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Inside Outsourcing In India

Outsourcing to India can provide a huge payback -- if you're willing to work at it. Two offshore veterans share their hard-earned lessons to help you determine if Indian outsourcing is right for your company.

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By Stephanie Overby

June 01, 2003 — CIO — Don’t bother trading horror stories about outsourcing to India with John Doucette. He’ll trump you every time. "I was doing this back when you didn’t want to be doing this," says Doucette, CIO of Hartford, Conn.-based United Technologies, who first sent coding work to India more than a decade ago when he worked at General Electric. "Most CIOs don’t have any clue what it used to be like. You had people who couldn’t speak English. The telecommunications were terrible. It was awful trying to transfer files back and forth."

Head down the highway 10 miles to Otis Elevator in Farmington, one of United Technologies’ six business units, and you won’t get much sympathy from offshore veteran David Wood either. "Back then, there was not a lot of capability in India," says Wood, who set up a captive development center in India in the early ’90s when he was CIO of Otis Asia Pacific in Singapore. "It was a phenomenon that was only just starting," adds Wood, now Otis’s director of systems development.

Today, however, Indian outsourcing is one of the best ways for CIOs to cut application development and maintenance costs, deal effectively with the peaks and valleys of software demands, and focus on more strategic work. Depending on whom you ask, anywhere from one-half to two-thirds of all Fortune 500 companies are already outsourcing to India, and, according to Forrester Research, the amount of work done there for U.S. companies is expected to more than double this year. If you’re not already sending some development or maintenance work to Mumbai or Chennai, chances are you’re either looking into it or your CFO, salivating over potential labor cost savings of 70 percent, is wondering why you aren’t.

But despite its popularity, successful outsourcing to India is still difficult. While the market has matured, telecommunications have improved and English fluency in India has flourished, challenges still remain. Cul-tural issues creep in, service-level expectations are set too high, transitional costs can be foreboding, and ongoing relationship management is expensive and labor-intensive. And although United Technologies is an Indian outsourcing success story, to be sure -- the company has already saved $50 million and attributes $30 million annual savings to it -- United has had to overcome some obstacles. Even old hands like Doucette and Wood make missteps, and they agree that outsourcing to India is a work in progress -- a journey, not a destination. But they are still big believers of the India phenomenon. They recently shared with CIO some of the lessons they’ve learned along the way.