Europe: Language hinders offshore outsourcing

When IT workers and employers in the U.S. and the U.K. talk about offshore outsourcing, they might as well be speaking different languages.The employers say they’re cutting costs, but their employees hear that as cutting jobs.

One thing that’s saved employers and employees in continental Europe from similar misunderstandings is that they really do speak different languages — not so much from one another as from low-cost countries like India, which have so far picked up the bulk of U.S. offshore outsourcing contracts. English, the language that allows Indian companies to compete on equal terms with U.S. and U.K. ones for IT contracts in those countries, takes second place in the rest of Europe.

IT project proposals tend to be written in a company’s native language because they begin life as internal communications, according to Marian Hanganu, marketing manager of TotalSoft SA, a developer of enterprise resource planning (ERP) systems in Bucharest, Romania. So even if a German company considers its international working language to be English, it’s important for outsourcing suppliers to be able to communicate in German, he said.

Despite their programmers’ prowess, that’s a skill that Indian companies lack, Hanganu said.

“The important thing about Eastern Europeans, and particularly Romanians, compared to Indians, is that you can easily find people speaking French, German, Italian or Spanish,” he said.

You’d expect a European outsourcing vendor with programmers fluent in six languages to say that, but the story is the same from clients too.

According to a survey of the chief information officers (CIOs) of 200 French enterprises, while 36 per cent had outsourced IT work, only four per cent used offshore vendors. Only the largest companies had experimented with offshore outsourcing, according to the study, published in September by SAP AG and Kearney Interactive, a division of Electronic Data Systems Corp.

The survey was released at a debate about outsourcing between the CIOs of elevator manufacturer Schindler Holding AG, banking group Caisse Nationale des Caisses d’Epargne and outdoor advertising company JCDecaux SA, organized by the French IT and Telecoms Press Club. If offshore outsourcing has been slow to take off in France, the CIOs said, then it’s in large part because most suppliers insist on speaking English, and French IT staff don’t deal well with that.

It’s important for outsourcing service providers to understand these cultural and language differences, and work to mitigate them, according to Gartner Inc. research vice-president Ian Marriott, who spoke on the topic at Gartner’s Symposium conference in Cannes, France, last month.

But although he was addressing Gartner clients from many different countries, Marriott himself took an anglo-centric view of the language issue, identifying English-speaking service providers from India, Ireland, Northern Ireland and South Africa as most suitable from a linguistic point of view, and rating vendors in Russia, China, Poland, Hungary and the Czech Republic as “poor”.

Yet German companies will find outsourcers willing to speak German in the Czech Republic and Poland, and Romanians are ready to communicate with French and Italian customers in their own language, according to Hanganu.

While clearly not an insuperable barrier, language is at least a stumbling block: So why are European CIOs even considering offshore outsourcing?

It’s all about cost, according to Gerhard Rohde, head of the Industry, Business Services and Information Technology Sector of Union Network International (UNI), a federation of trades unions, who recently attended a meeting to advise European Union officials on the subject.

Dollar salaries for a broad range of IT staff in India, from IT managers to chip designers, are around one seventh those of equivalent staff in the U.S., he told a meeting in December of the European e-Skills Forum, an offshoot of the European Commission. Yet these workers are not trapped in IT sweatshops: their working conditions are good, and their salaries are at purchasing-power parity with those of staff in the U.S., he said.

Competition in the market could erode this situation, though, so UNI wants businesses to guarantee that contract workers in other countries will be guaranteed freedom of association and the right to collective bargaining; that their working conditions will be safe and healthy, and that they will be paid a living wage, Rohde said.

UNI is supporting a network of IT workers’ groups in India, with the aim of improving helping them band together to improve their working conditions and salaries. If they are successful, then the cost of using Indian outsourcing companies could rise.

Romania is already competitive with India on price, according to a recent report from market researcher Pierre Audoin Consultants. However, the report has been criticized in the Romanian programming community for relying on official government income figures, which are far from reflecting market reality, according to Hanganu.

The report cited a typical annual cost of US$2,360 to employ a programmer in Romania, compared to US$5,880 in India, but “That’s a joke,” he said. In Bucharest, programmers’ net salaries are typically US$350 to US$800 a month, so employers face US$800 or more in monthly costs.

If price is out of the question, there are other points on which Romania can compete with India for European business.

Gartner’s Marriott considered nine criteria in his assessment of countries’ suitability as outsourcing destinations: language, cost, government support, labour pool, infrastructure, educational system, political stability, cultural compatibility and data security.

He omitted every real estate agent’s number one priority: location — yet this should not be overlooked, according to Hanganu.

“Language is an issue, but so is distance to market,” he said. Whether you are two hours away from your outsourced programming team or nine hours can make a lot of difference to your relationship with them. “It’s difficult when you fly, but it’s also different when you want to have a conference call,” he said.

A Polish client asked Hanganu to install a dedicated video link so that he could contact programmers at a moment’s notice.

“He’s at the implementation stage, he cannot afford for his business to stop. Imagine if we were in India, he would not be able to call while we were sleeping,” Hanganu said.

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