What are the real costs of outsourcing to India? How do companies ensure their overseas operations remain profitable? What are some of the complexities often overlooked?

These are some of the questions GlobalAtlanta posed to Ani Agnihotri, former president of the Georgia Indio-American Chamber of Commerce and Vicki Flier, a local cross-cultural consultant who recently formed Highroads India, a corporate training program to improve American and Indian business relations.

Mr. Agnihotri is an Indian-born president and CEO of IIIrd Millennium, a company providing technology solutions, business process outsourcing and professional staffing services for health care and information technology companies. He is also a certified cross-cultural trainer with more than five years experience co-facilitating intercultural programs.

Ms. Flier is a U.S.-born founder and president of Highroad Presentations, which provides customized training programs in intercultural communications, multicultural team building and international business skills to corporations and aid organizations and educators. She has designed and co-facilitated a training program for Immucor, Germany’s conversion to U.S.-based software and workflow.

Q. What are the real costs of outsourcing to India?

Mr. Agnihotri: It’s very difficult to calculate real costs of outsourcing to India. It depends upon the industry and your familiarity with the leadership of the outsourcing partner and market. You can estimate this only when you gone through one of two lifecycles of the project. For example, companies in Bangalore, often branded as world’s fourth largest high-tech cluster, have started facing high employee attrition rates and infrastructure issues.

The norms of hierarchy in Indian society are reflected in the workplace. Unequal distribution of power is typical and accepted by subordinates. Hence, it’s paramount that companies consider providing cross-cultural training. For example, Indians appreciate punctuality but do not always practice it themselves. Keeping this in mind, one has to schedule a little flexibility to allow for some delays. Also, for a typical American, ASAP means “do it now,” whereas Indians take it literally as “get it done when possible.” However, it is important to remember that Indians adapt very quickly to their new environment and are very fast learners.

Q. What types of research do U.S. executives need to undertake to determine if outsourcing overseas is the best option for a company?

Mr. Agnihotri: The main requirement for any outsourcing model to work is the co-operation between both parties. This calls for an integrated approach to communications between the U.S. client and Indian partner.

Key justification for outsourcing is reduction in the time line, reducing the recurring costs and improving the profitability. U.S. executives must evaluate these points before making a decision. Also, one should carefully do risk assessment analysis and contingency planning.

Q. Does the growth of the middle class in India pose challenges for India workers and their families? Please identify some challenges and provide examples of positive and negative elements.

Mr. Agnihotri: Yes. Rapid growth is an issue; it’s not growth over 20 years. This kind of growth is difficult for a traditional society to handle. Ancient societies have yardsticks of what is acceptable and what is not, such as the issue of call centers and women staying out. Cars and TV’s and electronics, technology – most of India is traditional but they are watching all these shows about sex and divorce. This puts ideas in their minds that weren’t there before. As with dowries they ask, “What kind of car do you have?” It puts pressure on families who have girls.

The middle class wants to get rich but they may have to compromise something, which is usually the value system. This places undue demands on families, causing them to have to earn money in any way they can, even in ways that are not honest or acceptable. Growth cannot just mean profit, it must mean growth for the society as a whole.

On the positive, the Indian middle class is becoming very aware of its own potential worldwide.

Ms. Flier: The Indian middle class is becoming very aware of its potential worldwide. Twenty years ago these same groups would not have made decisions about growth in global terms. Now they are traveling and broadening their perspectives in business. India’s middle class alone would be the third largest country in the world.

With better education and more recognition, India now has the power to contribute to the world economy and offer its citizens’ wide ranging talents to world business. Technology, science, film, art, and other Indian offerings can now explode onto the scene due to the resources and ingenuity of the middle class.

These Indians now have the luxury to expand on their talents rather than thinking solely of survival. India has brought to the table a staggering English speaking workforce and a highly educated middle class. Other countries certainly have much to gain from the subcontinent’s brilliant minds and diverse viewpoints.

Yet the growth of the middle class in India poses challenges for the Indian culture both in India and America. Many cultures experience a similar tension between wanting to grow economically and wanting to maintain their traditional way of life.

The challenge for India right now is not the growth of the middle class, but rather the rapid pace at which that growth is occurring. India’s powerful position in the global market did not incubate slowly over 100 years; the country has instead propelled itself with a bang. This kind of swift development is difficult for a traditional society to handle. “Progress” changes all of the rules.

One example is the explosion of call centers in areas like Bangalore and Hyderabad.

While the average call center agent makes an attractive salary, they also experience a disruption in their family life due to working graveyard shift, a 40 percent increase in risk for heart disease, higher alcoholism and smoking related illnesses, and a world of other problems.

There are other, more subtle issues that arise from offshore centers. For example, when female call center agents work late nights, they come home at odd hours causing suspicion among neighbors and family.

Family is the backbone of Indian society and when this is disrupted, there are untold consequences.

Q. What are some of the complexities that are often overlooked when developing interpersonal and cross-cultural relations between U.S. and Indian operations?

Ms. Flier: Most companies who set up offshore operations in India focus on training related to accent, language and technology. The company implements this training with local resources and sometimes an overseer from the U.S. operation. While this training is critical, it is incomplete.

In spite of all the efforts, customer complaints still occur and management still has trouble communicating across borders. The reason for these misunderstanding lies in the “covert culture” of each country. We can read a guidebook on the logistics of culture such as how to bow, shake hands or speak the language. These types of cultural gaps between the U.S. and India can usually be bridged with typical outsourcing training as well as with goodwill. But covert culture runs much deeper and is usually the cause of issues in intercultural business.

To understand this you must look at deeper cultural dimensions such as the context in which that culture communicates or their decision-making processes. Does the culture communicate indirectly and mainly though non-verbal means or do they state their case directly? Does the culture follow hierarchical formalities? If so, how do those hierarchical structures affect cross-cultural business? Does the culture value individual decisions or the decisions of the collective group?

All of these issues affect offshore operations between India and America, but when issues arise, most of the time neither party knows what went wrong. Since intercultural training cannot always be measured in hard metrics, it is sometimes overlooked in spite of its importance.

What is also overlooked is the risk to offshore operations in terms of attrition and workplace ethics. Due to the psychological impact on Indians as we discussed in the question above, companies who do not address this issue increase their long term risk of losing employees. It takes weeks, sometimes months to train an offshore call center representative, but attrition rates have been as high as 200 percent.

Many Indians feel that the high salary is not worth the price they pay with their health or family. Taking this a step further, a company who is to survive in the global workforce must rise above the norm by following ethical offshore practices. If we do not acknowledge the cultural and physical health of both the Indian and American workforces, we are not truly practicing business with a global perspective.

Q. Do you have any suggestions as to how companies can avoid the pitfalls of setting up outsourcing operations in India?

Mr. Agnihotri: India leads the world in producing a dedicated and skilled tech workforce. India has some of the most competitive programs for engineering and technology training, and 99 percent of its workforce is college educated. The country produces 150,000 engineers each year. By comparison, the U.S. produces 50,000 engineers each year. More than half of the world’s Level Five Capability Maturity Model (CMM) companies are located in India.

With all these benefits India offers an excellent choice but still U.S. companies must be careful in choosing business relationships, operation locations and plan for long term gains.

Q. What types of human resource services do companies need to put in place to ensure that their U.S. overseas operations remain profitable?

Ms. Flier: In order to remain viable overseas, human resources must ensure a measurable level of follow-through on quality training, including cross-cultural training. They must focus on competencies that come from the top of the organization and trickle down. Management has to buy into building successful, effective multicultural teams or else the rest of the organization will not have clear direction on the company’s goals. HR should have resources in place such as access to intercultural experts and language coaches to address cultural difficulties.

Online surveys of customer satisfaction can also be used to track trends and provide ongoing training. Management can then design their training maintenance programs to go beyond the standard performance or volume-based systems and into a system that aligns with India’s values such as collectivism and career success. Customer surveys can be used to design more effective objectives and to work with employees, helping them to improve their skills.

Monitoring calls can be helpful to identify cultural issues of Indian reps helping U.S. customers. Those calls can be used to analyze the issues and customize training more accurately.

But it is important to be selective with customer information– don’t flood management with data, otherwise you cannot be sure all the data gets to the Indian agents. In addition, the U.S. company should monitor the training facilitators to ensure they are staying current and using learning techniques that work for both Indian and American objectives.

For more information, call Ms. Flier at (770) 936-9209 or by email at vflier@mindspring.com. Mr. Agnihotri may be reached by phone at (678) 762-7589 or by email at ANI01@aol.com.