| The Ottawa Citizen |
Thursday, April 24, 2008
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When Dell Inc. first opened a Kanata call centre with 150 employees in early 2006, it was king of the global computer world and the Canadian dollar traded at 85 cents.
Politicians flocked from far and wide to well-staged announcements as Dell drove its Ottawa employment to 1,500 and ordered another building for 1,200 more employees selling equipment and advising customers.
But barely 26 months later the dream is dead, a victim of a 98-cent Canadian dollar, big mistakes at Dell and a take-no-prisoners market that changes direction at lightning speeds.
Dell laid off 500 employees yesterday and will shut the call centre operation and eliminate another 600 positions this summer.
About 100 employees will still sell computers to government and private-sector customers in Ottawa. Dell will have another 900 employees in Toronto and across Canada.
The company previously announced plans to shut another Edmonton call centre employing 900.
Dell said it took the action "as part of company-wide efforts to increase efficiency of its business, improve performance and provide better value for customers."
There was not a politician in sight yesterday. The media were kept well away from the site, which will soon be empty.
The Kanata office vacancy rate, already at 11.6 per cent as a result of Nortel and Dell, will go much higher.
"It's surreal, but there have been signs along the way," said one employee, who did not want to give his name.
Indeed, many employees knew the writing was on the wall.
The Ottawa operation had quietly shed about 300 jobs in the last few months and rumours swirled that more were on the way.
The number of calls flowing into the centre had dwindled as Dell started diverting traffic to 25 other centres around the world even before the announcement.
Workers were given separation packages, outplacement advice and assurances some would be considered for other positions within Dell. Some said they were told they would lose their separation packages if they spoke to the media.
"It's tough to get negative comments from anybody because we were all treated very well," said one employee, who declined to give his name. "It really comes down to cost and not performance."
Still, the decision to shut completely was a surprise. Some thought that some jobs would be saved by delivering a new high-end customer service offering, supporting complex server products or delivering bilingual services.
But with the dollar trading at 98 cents, the dream evaporated.
When Ottawa business leaders pursued Dell in 2005 in a bid to win the call centre, they co-named the contest "Project Nacho." Now the nacho has crumbled.
The Ottawa centre is closing because Dell can't justify paying $18 per hour with the Canadian and American currencies at parity.
The relatively high pay, benefits and training opportunities separated Dell from other call centres and the classic industry stereotype: low-wage, high-pressure and high-turnover sweatshops.
But selling computers is a tough business that demands high-volume sales of low-margin products. A small mistake can quickly become a disaster.
It was just a decade ago that Digital Equipment employed 2,500 people in Kanata making personal computers. That business was crushed by Dell and the old Digital plant now shelters printing presses.
There are some benefits that will come from Dell's brief sojourn in Ottawa. A Dell spokesman said that most of the employees got specialized training courses, supported by Ontario tax credits, which will improve their job marketability.
But whether they can find similar jobs remains to be seen, particularly with the technology job sector already in a slump.
Last year, there were an estimated 300 call centres in Ottawa employing about 20,000 people. But like the automotive and other manufacturing centres of central Canada, many are in deep trouble as the dollars rises.
The closing of the Dell call centre follows other recent, less-publicized closings by contract operators that are quickly shifting jobs to Asia.
Company founder Michael Dell was conspicuously quiet yesterday.
He is busy these days in Texas, trying to put his company back on track. Just 17 months ago, he told an adoring Ottawa audience "the remarkable growth of this customer contact centre is made possible by the depth of talent we found in the Ottawa workforce."
It was left to Michael Jaillet, the Ottawa site leader and founder, to say in a statement "The decision to close Dell Ottawa was a very difficult one. We appreciate the contributions of our Ottawa team."
A big change in Dell strategy helped shut the doors. Mr. Dell built a fortune by selling computers at low prices over the phone and the Internet.
Customers got exactly the computer they wanted and Dell saved money making the computers only when they were ordered.
But Hewlett-Packard has proven that many customers still want to try out a new computer first. Two years ago, it was in just as much trouble as Dell. A star chief executive was fired, sales were weak and the company was mired in scandal.
New HP management chopped jobs, improved customer service and matched Dell prices.
Dell suffered some self-inflicted wounds: customer service declined and product quality problems rose.
With the classic Dell formula in trouble, Mr. Dell was forced to fire his handpicked successor and step back into the top job. He cut jobs and shook up strategy.
Now Dell computers can be found in Wal-Mart and Best Buy stores and many other retailers around the world. There is simply less need now for call centre operations to sell hardware and answer consumer questions.
The new Dell strategy is starting to produce results. U.S. Dell shipments rose faster than HP shipments in the first quarter.
But the two big players have other competitors to worry about. Smaller, nimbler competitors like Acer grew even faster in the last quarter.
Mr. Dell may yet turn the tables on HP. But the Ottawa workforce will just be distant spectators.
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