Otis Sets Up a Dedicated Offshore Centre

While Doucette makes overarching strategy decisions and handles some vendor relation issues on a macro level from his penthouse office on the 26th floor at UTC headquarters, the day-to-day management occurs at the individual business level. At Otis, that task falls to Wood, sitting in his office amid a cluster of Otis buildings just off the Interstate.

Though Otis was sending work to Wipro before Wood transferred from Otis Asia Pacific in 2001, Wood has made significant changes to the relationship during the past two years. The biggest change: moving from a project-by-project service delivery model to having Wipro set up a dedicated offshore development and maintenance centre for Otis.

"When I showed up here, Otis's experience outsourcing to Wipro was in full swing, but it was not mature," Wood explains. Otis would have a specific project and requirements; Wipro would come in and provide a proposal and a quote. If accepted, the outsourcer would do the project with roughly one-quarter to one-half of its people offshore and deliver it to Otis. Otis retained Wipro's personnel for what Wood calls a 30- to 60-day "warranty" period, after which they would disappear until a new project came along or modifications had to be made. Otis was saving $US500,000 a year over doing the work internally, but this model was becoming burdensome. "It's a cost-effective model for doing a single project, but when you build up a portfolio of applications, it's very inefficient," Wood says.

In 2001, Otis had a total of 30 applications, and the old model wasn't working. Wood proposed that Otis and Wipro transition to the dedicated centre model, where Wipro would assemble a permanent team in Bangalore to work on nothing but Otis projects. "It's basically a standing army of resources provided by the vendor that addresses all of your application needs," Wood explains.

"The benefit is that people assigned to the project feel more attuned to the company, so turnover rates are lower," says McCaffrey of Software Outsourcing Research. "And those vendor personnel are acquiring long-term knowledge about your systems, so you have a more productive worker."

Wood and four of his employees spent six months analysing the business case, creating a proposal for CIO Ron Beaver, who approved the transition. "We went through the kind of phases a lot of companies go through in outsourcing to India," explains Beaver, who performed Wood's role for five years before taking over as CIO. "You don't wake up one day, fire everyone and send it all to India. You have to get comfortable with it, find the right partners and evolve in a way that makes sense for your business."

Wood then conducted the vendor bidding and selection process. Much like UTC did at a higher level, he defined Otis's goals in outsourcing, re-established reasons to go to India rather than other countries, and conducted Otis-specific research on the vendors. The only thing Wood didn't have to do was negotiate price; Doucette had taken care of that. In the end, Otis stayed with Wipro, doing $US3 million worth of work a year with the Indian company.