Wednesday, April 6, 2011

Cultural Issues in Global Outsourcing Blog 3 (week 4)

After finish this week’s reading Strategic Sourcing, from Periphery to the Core, the first thing appeared in my mind is the NBC comedy TV show “Outsourced” that talks about this lonely American manage work in this call center in Mumbai, India which outsourcing its order processing and must explain American popular culture to his employees as he tries to understand Indian culture at the same time.

With globalization rapid technology innovation, more and more companies are moving every single activity in their value chain to someplace else in the world where the labor cost is much lower in general, like India and China. According to the author of the reading, “The question is no longer whether to outsource a capability or activity but rather how to source single in the value chain, and this is the new discipline of ‘capability sourcing’”. [1]

The drive behind the outsourcing is a very simple economic theory called “Competitive Advantage” where people try to gain an advantage over competitors by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. And one way to lower the price will be to lower the cost associate in the production process. However, lower labor cost is no longer the sole reason for American company like Nike and IBM to outsource their activities. It is about how to use strategic outsourcing to improve company’s competitive position in the industry. And to achieve that, company need to concentrate on their resources on a set of "core competencies" where it can achieve definable preeminence and provide unique value for customers. After the company go through those analysis, it should have “an outline of a comprehensive sourcing strategy”.

What will happen after that? Will a company get to enjoy all the benefits of outsourcing as long as they figured the “comprehensive outsourcing strategy”? I doubt it. Because there is cultural issues involved. There are lots of stories out there about failed efforts that involve offshore development (“off shoring”), and fail in global communication is one of the real reasons. “The fact they came from high PDI (Power Distance Index) countries made it impossible for the proper communication to take place when it was most necessary to be plain and step outside the traditional power roles of these cultures.” [2]

So here comes my question, after figuring out the outsourcing strategy, what can a company do to make sure the implementation of this strategy goes well under the inevitable cultural issues?

[1] Mark Gottfredson, Rudy Puryear, and Stephen Phillips, Strategic Sourcing, from Periphery to the Core, Harvard Business Review

[2] Dave , The Real Reason Outsourcing Continues To Fail,


  1. Thank you for the information you've shared to us about outsourcing. I really had a great time reading this one.

    global outsourcing

  2. We know, the cultures of different places in world are almost different. Therefore it is a big problem for BPO. Otherwise all matters are positive as well as effective. Thanks for your information.


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