Role of language in outsourcing choices

Shingo Murakami, Roger Premo, Ina Trantcheva and Erik Yeager – students at MIT's Sloan School of Management – have just published the results of a survey they recently completed.  They surveyed 60 companies with annual sales between $100M & $1B on their outsourcing activities.  I checked with Erik this morning – these were all US companies.  As expected, language was mentioned as an important issue in forming outsourcing relationships, ranking third after "Specific Technical Expertise" and "Price."  What surprised me was the extent to which language actually drove the selection of outsourcing locations.  Here's the relevant picture:

Note the high scores for the US and India.  It turns out the question in the survey only allowed for the countries listed, but a number of respondents specifically mentioned Canada and Ireland as other important outsourcing locations.

I suppose I shouldn't be surprised.  At NMS we have our own staff all over the world, including major development centers in Montreal and Bangalore, and technical staff in France, Italy, Germany, Hong Kong, Beijing, Seoul, Tokyo, etc.  But everyone we hirer is an English speaker.  We also do some outsourcing to both English speaking nations and to Russia, but again the people we contract with speak English.

A few months ago I spoke with a friend running a high tech company in Germany.  Since the expansion of the EU, he's been hiring engineers from eastern Europe, but only those that can speak German.

I've never found culture differences to be a problem.  Motivated people can easily bridge cultural gaps.  But language is indeed an obstacle, apparently more so than I realized.

Comments

[Roger Premo]

Our findings in follow up interviews suggested more that the maturity of the outsourcing industry in each of the countries is responsible for the sorting of the countries rather than a specific language correlation. It appeared to be an outsourcing corollary to 'nobody gets fired for buying IBM'. When specifically ranking language versus other selection factors it finished 3rd behind technical expertise and price.

Follow-up interviews did also lend credence to the idea that culture similarity is important, but determining what constitutes the relevant aspects of the culture that must be similar and scoring those proved to be beyond the scope of the survey.

Erik's name is spelled with a 'k'. It is in the article spelled correctly and incorrectly. Also, shoot me an email (ropremo_at_Y!) and I can send you a non-skewed version of that graphic.