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Cultural Factors of Outsourcing and Offshoring Essay

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Updated: May 12th, 2020

Offshore outsourcing of call centers has become an attractive trend for many European and American companies. Higher profit and lesser cost are the two criteria that have dominated the decision for offshore outsourcing. Inexpensive labor in the Asian countries and a large English speaking population has made them an attractive destination for setting up offshore call centers. This idea emerged as an extreme paradigm for the globalization process and enshrined the belief that the global economy aimed to become truly borderless. Thus, the most important component for offshoring is the substitution of labor in the developing world for labor in the advanced world. In the developing world, the anticipated cost of labor is at least three times cheaper for labor doing the same work in a developed country. The savings for the companies who adopt offshore outsourcing is very high. Therefore, the push on call center migration to the developing countries from developed countries. However, choosing the right country and undertaking a restructuring of management is essential. Moreover, offshoring an operation to another country also requires understanding the culture of the country for doing business. This paper shows how cultural factors are essential to outsource an operation to an offshore location and restructure the organization.

What is outsourcing? Outsourcing may be defined as the process of relocating a business operation such as production, procurement, distribution, or customer service to an outstation location. Outsourcing of operation requires the adoption of offshore practices in human resource management around the world. For instance, if a call center is outsourced to India, to establish an office where locals are working, it is essential to understand the culture of the place and get them accustomed to the culture of the outsourcing country. Thus, learning becomes a two-way process. If the management is anticipated to be American for a US company outsourcing to India, then the management must learn Indian culture and the local employees must be given training regarding American culture. Hence, synchronization of cultures for offshore outsourcing is an essential requirement.

The top outsourcing destination for American or European companies is Mexico, the Philippines, China, Malaysia, and Russia. From among these, the country where the call center for Montezume Inc. can be outsourced is India. The other countries that would have been a good alternative are China and Malaysia. However, India is a wiser choice. The reasons are explained in the following paragraph.

Why Montezume Inc. chooses India as its outsourcing destination? To answer this question, it is necessary to ascertain the task that is primary for a call center that will help delineate the skill sets required for the task. The primary task in a call center is to take inbound calls (e.g., customer care services) or outbound calls (e.g., marketing promotion). Human capital is key to call center services. More specifically, call centers require skilled human capital with good communication skills and knowledge of foreign culture. Keeping this primary requirement in mind, the paper will now show why India is a better choice for Montezume Inc.

The main advantages of India are as follows:

  • Availability of skilled workforce that is proficient in English
  • Low salary expectation
  • Moderate geopolitical risk

The labor process is one of the main problems rooted in the basic structure of a call center. As the company has decided that it will hire local employees; hence, it is essential to understand the position of the local people. Hence, it is necessary to start operations in a location that has an abundant supply of English speaking, skilled workforce. India has a large educated workforce. English-speaking, tech-savvy young Indians who are willing to work in call centers are abundant in the country. The educated workforce of India is the primary advantage over other countries as this considerably lowers the training cost. Further, the technically trained labor pool in India has received several foreign investments to set up outsourced call centers, and there are many competing vendors who are already operating successful call centers for big US companies. Further, India has other outsourced operations as a back office, payroll, accounting, human resources, etc.

Language is a primary concern for companies opening a call center in offshore locations. Due to increased concern over offshoring of jobs from the US, there is great hatred towards offshore operations among US citizens. Further, when customers call up and find a person speaking in a foreign accent, they feel disrespected. There are often instances of the problem in basic communication. Thus, accent and cultural know-how for the call center workforce is essential. Cultural difference changes work culture in offices. Hence, considering the culture of the outsourced country is essential, as it would determine the work culture. Owing to cultural decisions, management decisions may, at times, seem insensitive to the employees that may breed into dissatisfaction. India has a well-trained workforce that speaks good English. They are moderately aware of the American culture due to the history of colonization in the country. India has the advantage of a workforce that is accent trained and has a moderately good knowledge of the American culture.

Considering these, a company that is strategizing to outsource their operations to an offshore location must consider a few factors before determining the location. First, cost reduction is the primary aim of outsourcing processes. Second, to transfer operation to an offshore location requires a change in the organization. Third, the creation of the offshore-outsourced office must create value about the products or services supplied by the company.

If India and China are compared as outsourcing destinations for call center, India fares better is most of the parameters. For instance, India has a larger, educated, and skilled labor pool than China. Further, infrastructure is similar in both countries. Quality regulations in China are low while that in India is high. Government support to open outsourced operations is high in India while it is low in China. India has a democratic government, and China has a communist government with no democracy; hence, political stability is greater in India. Though both the countries provide similar cost advantage, English-speaking labor is more abundantly available in India. Further, the cultural compatibility of the western countries is more with India than with China.

India is a better choice for setting up a call center for Montezume Inc. both India and China offer cost advantage in terms of labor, but the company is looking for a skilled pool of labor that would require minimal training to begin work is available in India. Call centers will require employees how are fluent in English. Hence, India is a better option than China, as the Indians are conversant in English.

The management has decided to hire local labor to operate the call center. Hence, a labor force that can speak English is essential, as this would reduce training cost considerably. As human capital is a strong consideration for setting up of call centers in outsourced location, it is essential to set up the operations in a country where people are already ready to start up a call center. As India is a favorite destination for other companies to set up their call center, it already has a workforce that is accent trained and knows the work in an inbound or outbound call center. Hence, opening a call center for Montezume Inc. would be a strategically beneficial decision.

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