The Asian Tiger Roars Back: Navigating the Cost vs Culture Divide

Two years ago, we were advising companies to get ahead of the curve and turn their attention to Asia. We were right on the money.

In 2023, an over-saturated outsourcing market for software development in Latin America saw a big swing back to South and Southeast Asia. 

With C-suite budgets still constrained, the region’s competitive rates and speed to scale, fuelled by its sheer depth of resources, are hard to beat. 

No wonder business confidence remains high. The International Monetary Fund has upgraded its 2024 growth forecast for the Asia region to 4.5% – outstripping a projected 3.2% expansion in the world economy. 

Our  2024 South and Southeast Asia Region Guide to Software Outsourcing draws on a wide range of international data and expert insights to analyze nine key markets and their potential for offshore partnerships. 

From countries with a great track record, such as India and the Philippines, to emerging markets in Vietnam and Bangladesh, there are plenty of great options to choose from. Narrowing down the field of potential candidates requires a more cautious and nuanced approach.

Cost v Culture: How to avoid walking into trouble 

There’s no question you can find top-quality talent in Asia, where software development is booming and advanced skills in AI are highly sought after by the best companies. However, the reality is that there are far more companies that fall well below standard.

While a proposal might look good on paper, a partnership is likely to fail if vital cues are missed that could put your project at risk.

We’ve looked before at how differences in the way teams communicate can lead to a fatal misalignment in outcomes and goals, because we’re all conditioned by our own cultural norms. To put it bluntly, Western companies don’t operate the same way South Asian ones do.

Dutch social psychologist Geert Hofstede’s 6-D model is a fascinating insight into how culture influences a society’s values and behavior. 

His research is equally relevant to the workplace. Using this framework when you’re building an outsourcing partnership can identify some of those cultural differences and help bridge the gap.

Hostede's research on cultural dimensions focuses on six factors. However, as this comparative breakdown shows, two measures highlight a striking imbalance between the US and three of its key outsourcing markets that indicate potential red flags.

The Power Distance Index:

Defined as “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.”

A higher degree indicates that hierarchy is clearly established and executed in society, without doubt or reason. Here, the Philippines nudges the top of the scale, with India and Vietnam not far behind.

The US sits at the lower end, signifying a society where people question authority and attempt to distribute power.

The Individualism vs. Collectivism Index:

This dimension explores the “degree to which people in a society are integrated into groups”. Again, a cultural divide is apparent between East and West.

Individualistic societies, such as the US, have loose ties that often only relate an individual to his/her immediate family. They emphasize the “I” versus the "we". 

Its counterpart, collectivism, describes a society in which tightly integrated relationships tie extended families and others into in-groups. These in-groups are laced with undoubted loyalty and support each other when a conflict arises with another in-group.

How is this useful in practice? One area to navigate carefully when choosing an outsourcing partner is to recognize when an Asian firm is masking its faults out of deference to you, the buyer. Likewise, going at it hard from a US perspective is unlikely to get the best result. 

When it comes to creating a great partner match, that’s where the insights provided by our team at Accelerance can be brought into play. We know what best practice looks like and we know how to get behind the shopfront and identify Asian companies that meet the required expectations.

There’s no one good reason to outsource to South & Southeast Asia - but here are seven of them 

1. Cost
   Top-quality engineering skills for less than half the hourly rate you’d expect to pay elsewhere.
   
   
2. Talent
   In South Asia, you have access to the most mature outsourcing sector and deepest talent pool in the world, while Southeast Asia’s strong emphasis on STEM education produces developers who are well-trained in the latest technologies and programming languages.
   
   
3. Expertise
   Software developers in the region have rapidly adopted and excelled in emerging technologies. Many outsourcing firms have expertise in areas such as artificial intelligence, machine learning, blockchain, and more.
   
   
4. Scaling
   Asian software firms are used to offering flexible scaling of resources based on project requirements, so you can quickly expand or reduce the size of your development team at each phase.
   
   
5. Time zone
   Distance can be a challenge or a virtue. A “follow the sun” model allows for continuous, round-the-clock deployment, where code written during the day can then be tested overnight by an outsourcing partner in Asia.
   ,
6. Government support and infrastructure
   The importance of the IT industry in many Asian countries has been recognized through favorable government policies, investment in education and infrastructure, and the establishment of technology parks.
   
   
7. Language
   English is widely spoken in the software engineering sector, particularly in India and the Philippines. The legacy of British colonial ties makes for compatible business partnerships and many companies have experience working with Western clients. 
   
   

• India 
  The world’s fastest-growing major economy – and the world’s third-largest startup ecosystem – India remains the gold standard for both its depth and track record. Some 2.5 million STEM graduates emerged onto the market last year and almost half of them were women. Economic growth surged to 8.2% in 23/24 and a recent report from the Deloitte Global Economics Research Center is bullish.
  
  
• The Philippines
  According to the IT-BPM Association of the Philippines, by 2028 the tech industry is expected to generate more than one million new jobs, of which 150,000 will be developer roles. While more of a business processing outsourcing and call center territory, the Philippines has a highly educated, English-speaking workforce and is a natural gateway from the West to the broader Southeast Asia market
  
  
• Vietnam
  Singled out alongside the Philippines as an innovation leader in the latest Global Innovation Index, Vietnam has remained the fastest-growing digital economy in the Southeast Asia region for the second year in a row. A center of innovation with strong investment in youth STEM education, it’s seen a spike in the growth of startups, and many software developers and engineers have experience working in the US or Europe.
  
  
• Bangladesh
  Bangladesh lacks the depth of India but great talent can be found here and at a better price. The second-largest source of IT freelancers in South Asia, Bangladesh is a promising technological hub, with a growing emphasis on digital technology, cybersecurity, artificial intelligence, robotics, and e-healthcare.