Cultural Risk versus Cost in IT Offshore Outsourcing

A number of IT offshore outsourcing projects fall short of being successful due to cultural issues. We performed an analysis of variance on Global Outsourcing Index data of CIOInsight.com and found that while cost is significantly important in determining the index as expected, the best scenario/treatment surprisingly is low cost and high cultural risk. Furthermore, such a treatment is found to be significantly better than the next best treatment which is low cost and low cultural risk. Taken together, these findings suggest that rather than culture, cost alone ought to significantly influence the decision to outsource given the index. This type of cost-driven recommendations may partly contribute to how IT offshore outsourcing phenomenon has been somewhat troubling. Organizational leaders should be cautious when making a decision to offshore outsource IT by considering cultural factors more seriously.