Outsourcing has opened the market to offshore and nearshore contractors. Amid the rising competition, companies are analyzing the different advantages and setbacks to both the service provider and the client.

While an outsource partner offers countless benefits—from offering cost-efficient services to having an extensive labor pool—most companies fail to consider that there is more to the transaction than delivering raw materials or inputs. A study done in 2007 by economist Pankaj Ghemawat found that “many companies fall too easily to an argument that we all live in a globalized world and distance, borders, and place no longer matter.”

This nonchalance is a contributing factor to the 69% chance of outsourcing deals failing completely, or partially, as stated by an Accenture study conducted in 2008.  The study pinpointed cultural incompatibility as the main reason for such failure. Here are five reasons the careful selection of an outsourcing partner is the key to business success:


Reason #1: Culture sets the tone for business interaction

According to researchers Krista Tuulik and Ruth Alas, “culture and social environment influence people values, and values influence the view and behavior.” This, in turn, can affect the decision-making process, communication, and coordination style. While this reason may be negligible in nearshore outsourcing where the top concern is placed on the partner most capable of delivering the service, the same cannot be said for offshore outsourcing where there is a disparity in cultural orientations.

Countries fall into two main categories—the high-context and low-context cultures. One notable difference in high-context cultures is the close connection over a long period. Social conventions are not explicitly expressed because most members already know what to do. These countries place a heavy weight on tradition, reputation, and honor, and they go through lengths to avoid confrontations. India, Arabia, and Asia are examples of such societies.

While America and some European countries are considered low-context, they are goal-oriented and see the end result such as closing a deal or achieving their expected outcome, therefore creating an aggressive façade.


Reason #2: Cultural compatibility cultivates trust

Imagine how frustrating it could get if the outsource partner fails to acknowledge the cultural differences. Failure to establish a middle ground between cultures tends to result in an individualistic company norm where the outsourcing company is never satisfied with the input, and the provider feels it is left to its own devices with inadequate support and unclear specifics.

It is a normal human reaction to withhold trust if one party acts, works, or communicates in a way that is completely different from what is considered a norm. There is a great chance of rejection regardless of the skill level and expertise. This will, in turn, lead to an unproductive partnership.

On the flip side, understanding how the culture of the outsource partner works and being willing to meet halfway could provide for a trusting transaction. Think of it this way, people work better and more effectively when they are with other people who think and act in the same way they do, creating confidence in teamwork.


Reason #3: Service maturity pushes for effectiveness

When making outsourcing decisions, be sure to consider the quality of service you will be receiving. The maturity of service from an outsource partner can be partially gauged by the company’s ability to handle cultural clashes. For instance, countries that have been outsourcing hubs for some time possess an understanding and coping abilities to deal with and cater to foreign labor or input demands.

It is easy for these countries to come up with the deliverables as they have culturally adjusted to the stress, structure, and tradition of outsourcing provides. This allows agile teams to work at a faster pace and a more synchronized manner.


Reason #4: Language relies on the culture

Language is primarily reliant on culture, while culture is reflected in the language. Words can be interpreted in different ways across cultures. Take for instance the drastic difference between India’s “yes-no” culture and that of Ukraine. Outsourcing Center’s senior writer Kathleen Goolsby says that in India, “yes” translates into “I’ve heard you — but it doesn’t necessarily mean that I understand you.” On the other hand, in Ukraine, “no” translates into “I don’t understand.” Saying “no” in Ukraine doesn’t mean the person can’t do the task.

Notice that these two countries are of the two varying contexts and therefore express themselves differently.


Reason #5: Decision-making process varies

There are noticeable differences in how agile teams come about their decisions across different cultural settings. In most western countries, individuals take pride in a person’s initiative, and they are generally not fond of being caged in overly-bureaucratic structures.

In high-context cultures, a person’s action must always conform to what was discussed and expected via a formal conference of some sort. Individuals should always obey guidelines as opposed to taking matters into their own hands or, worse, making unconsented decisions.

In a nutshell, the cultural factor is a broad and encompassing concept that may be the difference between the success and failure of your business outsourcing initiatives. If you are looking for a nearshore development partner we can help you. Send us a message and we will be contacting you ASAP.