In what seems like a no-brainer move, Dell (NASDAQ:DELL) plans to double its workforce in India to 20,000 over the next three years, according to founder Michael Dell. Given India's status as one of the most coveted growth markets, investors should react warmly to the news.
Although much of the news coverage dwelled on how the expansion will help Dell capitalize on India's growing PC market (which IDC expects will exhibit a compound annual growth rate of 23% until 2010), most of the new Indian workers are expected to be employed in Dell call centers. However, the articles raised the possibility that Dell may also expand recruitment in product testing, and possibly launch manufacturing facilities in India.
Expanding into emerging markets is vital for Dell and its rivals. Dell, which only has 4% of the Indian market, competes with IBM (NYSE:IBM), Hewlett-Packard (NYSE:HPQ), and several local competitors there. Some even wonder if Dell is increasingly targeted by Apple Computer (NASDAQ:AAPL), which has a minute but growing fan base of computer users; for the time being, that battleground remains here at home.
There's one more interesting element of this announcement; just last summer, Dell seemed to be bucking the outsourcing trend, announcing that it would double its customer service center in Oklahoma City. Fool contributor Rich Smith examined that move as a backlash against companies' increasing tendency toward outsourcing call-center functions, an issue where people tend to have very strong pro or con feelings.
Indeed, Dell should tread carefully in the customer service area, making sure it has good talent taking care of its customers, no matter where those workers hail from. It seems that every time I write about Dell, I receive at least a few emails from U.S. readers who complain that Dell's recent customer service has suffered.
Investors should also remember that India's standard of living is improving so rapidly that its reputation as a country with relatively inexpensive workers is losing relevance. Dell investors should keep an eye on just how much of a cost savings the company achieves by hiring Indian employees.
At any rate, it's not surprising that investors would welcome the idea that Dell's getting a toehold in a market headed for a heavy increase in computer sales. However, given that the lion's share of the plans relate to call centers -- the rest still sounds like long-term planning -- investors need to monitor how Dell might dig into this important market ... and just how much it might cost.
We've delivered further Foolishness:
- Just last week, Fools dueled about Dell.
- Revisit Dell's most recent earnings report.
- Rich Smith wondered if Dell was playing the patriot card last summer.
Both Motley Fool Stock Advisor and Motley Fool Inside Value have recommended Dell to subscribers. Check out our entire suite of newsletters by clicking here.
Alyce Lomax does not own shares of any of the companies mentioned.
