Buy-side clients are well versed in evaluating ‘hard issues’ like wage rates, infrastructure costs and investment incentives, but what about the ‘soft issue’ of cultural alignment? In other words, is there a cultural fit between your team at home and your service provider’s team offshore – and does that even matter? Jane Siegel, Director of IT Sqc and Senior Scientist at Carnegie Mellon University, thinks that culture should be one of the hard issues that you consider before outsourcing your project. As she says, many offshore relationships fail because of a failed understanding of cultural differences.
How important is cultural alignment in an outsourcing business relationship between a US company and a Latin American provider?
Siegel: It depends on the size of the deal and the nature of the relationship. For smaller deals it’s probably not crucial. For large deals, most of the big US corporations looking to do business will make those decisions in part based on the technical competence of the providers, but also based on trust and the relationships that they have. I’ve seen instances where a deal was about to be cancelled on a fairly significant engagement, because of dissatisfaction with the provider. The people on the provider’s side that got involved in that decision-making, and their ability to relate effectively to the management of the customer company were absolutely essential to the positive outcome of that situation. So for those large outsourcing deals, cultural alignment and relationship-building is critical.
Different kinds of behaviors, ways of speaking English and even how you greet someone over the phone can get confusing. So one of the things that the global Indian companies did around 2000 when they began taking on a lot of work from US companies for the first time, was to implement programs to sensitize their workers to US culture. They taught them about American music, sporting events, ways to dress, political events, and even gave them training in developing an American accent. Essentially a customer calling in would not know that they were not speaking to an American. Admittedly those were for very high paying accounts, but that’s how important cultural alignment is for your customers.
What kinds of cultural differences should US buyers be aware of?
Siegel: They’re mainly around issues of communication. We’ve seen US clients pull work back from Indian providers because there were major communication disconnects related to cultural differences. For example in India, weddings and birthdays are very important. It’s expected that employees take off from work to celebrate those events, whereas in the US, that expectation may not be there. We’ve actually documented situations where a senior IT manager at an Indian company tells the US customer that he’s going to be off right at the point when there’s a critical software build going on, because his son has a birthday. After several minutes of conversation, the US client hangs up the phone thinking that the Indian understands now that he cannot take off on that day since he has to be there for the build. The Indian leaves the call thinking that he’s dutifully informed the customer that he won’t attend, and that it’s understood. So of course when the build doesn’t happen, the US client is outraged, while the Indian is completely baffled because he thought he made himself clear.
Apart from communication, there are also organizational differences. Many case studies have been done showing that US-based companies working with an offshore partner either did very well or very poorly based on what their corporate culture was. If you have a very formal hierarchical culture in one company and a very loose informal culture in another, you can have some pretty serious disconnects. So it’s not just about language and nation-specific behaviors; it’s also about culture in terms of the organizational fit. The basic notion is that these things cannot be ignored. If you don’t have an understanding of the cultures on both sides, and a way to address those cultural differences, you’re likely to end up with a failed situation. Focus on relationship-building.
Nearshore countries always market themselves using the argument that because of geographical proximity their workforce is more culturally aligned with the US, and can partner more effectively with American firms. Is that true in your opinion?
Siegel: The thing is that there are still critical differences within countries and across national boundaries that do vary, so it’s a little bit risky to assume that the cultural alignment between Latin America and the US will always hold true. I think the Nearshore providers would be well served to consider exactly how true a statement that is. They may need to do some cultural education in preparing their employees to work well with the US market.
There’s added complexity in Latin America because you have people who come from countries that can sometimes be very different in terms of culture. But one of the advantages of Latin American providers is their ability to relate effectively to a very large part of the US population that is Spanish speaking and from the same cultural background. That’s certainly an advantage that I don’t think has been fully exploited.
Companies like Dell used to have all of their technical services going offshore. They now have a multiple tiered system. If you opt for the least expensive technical support, you get someone in India, and you may or may not be able to communicate effectively with them. A slightly more expensive package would maybe get you someone in Latin America, and so on.
Read Part 1 of our special interview with Jane Siegel here.