According to a recent report from the Economic Times, Apple chief information officer (CIO) Niall O’Connor is in talks with Infosys and Wipro, two major companies in India looking to score a contract with Apple as the Cupertino company tries to increase outsourcing of software development, testing and internal IT operations to the country.
Working With Apple is Important
Of course the top-level folks at both Infosys and Wipro want more than anything to work with Apple. As the report puts it, a contract with Apple isn’t only about the money (though it is a major factor). They say that working with the tech giant is “regarded as a badge of honor.” Not only is it likely to be a secure source of income for a company contracted with them, it means they were good enough to meet Apple’s exacting standards for software design. That looks good for any company.
What’s at Stake?
Currently, Apple makes up about $50 million in annual business for Infosys. Wipro, while an amount wasn’t mentioned, is also said to be seeing increasing revenue coming from Apple. However, Apple does reportedly outsource about $100 million worth of work to Indian companies. They are said to want to increase that by quadrupling the money they spend outsourcing to India. For those who can’t be bothered to do the math, that’s about $400 million, a bit less than half a billion. That’s quite the cash-flow, and it’s immediately apparent why a contract with Apple is a huge deal. It’s also worth noting that Apple was building a facility years ago in 2006, but pulled out a few months later. Perhaps something fell through.
Furthermore, there are recent reports saying that the IT sector demand is slowing in Western nations. While that happens, Apple is only increasing outsourcing plans. India is also looking to emerging markets to counter any slowing. A contract with Apple again means job security.
Well aside from bragging rights and millions of dollars of money flowing in, there are other factors that appeal to these companies. One example in the report is General Electric. They are said to outsource more at lower rates. Apple, on the other hand, is desirable, “because of high profitability and quality of work.” On top of that, a person who knows about Apple’s outsourcing practices said, “Apple and GE would make two extremes for the outsourcing industry – Apple handles even commoditised applications like its ERP with very high sophistication and treats vendors better.”
Outsourcing With Other Major Corporations
Back in 2010, Microsoft signed an outsourcing deal with Infosys. Though we don’t know the value of the contract, it was estimated to be worth more than $100 million, according to ComputerWorld. That $100 million will be dwarfed by Apple if the company does in fact quadruple their outsourcing to India.
General Electric (GE) mentioned above recently decided to cut outsourcing. Back in August 2011, CEO Jeffrey Immelt said that GE would be hiring over 15,000 new employees over a three year period, where previously about half of the IT work was being outsourced. That is being cut as they reason that doing so allows GE to develop programs more quickly, by doing it locally.
There are a handful of companies that outsource to India, all of them are well-known. They include Oracle, Dell, HP, AT&T wireless, Rand McNally and more. However, there seems to be no information, concrete or otherwise, how much they spend on outsourcing work. The only thing we have to go by is that Apple pays better and offers better quality of work, and words from unnamed sources.
Apple Handles Outsourcing Better?
That’s what they said. It’s not quite what we’ve been hearing in the past with outsourcing to China. Companies like Foxconn are said to overwork employees and not take necessary measures to ensure the safety of employees. Apple catches some of the flack for that. The problem has become such a big issue that Apple has launched investigations and CEO Tim Cook has spoken on more than a few occasions about Apple’s desire to improve working conditions at the plants that assemble Apple products, noting that the company cares about everyone in the Apple product chain.