ROLE OF CULTURAL DIFFERENCES IN MANAGEMENT OF OBPO

Noting that the companies and organisations actually performing OBPO are typically headquartered in USA, UK, Australia and western Europe gives rise to the observations that there will be cultural differences between customers and staff located in the locations from which business processes are being outsourced, and those countries and cities where the work is actually being performed. Offshoring of knowledge-intensive business processes will involve exchange of tacit knowledge, including culturally embedded work practices (Abbott, Zheng, Du & Willcocks, 2017).

Both Gregory (2010) and Gurung and Prater (2011) have surveyed the published literature on the role of cultural differences in offshore ITO. A number of research articles have found that distance and cultural differences pose unique risks and challenges to client companies that are engaged on offshore outsourcing, whether ITO or BPO (Gregory, 2010). While it is widely recognised in the literature that creating and sustaining an effective collaborative relationship between the client organisation and the supplier of BPO services is a critical success factor, Ang and Inkpen (2008) argue that multiple countries/locations involved in the delivery of OBPO magnifies the challenges associated with building an effective relationship.

One of the major drivers of distance-induced cost are cultural differences between client and supplier personnel, and in some cases, the presence of cultural misunderstandings can cause an OBPO initiative to fail (Aubert et al., 2011; Gregory, 2010). Cultural differences between client and service provider can impact on various aspects of the outsourcing relationship including trust, communication and knowledge transfer, each of which contributes to success (Gregory, 2010). Management of cultural differences has been identified by King and Torkzadeh, (2008) as a key research issue for ITO/BPO.

While various studies, such as those by Levina and Vaast (2008) and Dibbern et al., (2008), show that cultural differences have mostly a negative impact on offshore ITO effectiveness, a

key question that has so far rarely been addressed in the research literature is the extent to which management practices can ameliorate cultural differences.

Studies such as those by Oshri, Fenema and Kotlarsky (2008) and Levina and Vaast (2008) report that a key success factor in effective offshore ITO/BPO initiatives appears to have been managers variously described as “like-minded experts”, “boundary spanners” and “straddlers” who can “build bridges” between dispersed client and supplier project teams. Gregory (2010) argues that informal mechanisms for boundary spanning are of greater importance than formal and contractual mechanisms for coordinating effort in offshore ITO projects.

While the value created by such capable “boundary spanning” managers has been acknowledged in the literature, there is little or no published research dealing with the actions or capabilities of this cohort. Gregory (2010) notes that perception of cultural differences is both subjective and objective, while Aubert et al. (2011) introduces the concept of “perceived distance” which is a subjective assessment (made by individuals) of the “extent of space” between client and supplier personnel. As defined by Aubert et al., (2011) perceived distance is a mental representation and has both cognitive, relational and emotional components. Perceived distance appears to draw upon what is referred to by Gregory, Prifling and Beck (2008) as “cultural intelligence”, and is manifested at the level of individual managers. The concept of firm-level cultural intelligence is developed by Ang and Inkpen (2008) and appears to have similar antecedents to the concepts of Gregory et al. (2008) and Aubert et al. (2011). The importance of the cultural intelligence of top management teams is emphasised by Ang and Inkpen (2008), as well as those project managers directly responsible for offshoring initiatives. Together, these managers can develop culturally intelligent structural norms, the presence of which is seen as a critical success factor for sustained offshoring success.

Based on case studies of German companies conducting OITO to Indian service providers, Winkler, Dibbern and Heinzl (2009) identify cultural differences in terms of power distance, IS designer values, and an active versus passive working attitude that can critically affect relationship quality. The authors utilise data gathered in the case studies to propose structures and best practices which can assist companies to manage cultural differences.

Much of the research on cultural differences has been conducted in the context of offshore ITO. In a survey of BPO literature, Lacity et al., (2011b) reported only 1 article dealing with management of cultural differences out of 87 articles that were analysed in detail. Thus, there appears to be a research gap in terms of effective practices for managing cultural differences (i.e. perceived distances) in OBPO projects, and in particular whether the concepts of effective

“boundary spanning” managers and firm-level cultural intelligence can be further developed in this context.

It has been suggested by Abbott et al., (2013) that published research on OBPO has not sufficiently taken into account the complexities of intercultural collaboration, and that the practice of organisational learning must also be applied in order to achieve OBPO success. Choice of engagement model and selection of location appear to be critical success factors in OBPO, and there appears to be some research evidence that these two factors can significantly impact on the distance-induced management costs associated with OBPO, but these factors appear little explored in the published research. Therefore, it is proposed to address the research question as to how choice of engagement model and location influences distance- induced management costs associated with OBPO.