Europe: Language Hinders Offshore Outsourcing

[Francis M Hult]

Europe: Language hinders offshore outsourcing
By Peter Sayer
IDG News Service, Paris Bureau
29-12-2003

http://www.idg.com.sg/idgwww.nsf/unidlookup/94D8225893CA1B8248256E0B000D9651?OpenDocument

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 ERP
(enterprise resource planning) 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 percent had outsourced IT work, only 4
percent 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 $5,880 in India, but "That's a joke," he said. In
Bucharest, programmers' net salaries are typically $350 to $800 a month,
so employers face $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, labor 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.