Can Lenovo afford to take the Dell route for product support?

Just like every other major player in the PC industry these days, Lenovo is having to rethink the way it has already rethought its short-term business plan. After already having shuffled its executive ranks earlier this month, the company's reassigned CEO Yang Yuanqing announced yesterday an additional 450 job cuts, in addition to the 2,500 the company already decided to make, with the new cuts affecting workers in Lenovo's native China.

But the part of Yang's message that rang the loudest bell yesterday was this: "While our business in China remains very strong, many of our global support functions have employees based in China," an indication that the latest round of additional cuts will impact Lenovo's product support team first.

If Yang's indications are accurate, Lenovo's choices could have an eerily familiar ring to them. During the last economic meltdown to have a detrimental impact on the computer industry in late 2001, Dell Computer made the fateful decision to outsource large segments of its product support operations to facilities offshore. While slimming down did help Dell reduce operating expenses, it came at the cost of a reputation for support and service that, throughout the 1990s, had been unparalleled.

Lenovo started out with a fair reputation for product support -- perhaps not stellar, but certainly above average for a brand that was thrust on the scene in 2005 as the successor to IBM's PC business. Let's just say that reputation has been about as polarized as this non-scientific poll reflects.

But even though Dell had diligently invested in its offshore support operations, major customers didn't regain the feeling that the company cared about them. In 2004, it started the unusual step of rerouting some of its offshore calls onshore. At the time, then-CEO Kevin Rollins instituted a program of building "call center communities" in its offshore locations such as India's Punjab region, while at the same time building new US-call centers in Oklahoma City and elsewhere while giving Punjab time to develop.

Over time, the cost expended in justifying the cost savings, at least for Dell, has probably been greater than if the company had simply kept its original Austin, Texas personnel. Lenovo's decision yesterday has the danger of becoming equally problematic.