Study after study reveals that there are more successes than failures in offshore relationships today. However, where there are failures, the root cause still tends to be an issue that has existed in offshore relationships for years -- people's failure to connect and understand each other. The good news is there are proven tactics and strategies to help buyers deal with various countries' cultural nuances that might negatively impact an outsourcing relationship's success.
GlobalLogic, Inc. is a specialist in providing global software product development services with U.S. headquarters in Vienna, Virginia; European headquarters in London, UK; and software product engineering centers in India, Ukraine, and China. Its CEO, Peter Harrison, shares his insights on the differences in dealing with people in these various countries.
Harrison advises companies that they should chose their offshore service provider based on technical and domain expertise. "Cultural drivers should be secondary. They lend themselves to be strengths as well as weaknesses," he says. Yet, to a significant extent, understanding people's expectations and how people think differently from culture to culture will improve the chances for success.
Most Americans and Western Europeans outsourcing to offshore providers over the past few years have experienced challenges with communications involving "yes" and "no" statements. Harrison says "yes" and "no" have slightly different meanings as words in the Indian, Chinese, and Ukrainian languages.
So clients' questions when the client's expectation is a "yes" or "no" response will elicit several different meanings from people in these countries. In India, "yes" means "I've heard you -- but it doesn't necessarily mean that I understand you." In Ukraine, "no" means "I don't understand." Saying "no" doesn't mean "I can't do it."
"Yes" or "no" is not as big a problem in China, Harrison explains, because a smaller percentage of the people (only 20-30 percent) speak good English and would respond to a question using English words.
Harrison advises companies to become sensitized to these differences and, instead of asking a question that can be answered with "yes" or "no," dig deeper. Ask open-ended questions that can't be answered by a "yes" or "no" response.
Since people in these countries now recognize these misunderstood words cause problems, some avoid answering such questions. GlobalLogic encourages its employees to answer with honest feelings, rather than avoid responding. Harrison says it has been more difficult to accomplish this in India than in Ukraine.
The cultural nuances around mindset can have a dramatic impact on expectations in outsourcing relationships.
Generally, Ukrainians tend to be more conservative and Indians are somewhat more aggressive. But Harrison comments that service providers can coach their employees around this in order to better interact with business contacts in the United States, for example.
Indian work culture generally views deadlines as being flexible rather than set in stone, which can be problematic if very clear communication processes are not in place. Ukrainians tend to work in a detail-oriented way and can be counted on to provide tough product evaluations and "pick holes in things." In application development, if a client wants a lot of rigorous testing, Harrison says a Ukrainian service provider will serve well. However, India is often a better choice than Ukraine if agility is important to the client.
In general, Chinese work culture values polite interactions over casual behavior like the Indians, and they are inclined to be very detail oriented like the Ukrainians.
Age and size of market
An important criterion in service provider selection is the age and size/growth rate of the market in each country. As Harrison points out, the Ukrainian outsourcing market hasn't changed much over the last 20 years. In contrast, China has experienced big growth in the last 10 years and is the fastest-growing region. Market maturity and size are important, as they impact such factors as attrition, salary, strengths in experience and talent, how to manage the relationship, and the kind of work being done in that market.
For example, in the still-young market in China, it's difficult to find people with five years of experience. Regarding compensation, IT salaries can be 30 times higher in India than in China and 6-10 times higher than in Ukraine.
China has natural strengths and strong skills in doing embedded software. Ukraine is strong in mathematical skills and in high-level quality precision.
But these bits of insight into the cultural differences are generalizations, says Harrison. Success requires getting beyond the common challenges of word meanings and mindset. For that, he says there's no substitute for physical proximity and intimacy. "It requires an investment," he warns. "And the investment increases with the increase in complexity of the work being outsourced." It includes such items as video conferences and travel to/from the two countries.
Should buyers send their people to the offshore location or bring the provider's people to the United States to improve communication? Which is the best strategy? It depends on the answers to the following questions:
- Does one person know everything?
- How much knowledge needs to be transferred to the provider?
- How many people would be involved?
- How quick is the need to ramp up?
The best strategy, according to Harrison, is to have people from both companies travel to each other's country. The second-best strategy is to send people from the United States to the provider's offshore location.
Third choice is to bring some of the provider's team to the U.S. location. This is least effective as an investment, he says, because more often than not at least the principals in the provider's company have already traveled to the United States and are familiar with Western culture.
Choosing an offshore service provider
If a provider isn't like GlobalLogic with delivery centers in multiple countries, how should the buyer approach the process of selecting an offshore provider? Harrison's advice is to first determine whether a potential provider clearly understands the buyer's business and whether the provider operates from a partnering model.
Next, look at the skills and strengths in the country where the provider has a delivery center. Many offshore companies, such as GlobalLogic, are organized around domain expertise, not cities.
There will be three workforces -- three tiers of talent -- and the buyer needs to understand which will best meet its needs:
- Skills in English language (necessary in a call center, for instance)
- Technical skills but not ubiquitous English language skills
- Both technical and English skills (necessary in R&D, for example); this talent tier can add more value
What difference does it make if a provider has offshore resources in multiple locations or just one city? Harrison says that choice is like the constraints of a packaged software product and compares it to managing through such products as Oracle Database (India), SQL Server (China), or DB2 (Ukraine). "The buyer would have to work around the inherent disadvantage of having one choice."
When dealing with an offshore firm, Harrison cautions that it's just as important to have the right relationship model in place as it is to know the cultural nuances. He points out there are big differences when the outsourced work is process based (requiring more interaction and an ongoing sustained relationship) than project-based work, which requires less interaction.
He comments on the frequent misuse of terms such as "outsourcing," "in-sourcing," "co-sourcing," and "offshoring," which can have different meanings in different cultures. "For many, outsourcing still means throwing a process over the wall (my mess for less). But today, where there is a focus on innovation and strategic objectives, success is often more of a collaborative effort with teams from both companies contributing to a common goal. The offshore team needs a clear understanding of the type of relationship, and what to expect in the way it will be measured and managed. This relationship clarification also helps reduce problems from cultural differences," Harrison explains. "It gives the offshore team an understanding of the parameters by which they could and should push back."
Determinants for success
Based on observation, Harrison cites two factors as the primary determinants for success in offshore deals:
- Alignment of people and goals
- Communication skills and structure that enable collaboration
"Buyers still tend to under-invest in both of these," he warns. "They need to get on a plane and visit the provider before selecting the firm as a partner. But they also need to keep investing in these two factors on an ongoing basis."
Change management is key when dealing with the cultural nuances and communications in working with an offshore team. Many studies reveal that people at the buyer organization think: if this offshore deal is successful, my job may be at risk. "It's extremely important to acknowledge and tackle this head on," Harrison warns. "They need to change their mindset to: I'm not at risk; this is a way to grow and tap into global expertise."
He adds that "companies need to be sure their people are highly motivated to change and to help the relationship succeed. Not doing this is the most frequent reason for failure."
Lessons from Outsourcing Journal:
- When choosing an offshore service provider, the country's market maturity and size are important, as they impact such factors as attrition, salary, strengths in experience and talent, mindset, how to manage the relationship, and the kind of work being done in that market.
- There are three tiers of offshore talent: (1) skills in English language, (2) technical skills but not ubiquitous English language skills, (3) both technical and English skills (necessary in R&D, for example); this third talent tier can add more value.
- The difference in selecting a provider with offshore resources in one country versus multiple countries is like the constraints of a packaged software product (such as only having Oracle Database, SQL Server, or DB2); the client will have to work around the inherent disadvantage of having only choice.
- The offshore team needs a clear understanding of the type of relationship, and what to expect in the way it will be measured and managed. This relationship clarification also helps reduce problems from cultural differences and gives the offshore team an understanding of the parameters by which they could and should push back.
- Two factors that are primary determinants for success in offshore deals are (1) alignment of people and goals and (2) communication skills and structure that enable collaboration. It's necessary to keep investing in these two factors on an ongoing basis, not just at the outset.
- Buyers need to be sure their people are highly motivated to change and are willing to help an offshore relationship succeed. Not doing this is the most frequent reason for failure.