The Culture Factor

March 26, 2012

As we finished the SCL seminar kindly hosted by Baker & McKenzie on global outsourcing a couple of weeks ago I was suddenly struck by the fact that one thing we had not discussed very much was the impact of different cultures on the negotiation and indeed performance of multi-jurisdictional IT contracts.

In February I went to Japan on a business trip for the first time. Although in some ways the Internet and World Wide Web has shrunk the world and an office is basically an office wherever you are there are still immense differences in business practices. So in Japan it starts with the commuting. In the UK we have all suffered the interminable business or personal call on a mobile phone at high volume as we try to work or relax on the trains. In Tokyo’s excellent public transport system the use of mobile’s is politely prohibited – and journeys even though crowded in the rush hour are more peaceful as a result. In Spain some businesses still observe the siesta around lunchtime though that practice is diminishing as more commute and an American or Anglo Saxon work ethic influences practices. I was surprised in Japan, where they do admittedly work very long days, when at  around 12 or 12.30 a bell rang, the lights dimmed in the offices and employees had in effect a quiet time at their desks or in rest areas, some sleeping others reading. The Japanese are very respectful and organised so it seemed to work well there: I am not sure how such a practice would go down in Northern Europe or the United States. And in Japan exchanging and respecting business cards (not writing on them for example) is a well observed practices. I have been in several meeting recently in the UK where we did not do this and as a result it was much harder to work out who we were negotiating with. Everybody seemed to think we somehow should have known anyway.

So when dealing with a contract that affects a number of different countries and regions perhaps with some central Master Services Agreement and a number of local agreements taking into account such local differences can ease the way to a successful agreement that delivers what is expected. The reverse is true and ignoring these sometimes subtle differences and assuming everything works like it does back home (wherever that may be) can be a recipe for misunderstandings and ultimately for contract performance failure.

Even the approach to risk is different. UK and US companies are very careful to specify risk in contracts and to negotiate contracts very cautiously. In the US with the ever present threat of litigation uppermost in everybody’s minds lawyers invariably attend every meeting. In the UK some contract discussions take place without lawyers. Continental European IT contracts used to be shorter relying perhaps on the  codified legal systems. However I detect a trend towards longer more complex IT outsourcing contracts there as well. It seems that some of the large Indian outsourcing companies are more willing to accept contractual risk and to accept most of the contracts put forward by customers on the basis that they should make good margins and if there are performance issues they will throw more people at resolving them.

Culture can get to its most complex over what clothes to wear to work. In the IT industry casual clothes were the norm in some companies  – and indeed in others were expected. I like the story that in Silicon Valley wearing socks with sandals is “formal wear”.  Actually many customers wear suits and ties for men and the equivalent for women so IT companies have become a bit more formal. And custom varies from office to office so in some head offices wearing a tie is obligatory but not expected in other buildings.

Personally I have concluded that the most important habit is the one displayed so well in Japanese culture – respect. Respecting cultural differences and taking account of them helps the wheels of law and of the IT industry go round.

Please comment on this blog with cultural differences you have observed.