How to Stop Culture from Killing Your Offshore Deals

Steve Rudderham, VP, Client Engagement, Capgemini: “Problems culminate when customers and providers don’t spend enough time with each other”

Julia Santos, Director, Worldwide Strategic Outsourcing, Johnson & Johnson: “My way of communication and dealing with providers in India and LatAm is different. Because of the culture in Asia – it’s hard to just say no.”

Maurizio Velasquez, Commercial and BDVP Teledatos S.A., based in Colombia: “From a Latin perspective –we like to have the human approach.”

When people talk about “culture” in offshoring, what are they really getting at? It’s a question I’ve been thinking a lot about lately as I listen to people talk about culture as a fundamentally critical issue that has to be managed, watched over and in the most direct way – overcome.

Culture can, let’s face it, really screw up an offshoring deal. When I lived in Japan several years ago, I had my own taste of cultural “adjustment” learning quickly that if you’re out on the street and lost – people would rather give you bad directions than deliver the embarrassing news that the place you were trying to get to is far, far away.

Take that example, enlarge it and install it into a business environment, where both providers and customers may rely on increasingly sophisticated processes and modern technology tools to conduct business, but the sum result of that collaboration is intended to be something the client values and the provider understands thoroughly.

How Widespread are Cultural Breakdowns?

Research released recently by Boston-based Vantage Partners shows that culture is an issue that has to be reckoned with head on. The expanding gap between client expectation and provider service delivery – often referred to as “scope creep” – is at the heart of many deals that go bad.

“The top four consequences of scope challenges — service complaints from end users; time wasted on conflict, revisiting decisions; scope overruns; and missed deadlines — are not merely results of the mishandled scope discussions that plague any outsourcing deal. They can be directly traced to the extent to which commitments, tolerance for ambiguity, directness of communication, and acceptance of risk pose challenges. A cultural reticence to say “no” to out-of-scope requests, for example, can easily lead to missed deadlines. When these cultural challenges are not adequately addressed, the impact of service complaints, wasted time, scope overruns, and missed deadlines is significantly higher than in onshore deals,” states Vantage’s report on Managing Scope in Offshoring Relationships.

A few months ago, Chris Disher, Central America chapter president of the IAOP (International Association of Outsourcing Professionals) hosted and moderated a web seminar that tackled this very same issue, and the discussion was quite illuminating.

The guest speakers, including Julia Santos, Steve Rudderham, Maurizio Velasquez (quoted above) and Danny Ertle of Vantage Research (also Governance Chair at IAOP), each shared their own perceptions of what culture means to making offshoring work. Here are more of their thoughts:

  • Rudderham: “Every customer that I have had come down to our site in Guatemala has said, “This is not what I expected. It’s a lot more modern.”
  • Disher: “We see some gaps we should pay attention to in improving the quality and service delivery between customers and providers”
  • Santos: “My experience in LatAm is it is a very collective culture where as opposed to the US, we are individualistic. In Brazil, they put a lot of importance in workplace socialization practices, they even do business on coffee breaks.  They are much stronger about relationships – their culture is more energetic and excitable. To get the most out of the relationships I have to get into that mind-frame.”
  • Velasquez: “In LatAm we are more comfortable confronting conflict that in India.”
  • Disher: “I think the time zone plays huge [between LatAm and India], especially for US customers to do same day operations. There is a preference in India for some level of informality – but because of reliance on telephone or video conference, those things seem to create more formality.”
  • Santos: “In Asia, if they say to you  ‘I can’t do this’ they mean it. If they say ‘yes’ in LatAm – you need to look at that twice. They tend to be more optimistic. For Asia they tend to be more pessimistic.”
  • Rudderham: “Culture difference is minimized with strong governance.”
  • Ertle: “The reality is as teams become more globalized – we’ll all have to deal with this. Maybe it will get easier as we get to know each other.”
  • Santos: “It’s truly a point of view. In order to overcome the cultural challenge you really need to embed yourself in that culture. It truly is a two way street.”

Final takeaway:

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It takes time to understand a culture just as it takes time to develop sufficient trust in another human being, no less a business partner. Investing in offshoring is often looked at as cost-driven exercise. Approaching offshore deals through that lens will undoubtedly lead to trouble when the core of the relationship is in fact based more on backgrounds, communication styles, customs and ways of doing business. A few flights on Taca Airways, Continental or Spirit to your prospective provider in the Americas will provide important insurance against breakdowns later on. That’s not a guarantee, but it’s truly the right place to start. What do you think?