In Question 5.2, how much would the Indian currency (the rupee) have to rise in value (in percentage terms) for Hewlett-Packard to keep the service activity in the United States even after telephone time falls in price?

Question 5.2

Suppose Hewlett-Packard is considering outsourcing its telephone-based technical support functions for its printers to India. The hourly cost of a tech support person in the United States is $50 per hour. In India workers are paid in rupees but, at the current exchange rate, cost the equivalent of $20 per hour. However, calls serviced in India require paying for long-distance telephone service. Initially, the telephone costs were about $35 per hour. However, a switch to voice over internet protocol (VOIP) technology reduced the telephone cost to $25 per hour. Explain how the technological change affects the decision of where to base service.