourcing skews these numbers horribly. Its as though they've never gotten an actual quote in researching their articles. You can hire graduates for $700 a month, if you've got an office. The problem with direct hiring is retaining people. A guy will leave you for $800 a month with zero notice.

Apple's problems would be a little different as they were creating a call center. In my opinion, outsourcing call centers is a TERRIBLE idea. Culture matters in customer service, and giving a guy named Ganesh the name George and forbidding him from giving out his real name is hardly the equivalent of actual cross-cultural education.

Call centers in India are for companies that don't give a shit about customer service. Development centers are not neccessarily this way. The fact that the Apple Service tech I talk to is intimately familiar with technology because he's been a computer dork since age 5 and that he is acclimated to the Western hemisphere matters in whether I recieve satisfactory customer service. Not that customer service for an IT company is a dream job, but in the states people have options and so this job attracts a certain type of person.

A person that is well suited to the job. In India, where opportunity is limited and jobs affording entry to the middle class are not very diverse, this is not the case. If you're from the right city, and you can't become a doctor or a software engineer by getting a CS degree or any engineering degree and then becoming an indentured servant in exchange for training, you try to work at a call center. This being the case, odds are you are not suited to this work, and cultural barriers aside, will suck at it.

It is ironic that 'high value' activities like software development can be successfully outsourced, but 'low value' activities like customer service cannot.

In engineering, your American domain experts can act as quality assurance personnel, ensuring that code from Indian engineers who may not have a perfect grasp of the problem you're trying to solve never reaches the customer if it is not precisely what is required. Your American engineers will also be the source of creativity in creating novel solutions to business problems.

Thats not to say that Indians are not creative. They are, and increasing R&D development on the subcontinent proves it. But if you are starting an Indian subsidiary or are outsourcing work to an outsourcing firm, your Indian engineers will lack sufficient domain expertise to be effectively creative until they are more experienced in your domain. Whats more, Bangalore, Hyderabad, Chennai and New Dheli are such competitive markets that employee turnover rate is quite high, and so an investment of domain education is often lost when an employee moves on to the next job.

So you've got to have a competent team of engineers stateside who can parcel work out effectively to your Indian engineers. And in order to retain them, you've got to make your Indian engineers feel that they have a future with your company. You've got to inspire them, to make them feel that they are part of something meaningful. You've got to sell them on your mantra. The work has to matter. This is easier said than done, as you are probably 10 or more timezones away. But the bottom line is, that to get the most value from outsourcing software development, you have to take an active role in managing your Indian subsidiary or contract employees.

The culture in Bangalore in particular is one of distrust and deceit. Employees are used to being mistreated and lied to. Stock options are promised and then never materialize. Engineers work on substandard equipment. Management is completely cynical because of the turnover rate, and compound the problem further by treating engineers as easily replaceable commodities rather than human beings that the company is investing in.

You can do better. You can get enormous value out of India. But it is not easy, and you most definately need a trusted man on the ground. And it cannot be via call centers. Use the money you save on engineering to hire people in the rural US.

India: Why Apple Walked Away