Otis built the first elevator in the world 163 years ago and has since been the leader in the industry uninterrupted. The company, which is now a part of United Technologies Corporation, maintains about two million elevators in 200 countries/territories across the world moving about two billion people everyday. Philippe Delpech, President, was on a visit to India recently. BusinessLine caught up with him in Chennai. Excerpts from the interview:
What kind of innovations are we seeing in the elevator business?
The elevator is going to go through a dramatic revolution. I think what will happen in the next decade is that the digital part will be the big stream of innovation. Basically, if you visualise the elevator, it is a box going up and down — very safe, pretty sophisticated if you look at the system. It is connected to the other elevators in the building because you have to manage the traffic logically.
In some buildings we have the Compass (destination dispatch system — is advanced and mainly for taller buildings) that can manage traffic in a smarter way. In the future, this element will be connected to the cloud. The cloud will allow us to do a number of things. One, be smarter in the operation and maintenance of the elevator by sending data directly to the elevator via the control room. Or to the mechanic/employee who will have historical analysis of the elevator unit helping him to be smarter when acting on the elevator.
The cloud will also send data to the customers. All of this will create an ecosystem, which will be totally connected. We have signed an agreement with Microsoft to store Otis elevator data from around the world in Microsoft’s cloud computing platform — Azure. And we will use Corona, the analytical engine, to analyse all the data and trends.
We have signed an agreement with AT&T to transfer that data to a smartphone and we are going to deploy worldwide, including India, 35,000 smartphones in the next 12 months. And then we will have apps — a system which will allow us to be smarter in maintenance and communication with the customer. This means we are going to an ecosystem which will be totally different.
Where does India figure in Otis’s global scheme of things?
India has always been on the agenda. We have seven billion people on the planet and 1.2 billion of them are in India. Several people are on the farms — this is the market of tomorrow. As soon as they move to the city, land is expensive and you, therefore, have to build high and when you do that, you need Otis. India is one of the countries that I visit regularly. I meet important people, try to get ideas. I have a sentiment that India is moving in the right direction. It is the market of tomorrow.
So, what is the strategy for India?
We’re committing significant investments. We’ve decided to localise our engineering and product manufacturing. In the last three-four years we’ve invested in facilities such as new test tower, a new factory and newer product lines.
Thanks to the large investments going into infrastructure, we will be manufacturing escalators in India soon. We’ve always had a very good service organisation in India. Based on these, we do believe we’ll capture a lion’s share of the growth expected in India.
High-rises have not really taken off in India as a concept. Does that bother you?
What you miss in India today and which will come is social housing. Let me give you an example. France, 1958, when industrialisation came big time after the Second World War and also at the same time we had to repatriate people from Algeria — former colonies that we lost.
We had a wave of five-six years of building social housing. That was not high-rise but 18 floors and what happened is that construction companies emerged and became professional and Otis, which was very strong, received a significant share of the market.
The exact same thing happened in China. I was in China 25 years ago. And in the last few years, they built social housing in cities where they moved 500 million people from the farms. They did it in an organised manner. That will come to India.
Now you need significant connection between government planning and enterprise. You need to make the land available and need to plan for that in terms of where it is in the city versus industrial areas and then you need enterprise to build the housing at a reasonable cost because you have to be affordable and a company like us also needs to adapt to social housing.
That is the wave that has to come, otherwise you cannot urbanise (the entire country) India and it has to come fast. I think the next wave will be social housing. That will be big.
In a product like elevators, how do you distinguish yourself from competition?
The complexity of an elevator is the system. What you see as a customer is a small piece of the system. If you are the company buying the elevator then it is very different.
The most important is installation of the elevator — you need to manage a project within a timeline, in a safe way, with high level of quality in an environment that is not easy — construction work. What differentiates a good elevator company is obviously innovation and quality but the field installation management capability is also very important.
We’re doing that in 200 countries and territories with the same global standard of safety and quality. And that’s why today some of the most prestigious projects in India come to us.
When you are the user of the building, you are sensitive to the maintenance because it is a safety product and you have to have a maintenance department which is very skilled making sure that the elevator operates for decades. It is the combination of these two elements that differentiates a great company from an average one.
The complexity of an elevator is the system. What you see as a customer is a small piece of the system. If you are the company buying the elevator, then it is very different.
How strong is your safety record compared to competition?
Historically, Otis has always been leading in safety where there is public data — but there is no public data everywhere. Our main focus is public and employee safety. When we fight against gravity, safety is critical for the people who ride and also for employees. Because when you install an elevator and you have a fifty-floor building that requires a lot of safety. The amount of processes involved to install an elevator will impress you. It’s like a plane — you cannot fool with a plane.
As someone who worked out of China for many years and who now deals with the market there, can you tell us how does India compare with that country?
I lived in China for five years. I was President for Carrier then. The fundamental difference is the efficiency of the government to plan infrastructure transformation and urbanisation. Not comparing political systems, but it is a system (China) that drives top-down execution. And when they say we will build 200 airports in five years, they usually do just that. This has generated a significant pull for investment because you have the infrastructure. The labour has moved from the farm to the city at the time you need — social housing is built, metro is built, the workers can come to the factory every morning.
It’s a whole eco-system that they have realised. I think in India what we have seen is a private enterprise developing well. Some areas like IT, services have become world-class. Perhaps because of the complexity of the democracy in India it is challenging for the government to plan infrastructure. It looks like with the new government, progress could happen.
We got Hyderabad Metro, which is the largest order in the history of India for elevators and escalators that we got from L&T about two years ago. When we start to see that and if the pace can increase, India can catch up and can really develop because all the fundamentals are in place. Education is good, population is here — but you need to stimulate it with infrastructure.
You cannot move people from the farm to the city if you don’t have social housing in large quantity. People cannot go to work if you do not have mass transport — it’s a chain of effects and today that chain has begun, and could accelerate. In 6-7 years you could see significant growth. At the scale of India if you grow at 8-10 per cent for a decade, it’s a significant number and we have seen those numbers coming back. If India can sustain those numbers for 8-10 years, there could be a significant change in India by 2025.
What are you plans for the escalator market in India?
Escalator exists in two verticals — infrastructure, which is metro railways and airports, and retail. With the retail law of India, which does not allow international companies to come, you do not have the boom of shops. This market has not emerged in India because Carrefour, Tesco, Walmart, etc., never came in massively, like you will see in Dubai. That is a significant part of the commercial escalator market.
If you look at public escalators, the move into infrastructure is pretty new. We are starting to see many airports, subways, and investments in the railway system — but it’s been only in the last few years. Which means the escalator volume is not big in India. I think the scenarios will change for the public with a normal percentage public escalator. As for commercial, it depends on the laws and distribution.
Why is Otis not as big in India as it is globally?
Let me first give you a perspective on Otis. Otis is the company that invented the elevator 163 years ago and since then we’ve been the leader globally, without a break. Today, we maintain about two million elevators in 200 countries/territories across the world. We move everyday about two billion people, two India’s, so to say. So, to answer your question, we’re not giving away anything to anybody! We’re one of the leading brands in India, we have fully integrated operations here, we ‘Make in India’, we have the largest service organisation in India. India is obviously an attractive country and we see potential to grow here.
But you still haven’t answered my basic doubt. Why is Otis not the market leader in India today?
We are close — it’s a group of leaders. There are several companies of the same size. There is no significant difference between the four. It’s a balanced position but with the strategy we have today, we will answer your question positively soon.
With its expanded capacity now, will your India plant be the sourcing base for countries in the region?
We have a series of countries which are managed by Sebi Joseph, who is the president of Otis India – you have Sri Lanka, Bangladesh and Nepal. But the plant is mainly dedicated to India because we expect significant growth in India — we expect double digit growth for a number of years. That is really the focus today — to take a lion’s share of the growth in India.