Underestimated Importance of Cultural Differences in Outsourcing Arrangements

Abstract

In international business, it is important to be sensitive to a variety of different cultural backgrounds and to understand how to adapt the behavior when dealing with provider’s from other cultures. Individuals often do not realize that they communicate differently, have different understanding of the same subject, or hold differing beliefs about appropriate and inappropriate behavior, until they actually experience the impact of those differences to the final result. Cultural differences are named to be one of the biggest reasons why outsourcing deals are experiencing problems. Physical obstacles to successful outsourcing such as infrastructure and facilities have been mostly resolved, but the soft issues, cultural differences, will continue to be the main challenge. By its very definition, offshore outsourcing involves interplay of different companies, countries, regions etc. That evidences, that representatives of different nations will expect different results and will have different expectations from business relationships. Culture is difficult to assess, as it embraces so many aspects. Awareness of cultural differences in all the dimensions, mentioned in the paper, between outsourcing partners would be very helpful in reducing communication gaps and to understand the reasons of misunderstanding. Cultural compatibility in existing outsourcing country selection models is treated just as one of the multiple subcriteria. Cultural differences are not marked as one of the Top features to be considered and therefore cause many outsourcing deals to fail, because they were not properly evaluated and addressed. There are certain cultural criteria, which are very important in selecting the site. The results of the empirical survey are presented in the article. Some authors assigned cultural differences only to company’s culture differences and that is not exactly correct. There should be distinguished between Nations’ cultural differences and companies cultural differences. In onshore outsourcing arrangements the key is companies cultural differences, while in nearshore and offshore outsourcing Nations cultural differences are far more important. Often cultural hurdles can be overcome, when approached with a non judgmental, open mind and with preparation in advance. The goal of both parties should be: making the most of both cultures to add value to outsourcing relationships much beyond cost reduction. Requirements for the nations around the globe to work so close, so dynamic and at such scale as today – have never been present before. We are at the stage of major cultural shift: not only embracing extreme diversity but also enabling this diversity to synchronize and deliver results effectively.