In the past, outsourcing was a business dynamic only related to major multinational companies. However, nowadays, small and medium firms are able to take advantage of this global trend as well. The software industry is no stranger to this tendency. The traditional approach of face-to-face in-house software development has been shifted to a more virtual nature using cutting-edge communication technologies and applications such as instant messaging, teleconferencing, videoconferencing , and NetMeeting (the likes of Slack, Zoom, Microsoft Team or Google Hangout).
But outsourcing does not end with the signing of a contract and letting the services run. As the business world becomes increasingly interconnected, new problems are bound to affect the internal structure of organizations, including software factories.
Outsourcing fairy tale stories have led people to think that we all live in a globalized world where distance, borders, place, and time no longer matter. However, according to a study made by Accenture in 2008, more than 60% of all outsourcing deals fail, completely or partially, mainly because of a lack of cultural compatibility between the vendor and the client. Therefore, it is critical to understand that large gaps still exist and they have a genuine impact over performance. Time zone differences, language barriers, distance, differences in customs, diverse decision-making styles, as well as occasional face-to-face meetings, all add up to a series of intangible challenges that companies must deal with when outsourcing.
A great example of cultural difference can be observed when applying diverse software methodologies. In India, China, and Southeast Asia there may be a focus on well-defined instructions and structured processes. Work usually proceeds more comfortably in Waterfall and V-model processes. On the other hand, Latin America and Eastern European cultures are similar to that of Western Europe and the United States of America and may be a more conducive environment to accepting the flexibility and proactiveness of Agile methodologies and direct communication.
Another example that shows the importance of the cultural gap is communication. Software development is a communication-intensive industry, especially during the requirements stage which is relied on to remove uncertainty from the process. Because of language barriers, many times conversations lose effectiveness and critical information is missed. When addressed incorrectly, the problems encountered during this phase can create further delays which have an impact on the project schedule.
The above mentioned facts prove the importance not only of cultural compatibility but also of cultural adaptability. In order to be successful on this global trend, companies need to develop cultural intelligence, which is a form of organizational capacity in functioning effectively in culturally diverse situations. Today, firms can no longer choose their outsourcing providers and destinations only from a cost-effective perspective; other criteria should be introduced to a company’s outsourcing strategy.
How we address the cultural gap at Santex
Initiatives for Staff: Fostering international openness
Initiatives for Clients: Managing expectations
About the Author – Eduardo Coll is a natural born leader. He was the former Operations Director at Santex.