Outsourcing : An Observation

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Outsourcing An Observation

• Piyush Singh
• CIO
• RLI

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• You dont get to control any outcome, only every
  choice you make along the way
• - Stephan C. Paul

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Agenda

• RLI
• RLIs Outsourcing experience
• Culture
• Communication
• American Culture
• Comparative environment
• International Business environment

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RLI Corp. Overview

• Specialty property casualty insurer
• Publicly traded, 1.1 billion market
  capitalization 2.5billion assets
• Dedication to underwriting profits
• Product driven
• A.M. Best and Standard Poors both A rated
• Managements interests aligned with shareholders
• Technology provides a competitive edge

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RLI Underwriting Track Record
Northridge Earthquake
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86
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• RLIs Outsourcing Experience

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Cyber era

• Today almost 20 of world output about 6
  trillion of the 28 trillion world GDP is
  produced and consumed in global markets
• Within 30 years we estimate at least 80 of
  world output will be in global markets. By then,
  worldwide GDP will be 91 trillion, so the
  globally accessible arena could be 73 trillion
  a twelve fold increase in 30 years. Thirty
  years may seem a long time, but it is not if you
  consider that far more economic integration will
  occur, if our prediction comes true, than was
  achieved in the previous 13,000 years of economic
  history.
• L. Bryan, J Fraser,J. Oppenheim and W Rall,
• Race for the World, Boston, MA 1999
• Update as of 2004 data GDP was 40 trillion
• Trade in goods - 41.5 of GDP

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Outsourcing The Business need

• The Business Need
• Increasing need for IT resources for front-end
  development (diverse platform support
  requirements)
• Desire to deploy internal resources for leading
  edge solutions
• Need to transition staff to new technologies
  versus wholesale skill-set change
• Pressure to manage cost curve especially for
  times when there is a downturn or flattening
  growth

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Outsourcing Selection process

• Selection Process
• Evaluation of possibilities, vendor discussions
  and proposals while in Peoria
• Initial site visit to 5 companies after
  evaluation of possibilities (CIO)
• Short-list of 3 companies (Tier 1, Mid-size and
  Boutique)
• Site Visit to short-list companies
• Each company provided with a detailed expectation
  and process document
• 2 day study trip to each of the companies by
  Manager, Application Support
• ½ a day presentation/site-visit/social outing
  with each of the companies by COO, CIO and
  Manager, Application Support
• Summary discussions on the flight back

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Outsourcing Vendor decision

• KMG (Key Management Group) Boutique company
• Differentiators
• Experience in applications and technology we
  wanted to outsource at the time of the decision
• Good processes in place but small enough to be
  flexible to RLI needs and business requirements.
• Significant management commitment towards the
  success of the relationship RLI would be a
  large and significant client for them.
• Hygiene Factors
• Connectivity/Security/International Standards
• RLI had worked successfully with KMG on other
  projects (starting with Y2K).
• Competitive Rates

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Outsourcing View after 2 years

• Outsourcing Benefits
• Better morale for internal development team as
  they transitioned to newer technologies providing
  for increased service delivery for critical
  front-end systems that are LOB driven.
• Catering to increased service levels to the
  customer community
• Marginal increase in cost is much lower for
  additional support work.
• Flexibility to change the skill-set base at short
  notice without having to go through any
  transition issues and costs at all.
• Scalability of ancillary support staff for
  addressing peaks and valleys in requirements with
  no additional costs.
• Capitalizing on time-difference to address issues
  requiring attention.
• Inter-cultural aspect is probably the most
  difficult and challenging one !!

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Outsourcing Lessons learned

• Commitment to make it work has to be from both
  sides has to be beyond the verbal, and should
  be demonstrable to all levels.
• Communication is key to address inter-cultural
  issues there has to be formal structure in place
  to communicate status/issues etc. in a timely
  manner.
• An account manager is essential to
  communicate/have a relationship with the
  management personnel in US.
• The biggest and most under-served challenge -
  understanding of Inter-Cultural issues and
  appreciation of the differences.

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• Culture
• Human beings draw close to one another by their
  common nature, but habits and customs keep them
  apart.
• Confucius

Surface
Unspoken Rules
Unconscious Rules
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An Iceberg Model of Culture
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Culture is a deposit of

• Knowledge
• Experience
• Beliefs
• Values
• Attitudes
• Meanings
• Social hierarchies
• Religion
• Notions of time
• Roles
• Spatial relationships
• Concepts of Universe
• Concepts of material possessions
• Acquired by a group of people in the course of
  generations through individual and group striving

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Characteristics of Culture

• Learned, not innate (inborn)
• Transmissible (transferable)
• Based on symbols
• Subject to change, dynamicyet static
• Interrelated in its aspects
• Ethnocentric

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Cultural Syndromes(Triandis Parsons patterns
variables)

• Individualism and Collectivism
• Vertical and Horizontal
• Active-Passive
• Universalism-Particularism
• Diffuse-Specific
• Instrumental-Expressive
• Emotional Expression or Suppression
• Depending upon the situation
• Weights given to attributes
• Weights given to situation

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Hofstedes Dimensions

• Power Distance
• focuses on the degree of equality, or
  inequality, between people in the country's
  society.
• Uncertainty avoidance
• focuses on the level of tolerance for
  uncertainty and ambiguity within the society -
  i.e. unstructured situations.
• Individualistic
• focuses on the degree the society reinforces
  individual or collective achievement and
  interpersonal relationships.
• Masculine
• focuses on the degree the society reinforces, or
  does not reinforce, the traditional masculine
  work role model of male achievement, control, and
  power.

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Value Dimensions
Collectivistic
Venezuela
Costa Rica
Hong Kong
Malaysia
Mexico
Jamaica
Turkey
Argentina
India
Japan
Germany
Italy
Denmark
United States
Individualistic
Low Power Distance
High Power Distance
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Communication Keys Context

• High-context culture information is either in
  the physical context or internalized in the
  person with little being communicated in the
  explicit words or message. Listener is already
  contexted and doesnt need to have much
  background information. Japan, Spain and China
  are cultures engaged in high-context.
• Low-context culture most information is
  contained in explicit codes, such as words.
  Listener knows very little and must be
  practically told everything. Canada, US, and
  most European countries.
• Communication between high-context and
  low-context people is fraught with impatience and
  irritation. Japanese communicate by not stating
  things directly, while Americans spell it all
  out.

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Dimensions of National Culture
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Learning and National Culture
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• Communication

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Communication is

• Communication is the process by which persons
  share information meanings and feelings through
  the exchange of verbal and non-verbal messages.
  It occurs at different levels informal or
  formal, intellectual or emotional.
• Both sender and receiver occupy a unique field of
  experience, different for each person. It is a
  private world of perception through which all
  experience is filtered, organized, and translated
  (called individuals life space)
• The message that ultimately counts is the one
  that the other person gets or creates in their
  own mind, not the one we send.
• Inter-cultural communication occurs when there is
  presence of at least two individuals who are
  culturally different from each other on such
  important attributes as their value orientations,
  preferred communication codes, role expectations
  and perceived rules of social relationship.
• Total impact of a message on a receiver is based
  on
• 7words used
• 38 verbal cues tone of voice, loudness,
  inflection and other paralinguistic qualities
• 55non-verbal facial expressions, hand gestures,
  body position etc.

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Communication Keys Listening

• Humans speak about 150 words per minute
• Brain can absorb about 400 words per minute.
• What do we do with the spare capacity ??
• Types of Listening behaviors
• Hearing
• Information gathering
• Cynical listening
• Offensive listening
• Polite listening
• Active listening

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Variables in Communication Process

• Attitudes
• Stereotypes
• Social organization
• Thought patterns
• Roles
• Language skill
• Space
• Time sense

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The IC Communication Process
Environmental Influences
Cultural
Sociocultural
Psychocultural
Sending
Receiving
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• American Culture

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Influences on values

• Protestant Heritage?
• hard work
• Immigration England, Europe, Melting Pot?
  pragmatism
• Frontier heritage?
• the rugged individual
• The heritage of business? entrepreneurs as heroes

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Cultural Values

• Individual freedom/self-reliance/privacy
• Equality of opportunity-competition
• Material wealth (consumerism)/hard
  work/achievement/action
• Future/change/technology/progress
• Informality
• Goodness of humanity
• Time
• Directness/Assertiveness
• Altruism (e.g., volunteering)

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Cultural themes

• Egalitarianism
• Informality
• Names (first name, a sign of acceptance,
  friendliness)
• Handshakes
• Goodbyes
• Laid-back style
• Affiliative (warmth) behavior
• Relationships
• In-group/out-group distinction
• Display rules
• Levels of relationship (friend v. acquaintance)
• Personal questions (house tour vs. Garden
  fence mentality)
• Terms of address titles
• Authority Status
• Do-it-Yourself society
• Minimization of class differences
• Challenging authority

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Cultural themes

• Pragmatism
• Directness/efficiency
• Directness gt politeness (though both important!)
• Short answers
• Low-context communication
• Honesty
• Honesty gt courtesy, honor, family loyalty, etc.
• Informality gt formality
• Business dealings contract gt courtship
• Justice Equity gtEquality meritocracy
• Reciprocity symmetrical gt asymmetrical
• Mobility (geographic, group belonging)

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Cultural themes

• Individualism, Competition View of Self
• Materialism/Consumerism
• McMansions, Pods, Storage Systems
• Lots of things, but not always of high value
  (intrinsic or monetary)
• Keeping up with the Joneses
• Gift unwrapping habits
• Personal responsibility
• View of self and status as mutable
• Status mobility
• Self-help
• Salvation forgiveness
• Hyper individualism and decline of civility

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Cultural themes

• Activity
• Doing, progress, change external environment
• Pace of life fast, busy (but varies
  urban/rural!)
• Goal planning means, procedures, techniques (gt
  relationships)
• Responsibility Individual responsibility for
  action delegation of responsibility
  responsibility over decisions that affect oneself
• Evaluation of product, plans based on utility
  (usefulness)
• Problem-solving planning anticipating
  consequences
• Learner is active, self-motivated, sees ability
  for self change, improvement
• Goals material, comfort/absence of pain

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Cultural themes

• Social relations
• Status is attained, not ascribed
• Social roles are loose but segmented (specific)
• Equality People stress equality, minimize
  differences
• Informality, spontaneity
• Gender equality, friends of both genders
• Group purpose People join groups (
  organizations) to meet own goals
• Friendship social short commitment, shared
  friends
• Reciprocity real, short-term, equal (Dutch
  treat)
• Friendly aggression is acceptable, interesting,
  fun

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Cultural themes

• View of World (summarized!)
• Natural World physical, mechanical
• World Operates rational, learnable, controllable
• Nature of man separate from nature changeable
• Relationship to nature Good is unlimited man
  modifies nature for his ends good health,
  material comfort expected and desired
• Truth is tentative, relative to circumstances
  experienced/separated into dichotomies in the
  observed or object (objective)
• Language is representational,

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Cultural themes

• Nonverbal/verbal themes
• Silence small talk
• Touch contact
• Among American groups
• With visible foreigners
• Space privacy
• Time orientation
• Ethnic differences
• Monochronic gt Polychronic
• Segmented, lineal
• A resource (Time is money)
• Saved, spent, wasted
• Clock time on time versus in time

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Cultural themes

• More on Time! Future?
• Future orientation
• Industrial revolution
• Change is good
• Financial security as a core value Save for a
  rainy day. A penny saved is a penny earned
• Thrift, economy The clean plate syndrome
• Deferred gratification
• Youth is king!
• Enter postmodernism!
• From security to leisure Save for a SUV
• Have it your way (health ?? indulgence)
• The credit crisis
• Entertaining ourselves to death
• Gen X workers Style of Life gt 8 to 5

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• Comparative Environment

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Communication challenges

• American
• Communication
• Direct
• Elaborated
• Informal
• Low context
• Less differentiated codes

• Middle Eastern Communication
• Indirect
• Emphatic
• Formality
• High context
• More differentiated codes

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Communication Challenges..

• American Communication
• What is said
• q I focus
• q Direct talk
• q Assertive speech
• q Self-enhancing talk
• q Public personal questions
• q Expressive speech

• Chinese Communication
• What is not said
• We focus
• q Indirect talk
• q Hesitant speech
• q Self-effacing talk
• q Private personal questions
• q Reticent speech

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Cultural challenges

• American Culture

• Indian Culture
• Time IST
• Politeness/indirectness, and yes
• Hierarchy
• Family
• Public/Private
• Individual/Community
• Dress code hygiene
• Sexual equality
• Modernization pride
• Touch/Space
• Feet/Winking

• Time On-time
• Direct, Assertive,
• friendly aggression
• Equals
• Individualism
• Public/Private
• Community/Individual
• Equal opportunities
• Ethnocentric re world
• view
• Informality
• Acceptable behavior

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• International Business Environment

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International Business Environment

• An International business today must be more than
  a producer of goods and services. It must be a
  teacher and student simultaneously a craftsman
  and an apprentice dedicated to continuously
  improving the arts and sciences of managing
  without borders.
• The global enterprise is inclusive, not
  exclusive, it consists of customers, employees,
  stockholders, stakeholders, partners, suppliers,
  and communities around the world.
• The world of business demands a repertoire of
  style, a respect of diversity, an understanding
  of cultures.
• We must learn to move beyond the mere coping with
  cultural differences to creating more synergy and
  embracing the wellspring of diversity. Cultural
  differences can be a resource, not an impediment
• To survive, become and maintain a best-in-class
  organization, as well as to develop and retain
  talent from many different cultures at all
  levels, strong leadership is essential.
• People in global business must be triply
  socialized to their culture, their business
  culture and their corporate culture.

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Key Concepts for Global leadership

• Global leadership
• Cross-cultural communication
• Cultural Sensitivity
• Acculturation
• Cultural Influences on management
• Changing International Business
• Cultural Synergy
• Work Culture
• Global Culture

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Behavior Hints

• Describe, dont evaluate
• Recognize value differences
• Be aware of attribution
• Be aware of stereotypes (yours theirs!)
• Be aware of different meanings
• Know yourself!
• Look for similarities (too)
• Dont confuse people with cultures
• Talkthe American solution
• Give complete, explicit (low context) detail
• Paraphrase
• Ask questions
• Ask for verification

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Non-verbal Communication Hints ..

• Speed
• Gestures moderate
• Space large
• Posture In the classroom
• Pace brisk
• Touch moderate, but based on relationship
• Gaze and body angle direct (?)
• Smell notions of cleanliness
• Facial expression more emotion, less
  differentiated by status, etc.

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Resources

• Althen, G., with A. R. Doran S. J. Szmania.
  (2003). American ways A guide for foreigners in
  the United States (2nd ed.). Yarmouth, ME
  Intercultural Press.
• Bellah, R. N., Madsen, R., Sullivan, W. M.,
  Swidler, A., Tipton, S. M. (1996). Habits of
  the heart Individualism and commitment in
  American Life (updated ed.). Berkeley University
  of California Press.
• Davies, P. (2004). Whats this INDIA business?
  Offshoring, outsourcing, and the global services
  revolution. Yarmouth, ME Intercultural Press.
• Gudykunst, W. B., Kim, Y. Y. (2003).
  Communicating with strangers An approach to
  intercultural communcation (4th ed.). Boston
  McGraw-Hill.
• Harris, P. R., Moran, R. T. (1996). Managing
  cultural differences Leadership strategies for a
  new world of business (4th ed.). Houston Gulf.
• Hofstede, G. (1997). Cultures and organizations
  Software of the mind. New York McGraw-Hill.
• Lanier, A. R. (2005). Living in the USA (rev. J.
  C. Davis 6th ed.). Yarmouth, ME Intercultural
  Press

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Any questions?

• Piyush Singh
• piyush_singh_at_rlicorp.com
• But.just call me Piyush ?

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