Nearshore Americas

Want Your Outsourcing Deal to Survive? A New Study Says it All Boils Down to Culture

BOSTON–(BUSINESS WIRE): Vantage Partners (http://www.vantagepartners.com) announced today the publication of a new study, Managing Offshoring Relationships: Governance in Global Deals, which reveals the significant impact of cultural differences on the value achieved in offshore outsourcing deals.

“Many customers and providers recognize that cultural differences impact the value they achieve in their offshoring deals”

Study participants answered questions about their organization’s most significant offshoring relationship in which they are significantly involved. The research includes both customer and provider quantitative and qualitative data gathered from more than 400 companies from all regions of the world.

Key findings include:

  • Culture represents the most significant challenge in offshoring deals, with 90% of respondents reporting that it poses at least some challenges.
  • For most cultural dimensions, at least two-thirds of customers see some differences between their organization and their key offshore provider, whereas providers are much less likely to perceive significant differences with their customer.
  • Customers believe they are much more likely than their offshore provider to confront conflict rather than avoid it, communicate directly rather than indirectly, and multi-task rather than focus on one thing at a time.
  • Cultural differences directly contribute to the difficulty of engaging in activities critical to successful outsourcing relationships, such as gaining buy-in from stakeholders, managing scope, managing performance, and generating innovation.
  • Cultural differences can prevent both parties from achieving the full value of their deal: 64% of respondents say that the impact of cultural differences is greater than 10% of annual contract value, and 35% say the impact is more than 20%.
  • The impact of cultural differences can be minimized with effective governance and value-generating mechanisms such as joint skills training and health checks.

“Many customers and providers recognize that cultural differences impact the value they achieve in their offshoring deals,” says Robert Williams, Chairman of Insigma HengTian Software Ltd. “However, companies struggle to manage those differences. This study points to the potential for organizations to capture substantial increased value from their offshoring relationships — if they invest in understanding and enabling more systematic and collaborative approaches to managing cultural differences.”

To download the full study, go to: http://www.vantagepartners.com/uploadedFiles/Offshoring_Study.pdf.

About Vantage Partners, LLC

Vantage Partners leads the field of relationship management, building on more than 20 years of research and consulting experience with the world’s leading companies. A spin-off of the Harvard Negotiation Project, Vantage Partners helps customers and providers enter into, manage, and (when necessary) remediate working relationships. Vantage works with clients on specific transactions, as well as on enhancing their institutional capabilities to make effective negotiation and relationship management a repeatable process. For more information, please visit www.vantagepartners.com.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

2 comments

  • This study shows some of the problems that might be faced but there are additional problems like the fact that now is more common to find people from different countries in management positions which affects the way this is perceived. Globalization and multicultural environments are taking an important part on this game.

    In the other hand there are problems that come from the working environment. i.e. Some times the scheduled time for tasks is being provided by the customers and the provider is taking the fault for the delay. Bad management decisions will end on bad results and this has nothing to do with outsourcing.

  • I find that this study confirms and puts in black and white all of my experiences with my clients. I am a cross-cultural consultant with a specialization in onshore/offshore partnerships. The points here are absolutely dead on, and my clients feel the pain of cultural differences constantly. Often, they don't even know that's what is causing the strain and difficulty. Thank you for publishing this valuable study!