Business of Dell in India - Assignment Example

Business of Dell in India Table of Contents Introduction 3 Why India? 4 Dell in India 5 Challenges 8 Measures 9 Conclusions 10 References 12 Bibliography 14 Introduction The economic reforms in India, initiated in 1991 stimulated the effects of globalization and liberalization to reach India in the last decade of the previous century. The economic reforms helped India to grow at above 6% per annum rate on an average since the year of 1992-93 (Bajpai & Sachs, n.d.). The large multi national corporations of repute commenced to outsource their activities in India as the trade policies were liberalized and governmental restrictions were removed. The first industry to take such benefit was that of medical transcription. In the mid-nineties, the telecom sector was removed from government monopoly and was consequently liberalized. The liberalization improved scope for private investment. Along with private investments, the quality of service also improved as accountability is always a major concern for private ownerships. As the telecom networks and services improved in India, it opened the floodgates for the growth of the information technology enabled services in India. Along with this, the launch of new telecom policy by government of India in 1999 which introduced internet protocol telephony, led to rapid growth of the information technology and information technology enabled services, popularly known as IT/ITES. As the external environment for IT and ITES industries grew at the vehement rate, the leading global players started to view India as the preferred destination for their services. Dell Computers, once the largest producer of personal computers was not an exception either. Established by Michael Dell, the company chose Bangalore as the favored place to inaugurate operations in India. Why India? As the growth of the encouraging external environment of India has been analyzed in the previous part; there were more reasons to choose India as the preferred destination by the IT major like Dell. At the outset i.e.in early 2001, Dell started its venture in India with the customer contact centre at Bangalore. The customer contact centre of Dell Computers provided customer care to the customer care, technical support to sales and back office operations for finance related transactions. For such jobs, the company required persons with sound technical knowledge and English speaking capability. And populace with such attributes was found huge in India. In addition to that, the cost of employment (which contributed to around 60% to 70% of total operating expenses in the west) was also much lower in India. The research reports suggest that in the well educated and English speaking Indian work force was available at one-fifth the price of his American counterpart (Noughton, 2006). Also, the investment in infrastructure was lower in India as government often provided land to the multi national corporations at cheaper rates. All these measures resulted in lowering of costs for the company which on the other hand raised the savings for the company. The increased savings could be utilized for the research and development activities. The employees and the workforce available in India were also found to be more competitive and committed towards their work than that of United States. The prime reason of such happening is that of level of maturity in Indian counterparts. The US employees of call centers were generally graduates of high schools where as in India, most of the employees in the similar profile were graduates from universities and therefore, the level of commitment was much higher. Dell in India Dell’s operations in India commenced in May, 2001. It opened their customer contact centre at the so-called Silicon Valley of the East, Bangalore. Apart from the technical support to the buyers of Dell computers, the customer contact centers also provided back office operations of financial transactions. Soon it opened software development centre at Bangalore. The next destination for the company in India was that of Hyderabad. In the early years of this decade, in 2003, the Dell India experienced customer outbursts regarding the services provided by customer contact centers. The disgust among the customers reached such extents that the company had to transfer technical support of two product lines to United States. The major concerns that Dell India faced can be enumerated as follows: Language difficulties – The language problem that persisted with the call centre operations in India was mainly related with the accent. Even the employees acknowledged the fact. But the employees maintained that the prime reason of such problem was because of the inability to recognize US accent. Also, the fact that the accent of the citizens of United States varied from state to state further worsened the situation as no particular training mechanism could solve the problem at once. Long hold times – Another major concern for the customers of Dell who used to make calls to their help centre was that of long hold times. The callers accused that they were made to wait for around ten minutes to get in line with the attendant, which often antagonized the valued customers. Scripted responses – The customers of Dell also had allegations about the responses of the caller agents. Some of them even accused that they were put to answering machines and not any human attended them. The root of such uncalled happenings might have happened because several other set of reasons. While there was serious problems in understanding the American accent by the Indian work force, but no specific training could have helped the case as the accent of Americans widely varied from one state to another. Also, the customer care centers in India not only dealt with the customers from United States but from the entire globe. The customers acknowledged the fact that the call agents were very polite but the company policies were not flexible enough to allow the call agents from India to make any change. Such incidents infuriated the clients as it did not help any the customers and not even the companies in the long run. The customers in the United States had severe experiences such that the purchasers entitled to rebate according to their website and rebate centers located in the United States was turned down by the customer centers located in India as they repeatedly said, “Unable to honor your request” (FMDS Alumni, 2005). Even though several problems persisted, the growth of Dell India never ceased. In March 2005, the company launched its third customer contact center at Mohali. The centre was initially meant to provide technical support to the customers of Dell but with time it also started making sales call. As the net revenue of company increased from just over US $ 40 billions in 2004 to around US $ 55 billions in 2006, the company’s operations in India also increased. To meet with the excess, the management of Dell India decided to outsource its activities to third party BPO as and when required. The logics behind such decision were many fold. The company could avoid increasing employee on rolls and also the capital expenditures for the purpose of infrastructural development of a new customer contact centre. Outsourcing to a third BPO also meant additions of varying experiences (of those BPOs) to the functionalities of Dell India. Dell India, under the leadership of Romi Malhotra (Managing Director of Dell India), succeeded in developing new business models and increase revenue. For the purpose the company hired the best available talents from wide spectrum of functionalities. The company generally employed those who had expertise in data mining and analytical modeling. The background of such hires comprised of econometrics, actuarial sciences and PhDs. Apart from this, Dell India changed certain business models of the Dell e.g. it stopped providing free support to the non-Dell customers which the company used to provide. As the centers in India gained more dimensions, the company promoted India as the only country providing support to the customers all over the world be it Europe or America or Asia-Pacific. Challenges As the company grew both vertically as well as horizontally, it started to face certain challenges in its operations. There were technical threats as discussed earlier. The customers based at United States were thoroughly dissatisfied with the customer service of the company though they appreciated the products of the company. The major concerns for the company were that of communication problem among the customers and the call agents (basically understanding of other’s accent), long hold times for the callers (to get an opportunity to speak with the agent) and the scripted responses (which the company reasoned was necessary to standardize the customer service). In addition to these, the other problem that Dell India faced was lack of proper talent. The principal reason of such a drawback was primarily the nascent nature of the IT/ITES industry in India. The trained workforce was yet not available at plenty. The most suffered positions were that of the middle management levels as there was lack of growth opportunities (Fairleigh & Thibaudeau, n.d.). So the company started to hire from other industries and provide necessary training to them. Along with the unavailability of the middle level managers, the company also faced other human resource issues like high turnover or attrition percentages. It was found that 30% of the new hires resigned the job at Dell India with in four months of joining. The basic problem lied in selecting the right people for the right job. To cope with the problem the organization took measures to change their certain HR policies like providing allocating more time for on the job training. Mentors and coached were allocated to the new hires and feedback sessions were organized to provide support to the personal problems of the employees. Measures Dell Computers valued their customers to the extreme. As the modern management theories suggest that it is always tougher to find a new customer compared to retaining an old customer, so the modern way of management emphasizes on full satisfaction of the customers so that they are retained. For the purpose, the company had to remove all the grievances of the customers that were into effect. In order to do so, the company took the following measures: To reduce the call holding time, the company decided to open more customer contact centers so that the standard hold-time of 8-10 minutes gets reduced to 4 minutes or less. The company planned to cross-train its employees to overcome the problem of not having specialized support system so that all agents could handle all sorts of queries. Steps were taken to develop the training module. The duration of the training as well as the span of training both were increased to make the new recruits more conversant with operations. Conclusions Dell Computers have been global market leader in providing personal computers just behind Hewitt-Packard. The success story of the company depended on the six basic factors as follows: To be direct Emphasis on accountability and no excuses No celebrations or victory laps No ego No easy targets Cost-cutting measures. The company decided to open the fourth customer contact centre at Gurgaon as the call volumes increased. As the importance of India increased with in the company, Dell also found out that the market share of the company’s products in India was 4% compared to 18% in the global market. To penetrate deep in to the ever-increasing Indian market, the company decided to set up a manufacturing plant somewhere in Southern India which could also provide for exports in the regional market of South-Asia. Nevertheless, over the years Dell has become almost synonymous with outsourcing customer services to India (ERDMAN Centre, 2005). The business model that Dell followed has been successful to the great extent and widely followed (Chen, 2007). The company has repeatedly assured that it is committed to India and would continue its operations in the country. The expansion plans of the company from customer contact centers to set up manufacturing plants also pertain to the commitment. References Bajpai, N. and Sachs, J. D., No Date. India in the Era of Economic Reforms – From Outsourcing to Innovation. The Earth Institute. Columbia University. [Pdf] Available at: http://www.earth.columbia.edu/sitefiles/File/about/director/documents/altana.pdf [Accessed 29 June 2009]. Chen, B., 2007. Global production, outsourcing and logistics. Haas School of Business. University of California. [Online] Available at: faculty.haas.berkeley.edu/brchen/Global%20Production,%20Outsourcing,%20and%20Logistics.ppt [Accessed 29 June 2009]. ERDMAN Centre, 2005. Dell – A Study in Call Centre Outsourcing. Outsourcing to India. University of Wilconsin – Madison School of Business. [Pdf] Available at: http://www.bus.wisc.edu/erdman/pubs/Newsletter/Summer05.pdf [Accessed 29 June 2009]. FMDS Alumni, 2005. Dell Computer Customer Service – Deceptive and Fraudulent Rebate Offers. Western Washington University. [Online] Available at: http://www.ac.wwu.edu/~benson/alum/Dell%20Customer%20Service.htm [Accessed 29 June 2009]. Fairleigh, J. & Thibaudeau, J., No Date. India as an Outsourcing Venue – Challenges. Information Technology and Operations Management, SMU. [Pdf] Available at: http://tecom.cox.smu.edu/abasu/ITOM6230S07/India.pdf [Accessed 29 June 2009]. Noughton, K., 2006. Outsourcing: Silicon Valley East. Newsweek. Rice University. [Online] Available at: http://www.cs.rice.edu/~vardi/newsweek.html [Accessed 29 June 2009]. Bibliography Chohan, S. & Marriott, I., 2005. India Dominates in Offshore BPO, but Will Face Challenges. Gartner Research. Villanova University. [Pdf] Available at: http://www3.villanova.edu/gartner/research/129000/129014/129014.pdf [Accessed 29 June 2009]. Cusumano, M., Kahl, S. and Suarez, F., 2008. A Theory of Services and Product Industries. MIT Sloan School of Management. [Pdf] Available at: http://digital.mit.edu/research/papers/242_Cusumano_Theory%20of%20Services.pdf [Accessed 29 June 2009]. Dell, No Date. Company. About Dell. [Online] Available at: http://content.dell.com/us/en/corp/about-dell-company-info.aspx?c=us&l=en&s=corp [Accessed 29 June 2009]. Knowledge @ Wharton, 2009. ‘Second Fiddle’ No Longer: Indias PC Market Opens up to Notebooks. Managing Technology. Wharton University of Pennsylvania. [Online] Available at: http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4349 [Accessed 29 June 2009]. Read More