The real reason Dell has faltered

The reason Dell Computer Corporation has lost its former position as the number one computer company, says the New York Times, is that the company has continued to pursue its famous business model even though that model no longer works. I think this is incorrect. Dell has faltered, not because it has remained loyal to its old way of doing business, but because it hasn’t. The key to Dell’s success was its fantastic customer support and tech support. Over the last few years Dell has gone from having the world’s best customer and tech support, provided by competent, energetic, and knowledgeable Americans, to having the world’s worst customer and tech support, provided by frequently incompetent or barely competent, passive Indians who do not speak English that is readily understood by Americans; who follow scripts instead of their own intelligence and knowledge; who substitute excessive and irritating politeness for actual response to a customer’s problems; and who are mired in an unresponsive and unaccountable bureaucracy. For the Times to write a 3,000 word article on Dell’s falling market share, and not mention the company’s disastrous out-sourcing of its customer and tech support, is like talking about rampant violent crime in London, and not saying anything about the liberalism of the British police.

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An Indian living in the West writes:

I disagree with your argument.

There seems to be an automatic assumption in the West that any outsourcing of back office functions to India is bad for customer service. I don’t think this is correct. I think that as with any other country, if you try to cut your costs and pare them down to the bone, you end up hiring people who aren’t very sharp. And answering calls in any case is not an occupation that attracts the brightest people. [LA replies: First, tech support is not a back office function. Back office function would mean things like book keeping and accounting which do not involve dealing with the public. Second, tech support certainly does require knowledge and intelligence. Dell’s tech support people used to be very intelligent, you could tell they were “computer people,” not just employees.]

I have had bad experiences with Indian call centers and some good experiences. You can tell after a few minutes if the call center has smart employees or stupid employees. When the employees are stupid, there is almost no use talking to them because they are a waste of time. If the employees are sharp, they can deal with even the most difficult problems.

The problem with DELL is the same as with a lot of large American corporations. Their management appears to be completely fixated on quarterly profits. Quite often (especially in high technology) chasing short term margins is the road to long term disaster. The Japanese understand this very well. Which is why most people who have used Japanese electronics or cars rarely ever switch back to American brands.

The last point I would make is that I find the anger against outsourcing out of proportion when one compares it to the near total silence when looking at the destruction of American manufacturing by the transfer of factories and technology to China. I mean if you think about it: what is the total trade deficit from the import of manufactured goods from China and what is the total deficit from the outsourcing of back office functions to India? I think you will find that the Indian deficit is unlikely to be over a few billion. The Chinese deficit runs into the hundreds of billions. China has almost wiped out large swathes of American manufacturing since 1989. But the press tends to focus more on India because their understanding of manufacturing is close to zero.

Chris L. writes:

You are correct in your assessment of what went wrong with Dell. Their technical support used to be top-notch. Amazingly, a lot of companies seem to be learning their lesson and are pulling their call center operations back to the United States. Unfortunately, your Indian correspondent is wrong in this case. Foreign call center operations that require interactions beyond a script fail for a number of reasons. First, language is a significant barrier. Language is more than just knowing how to speak it. It is also important to be able to understand what the person is saying based on the way they are saying it. People who don’t use a language as their primary language or are immersed in it for a significant period of time are unlikely to know when a person is becoming frustrated. They will just continue reading off of the script. Second, a lot of times you can’t understand what they are saying. They might be doing well for people who are speaking a second language. However, I am not calling support to help someone with their language skills. Finally, cultural differences are important here. In general, Indians and Pakistanis do not like to admit mistakes or lack of knowledge about something. Therefore you end up with tech support people who either cannot admit they made a mistake and need to start over or cannot admit they need some help. By the way, this is the same problem you find with a lot of the imported technical people. They have a very bad tendency of overselling what they know.

The reason why there has been a greater outcry over outsourcing is that more people interact with call centers, therefore they feel the effects. A plant closing four states away is not as immediate.

Larry G. writes:

Indian living in West said:

“The last point I would make is that I find the anger against outsourcing out of proportion when one compares it to the near total silence when looking at the destruction of American manufacturing by the transfer of factories and technology to China.”

Partly this may be an elitist thing. The reporters don’t “do” manufacturing. And besides, America was supposed to become a “knowledge” society. We could have other people do our labor, but we would supply the brains.

But then companies started sending the “knowledge” work overseas. And for the jobs they couldn’t send overseas, they imported H1B immigrants to fill them in place of Americans. So it gradually began to occur to people that if we export all our agricultural jobs and fill the rest with immigrants, and export all our manufacturing jobs and fill the rest with immigrants, and then export all our technical jobs and fill the rest with immigrants, what’s left for Americans? Not everyone is suited to be a manager, and even management jobs are now being filled by H1B immigrants. It’s great that they’re finally showing concern, but it is much too late in the game.

But people are concerned about everything being made in China. I try to find American-made, or at least non-Chinese-made products whenever I can. It is increasingly difficult. The problem is that with so much investment going to factories in China, it is increasingly likely that the Chinese factories will be the ones with the best and most modern equipment, while the American makers will be running on decades-old equipment. Chinese factories will be producing the best, most up-to-date products, while American factories will be producing high-priced, low-quality merchandise.

If all these trends continue, Americans will not be able to maintain our standard of living. We can only get by on credit and our past reputation for so long before our world comes crashing down around us.

Dan R. writes:

Dell—megadittos!

It was so frustrating dealing with their service people that I wound up giving my Dell laptop to my daughter and vowing never to buy a Dell product again. The odd thing in this was the straw that broke the camel’s back: a modem that had been short-circuited in a storm. Three times Dell could not even send the right part! My daughter has the computer without modem and uses it for word-processing. Our arrangement is that I will pay for any repairs, but she has to make the phone call (I’m exposed as a very mean parent!). My experience with the Indian service people was that the better they spoke English the less competent they seemed to be in computer matters. What fun it was. Sayonara, Dell.

ILW replies:

I agree with what Chris is saying—I just think he misunderstood my point.

I agree that the cultural difference makes an employee of, say, IQ 100 in India far less effective than an employee with IQ 100 in the United States. This is not deniable by anyone with common sense and I wouldn’t deny this myself. In the instances where I have had to deal with Indian call centers I have had to sometimes speak in Hindi to get the point across. I also discovered to my chagrin that they still wouldn’t understand what I was saying because they were located in the south where they refuse to speak Hindi!

The point I was making, however, is that if a company really values its customers it will spend more on its customer support budget and therefore, would be able to hire employees with IQs of, say, 110 or even 120. In a country like India where the economy is still massively underdeveloped even wages that seem low to Americans can attract high IQ graduates. However, in my experience when I have seen the negotiations for outsourcing contracts, many companies simply go to the lowest bidder—they think that the lower the cost the more efficient the business. This is the biggest problem and this goes back to what I said about American corporations being fixated on their quarterly profits. It has hurt many top of the line American companies and will continue to do so.

The cultural difference is no longer as great as some of your readers might imagine. India has been exposed to American television for the last fifteen years through cable television. There are undoubtedly graduates in Indian colleges who can decipher most of the cultural “programming” without difficulty.

Posted by Lawrence Auster at September 09, 2007 07:14 AM | Send