Offshore outsourcing projects do not have to fail because of cultural differences

Over the past few years, more and more IT service providers have relocated services to countries with lower wage levels, especially India. The aim of this offshoring is to meet the increased competitive and cost pressure of the markets. However, many companies had to realize after outsourcing that the expected savings potentials can only be partially realized. As great as the business incentives are, as high are the demands on the provider management of these offshore projects. Due to intercultural differences, serious inefficiencies can occur in such projects. In addition to purely organisational challenges, it is especially the large cultural differences that have a decisive influence on the success of an offshore project.

The following illustration visualizes eight scientifically valid cultural dimensions (culture dimensions according to Trompenaars, Hall and Hofstede) and shows how much the German cultural profile differs from the Indian one.

The characteristics in each of the presented dimensions are completely different and have a decisive influence on the values and behaviour of the people of both countries. But what exactly is behind the respective cultural dimensions? And why do they have such an impact on everyday cooperation?

In the following, three of these cultural dimensions are described as examples and illustrated with a practical example from the cooperation with Indian colleagues.

Cultural dimension: Hierarchy - Power Distance

Description/definition according to Geert Hofstede: The degree of power distance expresses the willingness to accept unequal distribution of power in a society. A high value expresses the acceptance of the power imbalance, where people understand and accept "their place" in the system. Hierarchical structures are fully accepted. A small power distance, on the other hand, means that power is more evenly distributed. Looking at its cultural profile, India is one of the countries with a high power distance. The hierarchical thinking in India is therefore much more pronounced than in Germany.

The practical example: During a meeting between the on-site manager of the Indian provider and the staff of the German customer responsible for IT service management processes, discussions about the provider's performance take place. The German colleagues explain which services they expect, what weak points currently exist and how the contractually agreed services should be provided by the provider in the future.

From a German perspective, the discussion is initially very constructive and structured. This changes when the high-ranking Indian manager speaks out and vehemently rejects all criticism. The reasoning sounds absurd to German ears: He doesn't care what those present tell him, he only talks to managers of equal or higher hierarchical rank. Process owners have nothing to say to him.

With these words he leaves the room and immediately visits the German manager.

In the subsequent discussion, in which the process managers also take part, the German manager makes it clear that his employees speak for certain topics on his behalf and receive full competence and responsibility from him.

This clarification leads to the fact that in the future meetings will be much better, even with difficult topics, and the Indian manager will not see subordinates but equals in the individual colleagues.

Cultural dimension: Time

Description/definition according to Edward T. Hall: This dimension represents the differentiation between monochronous and polychronic cultures. Monochronous time means to pay attention to only one task per unit of time, while polychronous time means to be involved in several tasks at the same time. Monochronous cultures see time as a straight road, a line that can be divided into individual sections and planned. Time is a precious commodity that can be lost, won, saved or spent. Such people adhere strictly to plans and structures. Polychronic people, on the other hand, also like to do several things at the same time, as is typical for a cultural area. Polychronic people try to stick to plans and data just like monochronous people, but naturally they don't succeed with the same success.

The practical example: For the Indian project team members, it is difficult to understand why German project managers keep asking "Who does what up to when?

Most of the time it is still possible to quickly agree on the "what?", and the question "who?" is often referred to at least one team, rarely a single contact person, but the question "Until when?" leads to difficulties on a regular basis. With a lot of perseverance you get a statement about this or you have to make your own specifications. In our experience, however, this date is only a vague idea and not binding. On request on the given date, it is explained that it was not possible to work on the task because other things were taken care of. In other cases, results are delivered that do not meet the requirements. One explanation for this is that the German project manager is initially satisfied and the task will only be finalized with further iterations and discussions.

One solution that ensures easier cooperation and bridges the gap between the cultures is that the German project manager asks regularly and frequently (possibly several times a day) about the progress of the work packages. This makes the Indian colleague feel valued and reminds him of the urgency of the task and the German project manager can be sure that the task will be completed and will not be left unfinished due to other priorities or open questions.

Cultural dimension: Uncertainty Avoidance

The practical example: In a pharmaceutical company, we are globally responsible for compliance in the IT infrastructure environment. From a German and US perspective, it is particularly important that all regulations and laws are observed. These specifications are very flexible for the Indian provider.

Within the scope of an internal audit, we have determined that an important step in the preparation of certain documentation has not been regularly carried out. For pharmaceutical companies, however, this is even prescribed by law. When we inform our Indian colleagues about this and remind them of the urgency of compliance, they are very surprised and tell us that they do not consider this step necessary. We can follow the explanations, but we do not give in, because the law has to be obeyed.

The Indian colleagues have a very simple solution for this: we should simply call the government so that they can amend the law and continue to work as before.

This example illustrates how different cultural understanding can be when dealing with rules and regulations.

Offshore outsourcing projects can be expensive without intercultural understanding

The anecdotes we have experienced in the course of various outsourcing projects illustrate that without mutual cultural understanding, great tensions can arise in cooperation. Many companies that have gone offshoring have come to the conclusion that a large part of the savings in wage costs can be lost through additional communication and management efforts. Reducing these process losses and improving intercultural cooperation are therefore of great economic importance for these companies.

Intercultural workshop as a solution to problems in offshore outsourcing projects

Based on many years of experience in the management of Indian providers, noventum consulting has developed a model that serves as a practical guideline for the management of projects with Indian stakeholders. Based on current project management standards (e. g. Prince), the model and its implementation provide many practical recommendations for setting up, implementing and completing projects with a high degree of participation by Indian colleagues.

The model can also be applied to other cultures. The elaboration takes place before or at the beginning of the collaboration within the framework of general cultural workshops.

The following figure illustrates which of the cultural dimensions can influence the implementation of the respective PM tool.

Derived from these eight cultural dimensions, the model provides very concrete recommendations for action for each of the presented PM tools, which can help to mitigate intercultural scattering losses.

The following table lists exemplary recommendations for the "Designing and appointing the project management team" per cultural dimension.

Despite all the hurdles described above, cooperation projects with Indian providers can be good and successful. Knowing cultural differences and designing and practicing approaches in intercultural training is a good way to do this.