How to overcome cultural hurdles in an IT sourcing project

The success of an IT sourcing project depends on a number of factors. This also includes the compatibility of corporate cultures. Christian Hitz, lecturer at the Institute of Business Information Systems at the ZHAW, explains in an interview how important this is and what role employee training and education plays in eliminating incompatibilities.

How important is cultural compatibility in an IT sourcing project?

Christian Hitz: This question does not only apply to IT sourcing projects. As long as you are in a socio-technical system, cultural aspects play not only an important role, but a decisive one. In 1985, Edgar Schein described an impressive model of organizational culture, and this is considered undisputed in management theory. The mentality of people plays a decisive role in the behavior of the system.

Apart from language, what cultural aspects play a role in choosing a sourcing partner?

If you mean communication by language, then you are omitting one of the most important criteria. A corporate culture is derived from the mentalities of the people in the organization. These can only change through knowledge acquisition and communication. It is debates that lead to changes in mentality and thus secondary culture. In large companies, cultural aspects are summarized in codes of conduct. This describes at least a target image of how one wants to behave with integrity, respect, ethics, etc. This also includes principles of work culture, dealing with customers and communication culture. A sourcing partner is undoubtedly selected according to the criteria of a lived code of conduct and must not contradict it.

What are the most important cultural factors to consider when planning an IT outsourcing project?

It depends on the company’s perspective. This includes the internal relationships as well as those with the sourcing partner. It is important to establish trust between everyone. Such projects lead to change and this must be perceived as positive. It is commonly said that everyone must be brought on board. To this end, workshops are held with the sourcing partners during the planning phase to show what the communication culture is like and whether people see things the same way in terms of the way the project is handled and how pending issues are handled.

What challenges can cultural differences cause in IT outsourcing projects?

I would rather see the challenges from the inside. They show up in different forms of collaboration. A lack of trust leads to dislike or even refusal to work. If there is no definition of communication, which also defines art and style, this leads to misunderstandings. Conflicts arise and these are difficult to resolve. A situation that should be avoided at all costs.

How do you ensure cultural compatibility when selecting an outsourcing partner?

You carry out a pilot project. You play through on a small scale what such a collaboration could feel like. In addition to achieving the goals, both sides must be willing to change the culture (the mental models, the mentality) regarding the aspects of the culture mentioned above. Some sourcing partners have a higher level of maturity in terms of lived corporate culture than the sourcing company due to their existing customers. So it’s not just about getting to know each other, but also about learning from each other.

Does it matter whether in-, near- or offshoring is involved in the cultural match between sourcing partners?

There are differences. The closer and more specifically a project directly affects your own company, the more the cultural aspects become important. You could also describe it in terms of services and say: The more a purchased service is a pure commodity, the more cultural differences can be ignored. The more a service represents a unique selling point for a company, the more important a cultural match is.

What strategies can be used to overcome cultural barriers in IT outsourcing projects?

The recipe is not new and I am not just saying this from the perspective of the ZHAW, but the most proven strategy is training and continuing education. A company should also practice knowledge management and sensitize employees to company changes. If that seems too strenuous, the desired culture can be modeled for them.

Are there technological solutions to bridge cultural differences in IT outsourcing projects? If so, which ones and how does it work?

Yes, there are, and they do not try to bridge a difference, but to create and ensure a match. With such a technical solution, the governance of communication described above can be implemented well. If your company operates in a highly verticalized industry, then there is no other way. These technical solutions cover all processes. The benefit of a common information base, transparency, but also the handling of pending matters ultimately creates trust and a lived code of conduct. Today, there are a wealth of such communication and collaboration tools that also support frameworks.

How can training and development programs help mitigate the challenges posed by cultural incompatibility? And what should you keep in mind?

As already mentioned, such training programs are very important and are therefore also offered by our university as CAS. However, the focus must be on the organization in general and not just specifically on sourcing projects. It is important that employees are aware of their own mentality and know that they are passing on the company culture. Under no circumstances should their own identity be lost in the process, which is currently leading to a broad discussion of the diversity of cultural backgrounds. One of the most important components is the company management living out this culture.

Is it worthwhile for a company to resolve cultural differences with the service provider, or is it better to focus on cultural proximity when choosing a partner?

It’s worth it every fall. This question depends on two main factors. Firstly, it’s about how important the service provider is for your own business model, and secondly, whether you have a choice at all. In many industries and also due to legal regulations, the air of service providers is very thin. If the company is internationally oriented, then cultural confrontation is imperative. We notice that a global village emerges within an industry and a culture, a community, is established. Then it no longer plays such a role, because you are basically already speaking the same jargon.

Outsourcing was once considered a panacea for the shortage of skilled workers. What does it look like today?

This opinion about outsourcing still persists in Switzerland to some extent and is also the reason why many Swiss companies have not really got going with outsourcing. They did not understand that a highly and deeply verticalized economy cannot function without outsourcing of IT and business process services. Or they said that a company that does not master this differently sooner or later will no longer be part of the economy. So it is not about a shortage of skilled workers, but about choosing an IT or business operating model that includes every type of supplier. That is why we do not just talk about outsourcing in our training modules, but also about provider management. If we believe the forecasts, then a rethink is currently taking place. Growth in the Swiss IT outsourcing market alone is forecast to double in the next four years.