The English language has provided firm foundations for the global outsourcing boom of the last 20 years. English-speaking businesses have been able to directly tap into the competitive workforces of Ireland, Canada and above all, India, in areas such as IT and call centres. As a result, offshoring today is dominated by Anglophone suppliers and customers - The US is easily the largest single source of offshore demand, the UK has made up more than half of the European market, and British and US brands such as American Express, HSBC, Citigroup and British Airways have been in the vanguard of new offshoring models.

Anglophone firms may dominate the current picture, and English may be the lingua franca of much of international business. But it is of course not universally spoken by organisations in Europe, neither do most customers and most office workers. This raises major questions about the future of offshoring – Will its expansion be limited by these global language barriers? Can European firms find a way to globalise their multi-lingual back offices, or does offshoring only makes sense in English?


The language gap

Non-English language issues are above all a European problem. The US has access to a range of competitively priced Spanish-speaking populations in central and southern American locations such as Costa Rica, Jamaica and Argentina. Japan has developed a strong market of Japanese language providers in South Korea and Chinese locations such as Dalian. But offshore options for many European languages such as Italian, German or Swedish are less obvious, and capabilities in the market leading location - India - as are at best patchy, at worst non-existent.

Languages with a colonial past, particularly French and Spanish, are an exception to this and do have some emerging offshore location options. But the primary challenge of offshoring of non-English work is not in terms of finding specific locations to service a given language, but rather in finding locations to supply multiple languages.

Most major businesses in Europe are pan-European to some degree, and it is not unusual to see firms operating in 20 or more countries, using 15 different languages. There are even few options to provide this multi-lingual skills base without setting up a multi-location offshore model. In such circumstances the challenge is clear – how can the firm address this linguistic diversity, without building a new organisation so convoluted that it undermines the cost and flexibility advantages of going offshore?

Despite this challenge, a growing number of European companies (or US/UK firms with pan-European operations) are keen to start offshoring, in areas such as customer care, IT, business processes such as finance, human resources or research & development. As a result predictions for the acceleration of offshoring in Europe indicate 20%-50% compound growth rates for the next 3-5 years.

In an effort to attract this growing demand, most offshore suppliers are keen to tout their linguistic abilities. But when you visit the facilities on the ground, the reality can be surprising. Far from fluency, language skills are often limited to simple ‘cheat sheets’ of key words. In the key locations in India, most service providers will privately confess to only having capabilities in English. The fact is there simply aren’t enough French, German, or Italian speaking accountants, web developers or claims agents to satisfy demand in Europe.

The problem applies equally to ‘inhouse’ operations, where the offshore ‘user’ plans to set up facilities via an internal subsidiary, rather than through a third party outsourcer. Language skills shortages are an issue for insourcing and outsourcing alike.


Tackling the issue

So for companies operating across Europe that are considering back office sourcing, what can companies do to address the language issue? Fortunately, there are a number of examples of offshoring success by pan-European firms, and their experience can be distilled to reveal a few essential steps for overcoming the language challenge:

1. Understand the language requirement - Companies first need to realise that offshoring requires different levels of language capability depending on the task in question. Some data processing or IT development tasks may require only very simple language skills, research and report writing may require intermediate skills that could be supplemented by native language speaking support onshore, whereas customer support typically requires fluency and cultural awareness. Any programme needs to start with a detailed breakdown of the processes to be offshored, mapping onto this the level of language skills required at each stage. Offshore planning also needs to take account of the fact that there are different levels of language skill required at different stages of the programme – for example, a knowledge transfer activity may require excellent language skills to ensure that the task is fully understood, whereas following training and transition the operational role may not involve such a detailed level of linguistic ability.
   
   
   
2. Only offshore customer care where the capabilities are excellent - It is often extremely difficult to find the linguistic skill, appropriate accent and cultural awareness to deliver customer services from an offshore location. Where offshoring has failed in the past, it usually occurred in customer support activities, often offshored to India, that have not met the expectations of users. Recent examples of where work has been brought back onshore, such as Powergen in the UK, suggest that in many cases offshoring customer care doesn’t make sense. There are of course counter-examples, but the track record indicates that true back office activities (with minimal or no customer interaction) are less language intensive, and therefore less prone to significant language issues.
   
   
   
3. Simplify the language requirement - Companies can aim to minimise the non-English element of work done offshore. For example, it is possible to set up processes to manually or automatically translate materials (e.g. when invoices are scanned), so that the offshore component of a task requires only limited language skills. This process needs to be well planned to ensure that it is robust enough to handle the exceptions, errors and contingencies that arise during the course of normal business. Where linguistic skills are taken out of the back office, the company must understand and manage the risks accordingly.
   
   
   
4. Assess the ‘farshore’ options - For specific European languages there is a growing range of options, particularly as previously noted for languages with a colonial past. French-speaking back office work can be conducted for example out of Senegal and Ghana in West Africa, Mauritius, or Goa and Pondicherry in India. A number of Dutch companies are making use of historical ties to do the same out of South Africa, and Spain can similarly tap into South America. These pairings can be highly effective, but tend to be single language, rather than providing pan-European coverage.
   
   
   
5. Consider the 'nearshore' options - For multi-lingual offshoring, there are several locations in Eastern Europe where a wide range of European languages are available at relatively low cost. Prague, Bratislava and Warsaw have multi-lingual concentrations based on their young, cosmopolitan and well-educated populations. Significantly, as a result of economic and political factors, the list of nearshore options is steadily moving eastwards. 10 years ago, cities such as Dublin, Brighton or Barcelona were commercially attractive for pan-European shared service facilities. Today, outsourcing providers are starting to promote Bucharest, Sofia and even St Petersburg as prices further West continue to rise. Companies should factor this dynamic into the long term business planning for any nearshore investments.

Looking forward

For pan-European projects, language still remains a complex issue, and non-English language skills come at a premium. In the short term, because they can tap into the largest pool of offshore resources, English-speaking back offices may therefore enjoy a slight operational cost advantage. This may continue the long term trend for global and pan-European firms to take the strategic choice of establishing English as their standard back office working language.

But the picture is not static, and as demand grows it is likely the market will continue to develop European language capabilities. For example, on a tactical level, a number of Indian outsourcers are addressing short term spikes in demand for language skills by recruiting Europeans to live and work in India for 1 or 2 year postings – it is not unusual to see French or German students working for offshore projects in Mumbai or Bangalore. A longer term strategic change is taking place in India and China, where state-sponsored and business-driven language training programmes are seeking to overcome language gaps (in non-English and English skills respectively). For example, last year the Chinese government announced plans to spend an extra $5.4 billion on language training to target the BPO market, whilst Indian states such as Karnataka and Tamil Nadu are also taking measures to promote non-English language skills.

Looking forward only a few years, we can expect rapid developments both in the supply and demand for European-language offshore services. In 10 years time, we could even see English-language sourcing no longer making up the majority of the offshoring market. In so doing the offshore market will be continuing to do what it has done so successfully for 20 years – adapting to the needs of its customers. Language may be a barrier, but the offshore market will find a way around it.


About the Author

Paul Morrison is a Managing Consultant at Alsbridge, specialist advisers on outsourcing, shared services and offshoring. Paul’s work focuses on helping clients to develop sustainable offshore sourcing strategies, including business case development, location assessment and supplier selection. Paul’s advisory work covers a wide range of sectors, including clients both in the private and public sectors. Amongst other clients Paul has recently acted as an advisor to the UK Cabinet Office on BPO strategy.

Paul is a member of the Outsourcing and Offshoring Committee of Intellect, Trade Association for the UK’s High Tech Industry, and he writes and speaks on a range of offshoring issues, most recently in ‘Technology and Offshore Sourcing Strategies’ (Palgrave, 2005). Paul can be contacted at paul.morrison@alsbridge.com.