Spend Matters would like to welcome a guest post from Vantage Partners. This is the first part of a five-part series focused on managing scope in offshoring relationships. Today's post focuses on how cultural differences, in making commitments in offshoring relationships, make managing scope harder.
Scope is challenging to manage in most professional service arrangement, and a challenging economic environment only increases the pressure on both sides to win that battle. In offshore deals, customers and providers must grapple not only with these familiar challenges, but also with the obstacle that hundreds of study participants, both customers and providers, identified as the most significant challenge of working with an overseas partner: culture.
Cultural differences in offshore deals make managing scope harder
Scope management is one of the most significant challenges that customers and providers face when working across geographies. In fact, 82% respondents to a 2010 Vantage Partners survey believed cultural challenges result in a greater likelihood of scope overruns in offshore deals than in onshore deals. Specifically, cultural challenges related to commitments, tolerance for ambiguity, directness of communication, and acceptance of risk are believed by survey respondents to have the most significant impact on scope management.
A significant majority of respondents (58%) who said cultural differences impact scope management also said that making commitments poses a challenge in their relationship. The refrain from customers is a familiar one: their offshore provider would rather make promises it may not be able to fulfill than say "no." Customers under pressure to deliver results are accustomed to pushing for as much as possible from their providers. And rather than deny a customer request for a service they deem out of scope, providers frequently agree to deliver or at least "do their best." Upon realizing they cannot complete the work with available resources, they bill the customer (who is surprised to be charged after the fact) or simply fail to meet the commitment, which is disappointing and frustrating.
Customers often insist they would rather hear "no" in response to a request than sustain the impact of unmet commitments or additional charges for blown scope. "The provider just doesn't say 'no,'" said John Litvinchuk, a U.S. customer describing an application development deal with a provider in India. "Nothing is a 'no.' I coach them and tell them, 'just tell me,' but they don't."
Of customers who said that cultural differences impact scope, only 19% said their provider is reluctant to agree even when unsure about its ability to deliver, while 51% described their own organization that way. Many customers ascribe to Eastern culture the tendency to make agreements even when unsure about being able to deliver. For example, 67% of customers that offshore to India said their provider tends to agree even when unsure about its ability to deliver, while only 40% of customers that offshore to other destinations describe their provider that way (see Figure 1). "When I was doing customer-side deals, you could put any piece of paper in front of the pure Indian providers, and they'd sign it," says Gary M. Zeiss, Esq., former Vice President of Corporate Transactional Group at LawScribe (now UnitedLex). "Asian providers are known for wanting to say 'yes' and being accommodating, particularly in negotiations."
Figure 1: Customers ascribe some unique characteristics to Indian culture, as compared to other cultures
The perception of Easterners as reluctant to say "no" might result from Westerners' own tendencies and perspectives about making commitments. Many providers, after all, ascribe to American culture the reluctance to agree unless absolutely sure they can deliver. About half (52%) of providers that deliver to the U.S. said their customer is reluctant to agree unless absolutely sure it can deliver; only 24% of providers that deliver to non U.S. destinations described their customer that way (see Figure 2).
Figure 2: Providers believe their American customers are reluctant to agree unless certain they can deliver
Responding providers overall typically had a much different view from customers of their own willingness to say "no" (see Figure 3). Nearly half (46%) of providers said they're reluctant to agree unless absolutely sure they can deliver. Some providers do acknowledge different tendencies, however, particularly in relationships between Western customers and Eastern providers. "Inherited in their culture, Chinese people tend to say 'yes' to a client, afraid that saying 'no' will offend the client," says Gary Jia, a Chinese native and former CEO of Open Sesame. "I tell them they can only say 'yes' when they indeed agree with a client, and are truly able to do what the client asks for or expects. Otherwise, say 'no' and explain."
Figure 3: Customers view their provider differently from how providers view themselves
In addition to the fear of offending their client, offshore provider staff may worry about their job security. In a region where saying "yes" is taken for granted and "no" is frowned upon, it can be seen as dangerous for a programmer or engineer to say "no." They might worry about not being able to advance in their career and might wonder, as Zeiss suggests, "Am I going to keep my job if I say 'no,' or will the guy next to me who says 'yes' get it?" Absent clear messages from senior management to the contrary, offshore employees may indeed be incented to make promises -- even when unlikely to deliver on them.
The next part of this series will discuss how cultural differences in ambiguity, in addition to making commitments, pose a challenge in offshoring relationships.
- Danny Ertel, Partner, and Sara Enlow, Principal, at Vantage Partners
Vantage Partners. Managing Offshoring Relationships: Governance in Global Deals, 2010.