Int. J. Knowledge and Learning, Vol. 7, Nos. 1/2, 2011
From local to global – path towards multicultural software engineering Hannu Jaakkola*, Jaak Henno and Petri Linna Tampere University of Technology (Pori), P.O. Box 300, Pori, FI-28101, Finland Fax: +358-2-6272727 E-mail:
[email protected] E-mail:
[email protected] E-mail:
[email protected] *Corresponding author Abstract: One of the trends in software engineering is globalisation. Software development is expert work made in closely collaborating teams. The most natural way to do this kind of work is to implement it in local teams. Distribution of expert work increases the grade of difficulty; an additional grade of difficulty appears if the organisational parts represent different cultural backgrounds. The organisations that are distributed and multicultural must be adaptive. Adaptation can be done in two ways: either to adapt the people to the organisation or to adapt the processes of the organisation to take into account the differences. There is also a lot of knowledge available concerning the differences between cultures. The aim of this paper is to analyse multicultural information and communication technology (ICT) companies. The viewpoints discussed cover the global organisation as an adaptive and learning network and the maturity of the global organisation. Keywords: software engineering; global software development; culture; multicultural; cross-cultural; global; distributed work; adaptive organisation; learning organisation; maturity model. Reference to this paper should be made as follows: Jaakkola, H., Henno, J. and Linna, P. (2011) ‘From local to global – path towards multicultural software engineering’, Int. J. Knowledge and Learning, Vol. 7, Nos. 1/2, pp.5–24. Biographical notes: Hannu Jaakkola is a Professor of Software Engineering at the Tampere University of Technology, Pori. He is the Director of Pori Doctor School and the Head of the Centre of Software Expertise (CoSE). He holds a PhD (Engineering) from the Tampere University of Technology and a Bachelor of Business Administration from the University of Tampere. He is also an Adjunct Professor in Information Technology, University of Lapland. He is the Director of the eMBA programme organised by Tampere University of Technology in Pori. He is an author of close to 200 scientific publications. His areas of research interest are related in software engineering. Jaak Henno is an Assistant Professor at the Tallinn University of Technology. He holds a PhD in Math from the Tartu University, Estonia. He is the author of more than 100 scientific publications on abstract algebra, complexity of functions, computer languages, emergence of natural language and four books (prolog, compilers, games). His current research interests include games as an emergent art form and emergence of information in human/agent society.
Copyright © 2011 Inderscience Enterprises Ltd.
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H. Jaakkola et al. Petri Linna is a Researcher in the Department of Software Engineering in the Tampere University of Technology, Pori. His previous research was a business process model that was linked to emergency management. Currently, his research areas are cross-cultural theories, dimensions and collaborative tools that support cultural factors management and software quality management. This paper is a revised and expanded version of a paper entitled ‘Software development in multicultural context: adaptive and learning organisations’ presented at 33rd International Convention on Information and Comunication Technology, Electronics and Microelectronics – MIPRO 2010, Opatia Croatia, 24–28 May 2010.
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Introduction
The information and communication technology (ICT) industry is becoming more global both in ownership and in the scope of the markets. The driving forces for globalisation include: •
lack of skilled personnel in the home country
•
cheaper workforce in the target country
•
opening up of a wider market via or in the target country
•
expertise of the target country from the point of view of the company’s products and services
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localisation of the products and related services to conquer the markets of the target country.
Our hypothesis is that most of the globalisation decisions are due to economic factors. A pre-condition for establishing a new global site is that the target country has a well-developed education system that can provide skilled candidates for the expert work. In ICT, distribution of work is the common procedure. A typical project is based on dividing the work into parts, which are made the responsibility of collaborating project teams. Physical work is done mainly by using (networked) computers and the artefacts are managed in joint repositories. This distribution of work will cause issues that can be divided into two categories: 1
product
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work management.
From the product management point of view, it is mainly a question of version management – how to avoid simultaneous changes in a certain artefact, but also of how to guarantee that the separate components are finally parts of the same product after integration. Product management problems are mainly solved by suitable tools and work practices. Work management problems are related to teamwork – communication inside teams and between teams. ICT-related work is usually organised as projects. Project groups are expected to have an opportunity for unrestricted communication whenever
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needed in a way that restricts the chances for any misunderstanding. This issue is solved partially by high quality documentation (produced by commonly used tools and technologies, produced in predefined high capability level processes). Another additional difficulty in teamwork is caused by cultural differences of the members of the teams. This is seen mainly in the ways of communication, tools acceptable for communication, (project) management practices and organisational issues. In this paper, we will focus on software development and software engineering work as a meaningful part of the ICT sector. In software engineering, there is a trend away from the traditional plan-driven software development culture towards agile processes. The transfer from traditional process and plan-oriented methods to agile methods increases the need for communication especially inside the development teams (Agile Manifesto, 2010; Boehm, 2006). This trend is very challenging especially in the case of the distributed work that the multicultural teams are responsible for. Globalisation does not concern only big companies, which have resources for the step up from a local to global organisation. Even small software companies are becoming more global and international, and this happens earlier in their life cycle and in a smaller size category. A typical path towards globalisation for small companies is participation in networked development activities as a specialised organisation or as a part of subcontractor network; success stories of normal globalisation paths exist, too. This paper is based on the work in the ongoing project conducted by the Tampere University of Technology. The aim of the project is to study the problems occurring in multicultural software engineering work and to find good practices supporting software organisations to make right kind of globalisation decisions and to implement their globalised processes in a productive way. The paper analyses the interview material collected in early 2010. At the beginning of the paper, the analysis framework is introduced (Section 2). This part of the paper covers two topics: the framework used to structures the complex problem and viewpoints on the analysis of cultures. Section 3 introduces the company cases and the main findings; the findings are analysed in Section 4. Section 5 introduces a globalisation maturity model (GMM), which explains the steps towards successful globalisation. Section 6 concludes the paper.
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Distribution, globalisation and multi-cultural organisations
2.1 Organisational issues In our research project, the five factor model (FFM) is used to structure the globalisation analysis (Jaakkola and Heimbürger, 2009; Jaakkola, 2009; Jaakkola and Heimbürger, 2010). The factors are: 1
organisational characteristic of distribution and globalisation
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frameworks of cultural differences
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direction of the globalisation
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ownership of the global organisation
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artefacts: product, process, service.
8 Figure 1
H. Jaakkola et al. Globalisation grid (see online version for colours) A.Outside
Broker
Broker Network
Broker Offshoring
Broker Outsourcing
Traditional Subcontracting
B. InterOrganizational
Virtual Organization
Distributed Traditional Virtual Offshore Organization
Traditional Outsourcing
NULL
C. IntraOrganizational
Traditional
Distributed Concern Traditional based Offshore
NULL
NULL
1. One site
2. Multiple sites
4. Outsource
5. Subcontract
3. Offshore
The organisational characteristics of the global organisation are classified according to Figure 1. In the globalisation grid, the left-to-right dimension lists the type of distribution and the down-to-up dimension the characteristics of the organisation. In the figure, the companies inside the ‘marked’ area are in the scope of our research. The semantics of the terminology are not well established. Additionally to the general term ‘offshore’ (in our study focus is on cross-organisational processes) the term near-shore (indicating the geographical closeness of the offshore organisations) is used; offshore indicates a long geographical distance instead. Also, terms onshore (close to the customer) and rightshore (suitable distance) are used throughout this paper. The frameworks of the cultural analysis are handled in Subsection 2.2, as this topic is the focus of special attention. The globalisation direction is an important factor. It tests the similarities/differences in the case where a company (or employee) is going into a foreign culture and vice versa. The expectation is that the same rules will not apply in both cases. The ownership factor tests the ruling mechanism in the global network – this has consequences in adaptation mechanisms either to the national culture or to the owner’s culture – two approaches, permissive (freedom to follow one’s own cultural values) and non-permissive (unification into one culture) in adaptation is studied. The artefact factor studies the differences in the globalisation of product development, processes (over cultural borders) and services (over cultural borders).
2.2 Cultural issues There are several frameworks concerning the analysis of the differences in national cultures. The best known and most widely applied are the studies of Hofstede (Hofstede and Hofstede, 2004; Hofstede et al., 2010; Hofstede, 2010). He defines the term culture “As a collective phenomenon, which is shared with people who live or lived within the same social environment, which is where it was learned; culture consists of the unwritten rules of the social game; it is the collective programming of the mind that separates the member of one group or category of people from others.”
He also uses a pyramid model to separate the three levels of uniqueness in mental programming (Figure 2).
From local to global Figure 2
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The levels of uniqueness in mental programming Symbols Heroes
Inherited and learned
Specific to individual
Rituals
Personality
Specific to Group or category
Universal
Culture
Human nature
Learned
ctic Pra
es
Values
Inherited
(a)
(b)
Source: Hofstede and Hofstede (2004)
The mental programming pyramid [Figure 2(a)] points out that – even in the case that personal properties are dominating in certain situations (e.g., in recruiting of new people in the organisation) – cultural issues are always in the background. Hofstede also refers to the ‘onion model’ [Figure 2(b)], which separates four factors as a manifestation of culture: symbols (words, language, styles) are the outermost manifestation easiest seen, heroes are characterising the highly prised persons as a model of behaviour, rituals are collective activities related to a group of people. Everything is based on values, which are the basement of behavioural practices combining the properties of three previously mentioned ‘onion layers’. In our research project, all the interviewees pointed out that personal properties overcome cultural factors when new staff is recruited. It is worth noticing that people’s behaviour is guided, in addition to the national cultures, by several other cultural aspects, like organisational culture (habits adopted by the organisation), organisational subcultures and subunit cultures, work culture (similarities in behaviour, interaction, decision-making, organisation structure, and goals), professional culture (education and adopted practices typical of certain professions), project culture (cross-section of organisational and professional culture) and team cultures [for more details, see e.g., Jaakkola et al. (2009)]. There are two widely used frameworks for cultural analysis – the one developed by Hofstede (Hofstede and Hofstede, 2004, 2010; Hofstede, 2010) and the one developed by Lewis (1999, 2010). The studies consider relations between people, motivational orientation, orientation towards risks, definition of the self and others, attitudes to time, working methods, communication protocols and attitudes to environments. Hofstede’s (Hofstede and Hofstede, 2004; Hofstede et al., 2010) framework consists of six dimensions having relative score values: •
Individualism/collectivism (IDV): IDV describes the extent to which a society emphasises the individual or the group. Individualistic societies encourage their members to be independent and look out for themselves. Collectivistic societies emphasise the group’s responsibility for each individual.
•
Power distance (PDI): PDI describes the extent to which a society accepts that power is distributed unequally. When the PDI is high, individuals prefer little consultation
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H. Jaakkola et al. between superiors and subordinates. When the PDI is low, individuals prefer consultative styles of leadership.
•
Masculinity/femininity (MAS): MAS refers to the values more likely to be held in a society. Masculine societies are characterised by an emphasis on money and things. Feminine cultures are characterised by concerns for relationships, nurturing and quality of life.
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Uncertainty avoidance (UAI): UAI refers to the extent that individuals in a culture are comfortable (or uncomfortable) with unstructured situations. Societies with high UAI prefer stability, structure and precise managerial direction. In low UAI societies, people are comfortable with ambiguity, unstructured situations and broad managerial guidance.
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Long-term/short-term orientation (LTO): long-term/short-term orientation refers to the extent to which a culture programmes its members to accept delayed gratification of their material, social and emotional needs. Business people in long-term oriented cultures are accustomed to working toward building strong positions in their markets and do not expect immediate results. In short-term oriented cultures the ‘bottomline’ (the results of the past month, quarter or year) is a major concern. Control systems are focused on it and managers are constantly judged by it.
•
Well-being versus survival (WVS): indicates the acceptance of indulgence connected to enjoyable life and happiness. Restraint cultures emphasise abstaining from indulgence and reserved behaviour, indulgent cultures are permissive. High WVS score is associated with the combination of high IDV and low MAS.
All dimensions are generalisations and individuals may vary from their society’s descriptors. Lewis’ model of culture (Lewis, 1999, 2010) focuses more on communication and interaction skills. It analyses national cultures in the continuums from three corners of the triangle: linear active, multi-active, reactive. Hofstede’s and Lewis’ model can be seen as a layered whole, in which the former represents culture based behaviour and the latter the behavioural issues of an individual.
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Company cases
3.1 Structure of the companies The company cases introduced in this paper cover part of the selected set of companies that represent different categories in the FFM classification (explained above). In this paper, the following cases are reported: •
Company A: large internationally operating company headquartered in Finland and numerous locations around the world. The personnel structure in Finland is 57% in R&D, production 13% and other service types of tasks 30%; the same shares in global sites are 25%, 24% and 51%. The total amount of personnel is approximately 120,000 (at the end of 2008). In Finland, the company employs 23,000 employees; biggest global sites are India (16,000), China (15,000), Germany, Brazil, the USA (9,000), Hungary, UK, Mexico and Italy. The figures have changed since the end of
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2008; current data is not included in this analysis. The company operates in the telecommunication sector. •
Company B: Large internationally operating IT company (business solutions and services) headquartered in Finland. The company employs 16,000 employees (36% Finland, 20% Sweden, 9% Czech Republic, 7% Germany, 5% India, 4% Norway, 4% Latvia, 3% Poland, 2% UK, 2% China and 8% in the rest of the overseas sites).
•
Company C: global company with 90,000 employees around the world, 700 in Finland and e.g., India 22,500 of these. The company operates in the business solutions sector.
•
Company D: Finnish company operating in enterprise solutions and system development for mobile devices and networks. The company employs 1,500 employees, approx. 200 of these outside Finland (China, Russia and Sweden).
•
Company E: Indian company (nowadays) – extremely large (over 100,000 employees), with operations in 55 countries. The roots of the Finnish site are in a Finnish software company, which was transferred to Indian ownership by an acquisition in 2006. The Finnish part of the company operates in several cities around Finland.
The reports below are not commensurable; every interview has been made on an individual basis and the role of the interviewees is not comparable between the company cases. In some companies the interview has been combined from several individual interviews.
3.2 Company A The company’s motivation to establish a global site varies between countries. In cheap workforce countries, the main factor is the cost level. In some cases it is connected to the opening up of new business opportunities (e.g., in China and India). One of the important preconditions is the availability of a skilled workforce. The lifecycle of the global site (in most cases) as a resource pool is in the first stage and (if possible) improving it to become a global competence centre (having its own expertise serving the whole global network) in the second stage. In some cases, the global sites have both roles. Establishing a new site is typically initiated by expatriates in the higher management. The role of local management will grow with time, but not all the managerial positions are occupied by local managers. The sites under discussion are in China, India and Romania. Recruiting new personnel is based on the company level process – the same rules apply for all sites and cultural background is not taken into account. The career in the company is also independent of site and culture. However, opportunities in different sites vary: the sites have different competence profiles and the height and breadth of the organisation pyramid varies between countries. The company encourages its employees in job rotation and provides opportunities to move from site to site. The company does not provide systematic adaptation training for their employees in the situation where an employee is moving to a foreign site; similar training would be helpful for employees of the receiving site, too. Company A follows the same working processes in every site. It ties employees more closely to the company than culturally adaptable processes would. Similar processes in
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all sites help the employees to move from one site to other, if his/her career expects such kind of job rotation. Management culture is also ‘standardised’ in the global organisation. At leadership level, local circumstances must be taken into account. Experience has shown that trust building between people representing a similar cultural background is easier than between different cultures. As a result, managers and their closest subordinates often come from the same cultures. Some findings concerning the global sites are collected below. In China, the motivation to apply for a job in a foreign company is the willingness to work for a ‘Western’ company, which looks good on the CV and opens the doors into a better job in local companies, other foreign companies and also abroad (which seems to be another motivating factor). Secondary motivation is based on a slightly higher salary, working conditions and job-related benefits. Chinese employees seem to prefer western working culture instead of hierarchical Chinese. Chinese employees are loyal to the employer, but need more managerial support and control than their Finnish colleagues. Company A is market leader in China with its primary products. The global site represents the role of resource pool and global competence centre. In India, Company A’s market is growing fast; growth is based on primary product related service products, which is accelerating company A’s primary product business. The services are derived from the local needs and socio-economical structure of the country. The role of the Indian site is still more resource pool, but it is fast becoming one of the global competence centres. Romania is the new site in Company A’s global network. In comparison with India and China, it has a European (Romanic) culture background; because of that the threshold to work for a European company is lower than in China or in India. Salary indices (approximated by the Company A’s HR management) compared to Finland 100 are in China 50, in India 35, and in Romania 30. As a comparison, the index is 280 in the USA (California).
3.3 Company B The company’s global organisation has its roots in merger of two big Scandinavian ICT companies. Based on this, the two important sites are located in Finland and Sweden. In the first phase the organisation did not have a well-planned globalisation strategy – new sites were established based on individual activities inside the organisation, later on all the decisions were based on a predefined strategy. As the result of the first globalisation wave, the global organisation was based on reasonable independent units each with their own responsibilities; the second globalisation wave led to a global organisation, where the duties were based on the roles in the value chain. China case: The interviewee was establishing the China site of the organisation. The motivation was closeness to the Finnish clients operating in China. The decision to establish the China site was based on the market study of the local circumstances (availability of work force, bureaucracy) and existing pilot clients (representing the first globalisation wave to China; Company B represents the second wave). The lifecycle of a foreign company in China starts from the representative’s office; the second step is a full-scale company 2–5 years later. This path was also followed in the case of Company B. Chinese rules are not easy to follow for a Western company; because of this a partner with knowledge of local bureaucracy has a key role to play. In the case of Company B, all official documents and discussions with the city and government were the responsibility of this partner. The banking system was not well developed; China has limitations in international money transfers; therefore, extra arrangements were required
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to guarantee appropriate results from the business point of view. Another key person, in addition to the administrative partner, was the HR manager of the China site. She was a Finnish lady that had studied in China and was fluent in spoken and written Chinese. A meaningful source of experiences was also an informal weekly – monthly meeting of Finnish business managers. Recruitment was prepared by a specialised Chinese service organisation in collaboration with the HR manager. Recruiting principles are similar all over the organisation, as well as the work processes. During his stay in China, the interviewee established two sites in a five-year stay as the country manager of Company B. In the discussion concerning the characteristics of Chinese employees the following findings were listed: the Chinese employee is conscientious, ambitious and hardworking. Loosing face is not acceptable, which has consequences in the leadership. Sometimes the employee is ready to lie to whitewash mistakes or problems. A Chinese employee needs more control and managerial grip than a Finnish one. Belarus case: Belarus was competing with Russia in a situation where Company B was planning to establish a site in these areas. The motivation was to get a bridgehead to Russian markets, first, however, by acting as a resource pool for the Finnish parts of the organisation. Company B was one of the pioneers establishing a Western company in Minsk; therefore quite soon it earned a special role as a part of the just-established technology park that was supported by the government. Foreign companies were also allowed to work tax-free as a part of this programme. Local universities are able to satisfy the needs of skilled personnel – at a technically high level, but without a good knowledge of Western business principles; this is partially supported by the ‘Company B laboratory’ inside one of the biggest universities. In Belarus, Finland and Finns are respected; therefore the cultural barrier between the top Finnish management and the rest of the organisation was low. After the start-up, which took some years, the aim was to convert the company to be fully under Belarussian management – which has now been accomplished. Belarussian culture is hierarchical; employees are not expected to do independent work and take on responsibilities. Foreign management is respected more than local management, which is why English as the language of management is a better choice than adopting the local language. Bureaucracy is an essential part of the system, but good contacts with the local management help to avoid problems. As in China, a local partner is needed to avoid problems and to get knowledge of local circumstances. In this case, luckily the local partner had very good contacts with the highest level in government. Several West European international banks have their branch offices in Minsk, so there are no problems with activities that need money transfers. Work processes are the same as in all sites of Company B. Nowadays the Minsk site is a resource pool of the organisation. The recruiting structure leans to a proportion of 1/3 experienced (from other software companies) and 2/3 non-experienced from universities. The salary index compared to Finland (100) is 30. The responsibilities of the Minsk site cover the back-end engineering processes (implementation, testing) of the value chain, no client interface and total responsibility of the client cases. The current size of the organisation is approximately 100. CzechRepublic Case: Setting up in Ostrava in the Czech Republic was based on the acquisition of a local software company. Ostrava was selected as the host city of the site because of the university, providing skilled personnel for the company. From a small beginning, the organisation has grown to a level of 1,500 and there is the potential to reach 2,000 in the near future. This site has two roles – half of the activities are related to
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software development and half of the responsibilities are a part of the global help desk service (this service process is initiated in Finland and implemented – depending on the case – in Ostrava and Sweden). The Czech Republic is geographically located in the centre of growing European markets and also local business has grown to a meaningful level. The lifecycle of the site has changed from a cheap work force resource pool to a competence centre and business unit. India Case – an offshored client project. The client (Company Z) of the project represents a specialised business sector, in which daily activities are heavily based on the use of information systems. Applications are complex and large and operations are based on complex rules with a lot of exceptions. Development of new components and maintaining the existing components for this kind of application architecture is extremely demanding. Company B’s business unit is responsible for Company Z as a supplier of information systems. In this business case, Company Z wanted to test the applicability of a shared delivery process, in which the requirements and design was made by Company B in Finland, and implementation (coding) to be carried out at the offshore site of Company B in India. The client Company Z wanted to have all documentation in Finnish, as well as commenting that the final code should include a comment text in Finnish. The Indian offshore site was experienced in the implementation work, but the communication language was expected to be English. In the first phase, the specifications had been planned to translate into English by an experienced translator company. However, the technical characteristics of the documentation made this impossible. The next step in the project was to formalise the specifications – from natural language to semi-formal specifications. A new tool was selected and adopted by the client Company Z and by Company B. The people responsible at the Indian site were given training on the ability to understand the specification in this semi-formal form. This adaptation phase was based on close collaboration between the Finnish site and Indian site; Indian managers (not the employees responsible for the actual work) were sent to Finland for training and studying the specification. This solution indicates the suitability of tools and semi-formal models to establish a mutual understanding instead of a natural language (which is also needed to fill the gaps in the formal specification). Finally, the project was successful, but rather than implementation work, the workload at the offshore site required the resources of two higher hierarchy levels in the Indian organisation. The cost index in this case, compared to Finland (100) is 30; extra management costs finally made the total costs of the offshored project the same level as in Finland. However, as a pilot, the costs were higher in this case than they would be when repeating a similar project later.
3.4 Company C The case introduced here belongs to the category ‘offshored services’. Company C has ERP (enterprise resource planning; application integration) clients, who are supported by a help desk service. A client interface is provided from Finland in Finnish language, and some of the service cases are solved in Finland. Service contacts come mainly by phone, sometimes by e-mail. The service case (incident) is managed by the incident manager, who directs the case to the most suitable site – one of the sites is located in India. Communication between the Finnish and Indian sites is done in English, which means that the service specifications must be translated from Finnish into English (and vice versa in the response phase). This translation is supported by standardised documents
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(partially automatic translation). The organisation works under a global quality management system and covers all sites. The maturity level of the Finnish organisation is lower than that of the Indian site, which means that the Indian site needs more exact specifications than those automatically produced in Finland – which means extra work. Higher maturity and a very process-oriented work culture is typical in India, and in other high UAI countries; following the specifications closely avoids failures and loss of face for the Indian expert. The case that in Finland is solved by an individual expert needs in India the contribution of two additional persons that have a higher status in hierarchy (high PDI index). This causes problems in information flows. In client-oriented service, knowing the client’s needs is important and it is built up only by experience. In India, employee turnover is faster than in Finland, because for Indians, fast job rotation means a better work status. However, this faster job rotation also means a lower ability to solve incidents rapidly and effectively. To summarise – the cost benefits in comparing Finland to India are clear, but there are also factors that reduce the benefit. Company C uses the term ‘rightshore’ to describe the aim of using a global organisation as a whole in a beneficial way. The company has recognised differences between cultures: decision making, team work, management, leadership, problem solving, feedback mechanism, authority roles, and communication, are typical types of differences that must be taken into account. The rightshore concept includes the aim to organise work in comprehensive responsibilities instead of fragmented parts, which decreases the need for communication outside the responsibility area, but also expects splintered competence in the organisation. Distributed collaboration must be supported by tools like Wikis, to allow knowledge transfer inside the organisation.
3.5 Company D The site under discussion in this case is located in Russia, with roots in the acquisition of a Russian software company (nowadays operating in St. Petersburg; originally another site belonged to the network, but it was joined to the St. Petersburg site). The motivation to buy this company was based on two arguments, the availability of a workforce and getting access to the Russian market. At the moment, 90% of the work is still being done for Finnish clients and 10% for Russian clients. The long-term goal is to develop the Russian site to reach the status of competence centre – a competence transfer mechanism is under development and one of the important activities at the moment. The Russian site is responsible for the back-end engineering processes; front-end processes are the responsibility of the Finnish sites. Restricted competence responsibility decreases the need for outside communication and avoids communication problems; the communication language in this case is English. The processes and organisation structure of the Russian site are similar to all the other sites of the company. The cost index of labour compared to Finland (100) is 40 and the availability of skilled employees is good compared to Finland, where there is a shortage of experts. Experiences with Russian employees are good; their technical skills are at a high level, but they do not have the readiness to operate in direct client contacts, not even in all cases in Russia. The Russian employee is less spontaneous and proactive than his Finnish colleagues, innovation and development is also more passive. Sometimes the expectation of their competence is excessive. The organisation has local Russian management, which helps adaptation to local circumstances. HR practices are adapted to the local culture, but follow the basic
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rules of Company D. The company is building up a joint venture with a Finnish university located close to the eastern border of Finland to support the development of the Russian site more closely to the Finnish University tradition; connections with Russian universities are currently quite loose.
3.6 Company E Company EFinland (subscript is used to separate the company under Finnish ownership from the same organisation under Indian ownership) has a long history as a subcontractor in the development of telecommunication systems. In this product segment the company has high expertise in a wide range of different sub-segments. The company was originally a Finnish privately-owned organisation that was acquired by an Indian company in the middle of 2000s. This case is focused on reporting the changes at the breakthrough point of the change in ownership. The company was growing fast in the early 2000s because of the fast growth of the telecommunication business and fast growing demand of expert work in software development. It established several sites in Finland, not as usual in university cities but in smaller provincial cities with a lower level of specialist education (polytechnic, Bachelor level degree). The recruiting policy was based on the opportunity to enter a frontier business segment of its time in a company located outside big cities – with a better standard of living at lower costs for employees. Therefore, the stereotypical employee enjoyed living in a small city or in the countryside, but was also locally oriented, and not so interested in working for an international company providing the opportunity for job rotation between different global sites. For Company EFinland this was a competitive edge, because the employees were committed to the company at a time when the demand for experts was high, but mainly in companies located in bigger cities. Company EFinland also had plans for globalisation (by establishing a site in India) to benefit from cheaper labour. They had planned an adaptation programme to soften collaboration in a global (Finland/India) organisation. This programme was never implemented in practice because of the acquisition. The main contractor of Company EFinland used a wide network of subcontractors, Company EFinland and the Indian company (future owner) among them. One of the expertise areas of Company EFinland was mobile network related software, which was one of the missing expertise areas of the Indian company. Based on the initiative of the main contractor, the Indian company offered to buy the Finnish Company EFinland. The acquisition was implemented and as a result, EFinland became the Finnish site of the Indian Company E. The motivation for the acquisition was to enter a new expertise sector of business and as a consequence, find new solvent clients in this sector. At the moment of acquisition the Finnish site was at CMMI level 3 and the Indian site at level CMMI 5. (principles of CMMI model are explained in Section 5). Analogously to the earlier cases, the capability/maturity level difference caused problems: the Indian owner was engaged with quality-oriented management processes and the Finnish site used – according to the Finnish tradition – economic and balanced (BSC) metres in their management and follow-up. The goal setting of the new organisation was also based on the Indian context. It was based on fast growth (at a level of 20%) in a time when fast growth in the business segment was over; the growth expectations were derived from the Indian context, not from the real opportunities. In one year, the organisation was adapted to follow the Indian management culture; headquarters also expected job rotation of employees inside
From local to global
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the global organisation. As mentioned earlier, this did not fit in well with the earlier recruiting policy (based on locality) and several employees left the company (especially the pedantic, dutiful, perfectionist kind) and dissatisfaction increased among the rest. The adaptation process from a Finnish organisation to a site of the Indian Company E took two years; it was slowed down by the difference in tools and practices. The biggest changes between EFinland and Indian E were recognised in management culture (quality oriented), project culture, work atmosphere (individual vs. team, work time vs. leisure time), Indian HR management (which is tightly based on hierarchical classification guiding the career path). Division of work between Indian and Finnish sites is typical: back-end work in India, front-end work, and transition in Finland (near to the client). The role of documentation was increased and the global organisation established multicultural teams deliberately – job rotation of Finns to India and vice versa became the norm. Cultural differences were softened by culture-free processes; the product is also suitable for multicultural teams, because it is technical without being bound to the client interface. At the moment, Company E’s activities are in the process of restructuring. The division of work between the Finnish and Indian sites is under discussion. When under Finnish ownership EFinland had responsibility for the whole value chain of software development; now the back-end work has been transferred to India without moving new work to the Finnish sites. It is possible that some of the Finnish sites may be closed as a part of this restructuring. It is also likely that the front-end part of the value chain stays in Finland because of the customer relations and interface, but this work is not increasing, because the business sector is not growing fast enough at the moment to replace the outsourced work.
4
Cultural analysis
The cases introduced above have similarities and differences. One of the hypotheses behind our project is that in globalisation, cultural differences are not well known, not even at such a level that could easily be studied using the available resources (see books by Hofstede and Lewis and their websites). Table 1 is based on the collected Hofstede indices of the nationalities related to the cases introduced in this section. The table includes also some other countries that are relevant in the ongoing discussion of the future globalisation trends. PDI differences in the table indicate differences in organisational structure: In India, two managers are needed to manage an expert; in Russia hierarchy beats democracy, etc. Differences in IDV indicate differences in people’s basic behaviour. Individualistic cultures are able to separate work and leisure time, and in less individualistic cultures, the work society also follows into the leisure time. Feministic cultures (low MAS value) prefer family and leisure time to work. This should be taken into account when motivation factors related to work are discussed. UAI is typical for cultures with a fear of losing face – typical in Eastern cultures. This means adaptive feedback and leadership in the global organisation. Low PDI cultures also tend to work according to pre-defined processes supported by complicated documentation. Table 1 also covers countries that are not included in the cases introduced: Vietnam, Malaysia, Indonesia are the goals of future globalisation, Pakistan is interesting for comparison with India as well as China
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with Taiwan and Hong Kong, which have a different political history but are from the same cultural roots. Table 1
Scores of Hofstede’s dimensions – selected countries, alphabetical order
Country/cultural dimension Finland
PDI
IDV
MAS
UAI
33
63
26
59
LTO
(Bela)Rus(sia) (*)
93
39
36
95
Brazil
69
38
49
76
65
China
80
20
66
30
118
Hong Kong
68
25
57
29
96
Taiwan
58
17
45
69
87
57
58
57
74
13
Czech Republic Hungary
46
80
88
82
50
India
77
48
56
40
61 0
55
14
50
70
Indonesia
Pakistan
78
14
46
48
Malaysia
104
26
50
36
Mexico
81
30
69
82
Romania
90
30
42
90
Sweden
31
71
5
29
33
Vietnam
70
20
40
30
80
Note: Derived from Russia; data not available.
Some brief comments related to the cases in Section 3 are listed below: •
Salary benefits in some estimations are expected to be a temporary phenomenon. There is an expectation that salaries in lower cost level countries will rise faster than in high cost level countries; filling the gap will not take more than ten years. The experts’ (interviewees of this study) opinion is different – they expect it to take more than one generation.
•
The term ‘emerging culture’ was used to indicate a country or culture in which the gap between an attainable level and the current level of welfare is larger than in ‘mature cultures’ and countries. The motivating factors in these country categories are different.
•
The trend in Finnish-owned overseas sites is moving from resource pool towards competence centre, from fragmented responsibilities towards comprehensive responsibilities, from separate responsibilities towards a role in the global value chain. The current situation seems to support the hypothesis that work division is based on front- and back-end processes, i.e., the client-oriented part of the work is still being done in Finland, and the technical work according to detailed specifications is being carried out in overseas sites. The trends described could be used as a basis for a GMM, which indicates the state of globalisation and activities expected to reach the next level in maturity (analogous to the CMMI of software processes). This will be shortly discussed in Section 5.
From local to global
19
•
Religion has an important role in the behaviour of societies – religion is also one of the factors indicating ranks in Hofstede’s indices.
•
Decision-making in different cultures differs a lot. A high PDI indicates hierarchical decision-making. In business activities this means that agreements cannot be finalised in business meetings. There are also differences in the role of the individual person and organisation in business transactions – sometimes agreements are made between people, sometimes between organisations, and sometimes as a mixture of these.
•
Joint features in the cases introduced are the role of universities and the importance of local ‘consultation’ to provide contacts to and knowledge of the local administration. In some cases, ‘strategic alliances’ between the foreign company and local organisations support success in globalisation. Local HR practices and recruiting channels are needed.
•
Language problems seem to be the main source of misunderstanding. Special attention to language problems should be given in countries with a strong cultural identity, like Germany and France. Using common tools, semi-formal specifications, and common tools support language-free mutual understanding.
•
The role of bridgehead teams (teams piloting multicultural practices) is important in cultural adaptation. Formal and informal forums for experience exchange are also positive indicators of success.
The list is a summary of our findings. Our work will continue in two dimensions: covering more companies and further analyses of the selected organisations.
5
Globalisation maturity in the organisations
5.1 Capability and maturity model The basic idea of capability and maturity model (CMM) was introduced by Crosby (1979) as a part of his quality management framework. To software engineering sector it was transferred by Humphrey (1989) as the result of his work in Software Engineering Institute (SEI) of Carnegie Mellon University. Since that the model has been improved and further developed first by applying it in different sectors of information technology related activities and later integrating the separate models in CMMI (capability maturity model integration). The current version of it is Version 1.3 (SEI, 2010). Simultaneously to CMMI development, International Standardization Organization started a project to develop an international standard for process improvement in software industry. Software process improvement and capability determination model (SPICE) development was organised as a part of ISO/IEC JTC1/SC7 activities and the standard was published as a series of ISO 15504-x standards; see e.g., ISO (2006) and Spice (2010). In spite of the different development paths CMMI and ISO 15504 are more or less unified. Original process oriented approach specified by SPICE-project was also adapted to CMMI in the form of continuous (process oriented) model to complete the original organisation oriented staged model.
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The concepts ‘maturity’ and ‘capability’ indicate sophistication and good quality. In model context maturity is connected to organisation and capability to processes. The terms are also connected to each other by relation: precondition to high maturity level organisation is that also its (relevant) processes hold high capability. Both continuous and staged approaches implement the idea of continuous improvement in an organisation – either in selected processes or in the organisation. The capacities are characterised by five (six) step scale (simplified definitions): 0
Not executed (only in continuous model).
1
Initial (executed): processes are unpredictable, poorly controlled and reactive. They are (typically) undocumented and in a state of dynamic change, tending to be driven in an ad hoc, uncontrolled and reactive manner by users or events. This provides a chaotic or unstable environment for the processes.
2
Managed (repeatable): process is characterised for projects and is usually reactive. Processes at this level are repeatable, possibly with consistent results.
3
Defined: process is characterised for organisation and is usually proactive. There are sets of defined and documented standard processes established and subject to some degree of improvement over time.
4
Quantitatively managed: process is measured and controlled using process metrics and management.
5
Optimising: focus is in process improvement – continually improving process performance through both incremental and innovative changes.
The main elements of further discussion in this paper are: •
recognition of the capability/maturity levels
•
recognition of the activities needed to reach the next step in the five level stairway (Figure 3).
In staged model, the path from lowest level to higher levels is predefined. In practice, this means that the organisation has to implement improvement activities in certain order and the improvement steps cannot be (in principle) passed.
5.2 Globalisation maturity model GMM is an application of the general CMM in the globalisation context. It has two dimensions •
maturity levels
•
globalisation activities.
The maturity levels (below) are derived from the experiences of case organisations introduced in Section 3 and the analysis results of Section 4. The model itself can be illustrated in the form of a pyramid or stairway (Figure 3): The pyramid focuses on the difficulty to reach the higher maturity levels, the stairway illustration points out the importance of the improvement activities to execute to move from lower level the next one.
Not defined
Expatriates in higher levels. Staff local.
GS: back-end and technical. HS: front-end, client interface and process ownership
Local values in sites and operations.
All owned by the HS
Employee nominated to one site.
Management
SE processes
Organisational culture
Artefact
Employee (role)
Some circulation exists
Distributed, one site – one artefact
Local values operative, awareness of global values exist.
GS: back-end and technical. Ownership of own sub-processes. HS front-end and client interface; total process ownership.
Expatriates in site management. Next levels local.
Resource dominance. Duties based on the existing competencies. ‘Subcontractor’
M2
Organised circulation
Virtual team trials.
Component based artefact policy in global network
Global values and processes operative. Best local practices still left.
Global values visible, not fully accepted. Global processes implemented.
Artefacts based on joint fixed responsibilities
GS: core competence based total process ownership. Bidirectional flow as a normal case. Own global clients.
Local management and staff. Host in the board. Some mobility between sites.
Core competencies exist. The role of competence centre in global context.
M4
GS: wider responsibilities – not anymore based on front/back end bases. Bidirectional flow of process possible in limited situations. Own local clients.
Local management and staff. Mentor from the host.
Own competencies. Responsibilities in limited tasks. Organised use.
M3
Global virtual teams.
Fully flexible artefact responsibility.
Multi-cultural organisational culture; common culture is tuned to benefit on local practices.
Responsibilities distributed in global organisation based on competencies (including client interface)
Nation neutral organisation. Sites represent a mix of cultures. Wide mobility
Distributed global organisation of equal sites.
M5
Table 2
Role
M1
From local to global 21
GMM – a framework version (V0.1) (GS-global site; HS-host site)
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The initial level indicates the situation, in which the organisation is after making a globalisation decision. Typical to this level is that the global site exists and it is organising its activities. This is common both in the case of acquisitions and in the establishment of the own global site. The managed level has transferred host organisation’s processes to the global site – usually by expatriates as managers and without taking into account the local circumstances. The role of the global site is clarified, but not yet fully utilised. The defined level has pointed out the specified responsibility to the global site either in the form of predefined responsibilities in the business processes or in the form of the responsibility of certain competences. Quantitatively managed level needs of the competencies of the global network and ability to allocate the responsibilities to the sites in an appropriate way to guarantee the affective use of the existing resources. The site has local management and it operates from the starting points derived both from local circumstances and the site’s role in the network. When globalisation is in the optimised level the global organisation is seen as a networked organisation of equal sites. Tasks are allocated in the network in an optimal way. The strengths of the multicultural organisation are utilised and some diversity between the sites are accepted and managed. Figure 3
Globalisation maturity model (see online version for colours)
ML5: Optimized
ML5: Optimized ML4: Quantitatively Managed
ML4: Quantitatively Managed
ML3: Defined
ML3: Defined
ML2: Managed
ML2: Managed
ML1: Initial
ML1: Initial
Our GMM is still under development. Table 2 indicates findings in our case organisations. The maturity levels are positioned from left to right towards more mature organisational characteristics. Different viewpoints as a part of the globalisation phenomenon are listed in the up-down dimension. This version of the table is planned to be used as a framework to test the model in the real world company environment. Next step is to test its current version (V0.1) using more varied case material and develop a generalised model (V1.0). Table 2 covers some example situations and steps towards more mature organisations from level 1 to 5. The factors analysed are selected from our experience and are not systematically selected. The purpose of the table is to give an idea of the maturity analysis more than to act as the final maturity model. The factors introduced are shortly explained below: •
role: role of the organisation in the global network
•
management: organising the management of the global site
From local to global
23
•
SE processes: distribution principles of the responsibilities in software engineering work
•
organisational culture: values of the organisation and attitude to the local differences (unification/permissive approach in cultural differences)
•
artefact: ownership of the artefacts (product, service process, etc.)
•
employee: employees role and utilisation in the organisation.
The activities bounded to the transfer of the organisation to the next level would be interesting to analyse in every maturity chain from level 1 to 5. It will be included to the further development steps of the model. The CMMs were originally developed to provide means for assessment (of the quality) of the organisation. CMMI is widely used as reference and assessment model in the quality certification of software organisations; the assessment is based on the CMMI assessment model. GMM is planned to increase understanding of the changes in the globalisation process and recognise the activities needed to increase the productivity of the global organisation. Although the maturity levels in GMM do not indicate organisational maturity levels from the CMMI model point of view, it is quite clear that high CMMI maturity indicates high GMM maturity. However, there are also opposite indications especially the situations, where the collaborating organisations have different CMMI levels. Further discussion on the connections between GMM and traditional CMMs will be left to the next improvement steps of GMM.
6
Conclusions
This paper has analysed the problems occurring in multicultural distributed software development organisations. The analysis is based on empirical data, collected by interviews with selected experts. The case studies are introduced and some critical analysis is included in the case reports. Further work focuses on four topic areas: 1
More detailed analysis of the relevant cultures producing a description of cultural stereotypes. Software process models provide the means to analyse the characteristics of individual processes. By analysing the expected skills from a process point of view and the cultural stereotypes from a cultural readiness point of view, it would be possible to develop culture sensitive process models to be applied in multicultural software organisations.
2
Current state of globalisation from the point of view of software development. This is a continuation of the work briefly introduced here.
3
Current state of globalisation from the point of view of software-related services. This is a continuation of the work introduced in this paper, focusing on services as artefacts.
4
Development of a GMM to describe the steps to successful globalisation. This will integrate the findings of earlier work packages in the form of a useful improvement model.
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Our work is continuing with a ‘globalisation guide’ for software companies as a final product goal.
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