A Case Study – With Practical Lessons
Introduction – the Scope of the
Challenge
In my career, I have worked with clients and
service providers in many off-shore locations – on every continent except
Antarctica. Countries where I’ve done
business include:
· Canada
· Dubai – United Arab Emirates
· People’s Republic of China
· Belarus
· Romania
· United Kingdom
· Nigeria
· Colombia
· India
· Philippines
· Australia
· Belgium
· South Africa
· Singapore
· Japan
In addition, I literally “grew up” in the
world of foreign commerce. My late
father owned and operated a company that connected European and American
construction-supply manufacturers with overseas clients. He represented European firms such as Sweden’s
Dynamit Nobel in bringing innovative roofing solutions to American architects
and construction firms – while at the same time, he sought out unique-to-America
products, representing the products and their manufacturers to European
architects and construction firms.
Cooperative international trade was part of my
growing-up daily dinner-table discussions.
Later, in one of my first jobs after college
graduation, I worked for a state agency – a division of the South Carolina
governor’s office – that maintained off-shore offices in Western Europe and
East Asia. There, we aggressively
recruited European and Asian companies, encouraging them to set up production
facilities in South Carolina, such as the $4 billion dollar Michelin Tire
production facility.
Beyond those experiences, I have taught
business and marketing at several major universities, including Middle
Tennessee State and the University of Nevada Las Vegas. In these, I have both taught about conducting
cross-border business and I have taught students from many countries, who added
their own unique perspectives to classroom discussions.
In several of my published business books, I
have also addressed some of the benefits and challenges of working across
borders with both clients and service providers. Finally, in addition to working with
off-shore companies, I have provided guidance to other off-shore companies
through universities in India and Colombia, as well as through a professional
society of marketers in Nigeria.
As a result, over a period of more than 40
years, and having worked directly with many overseas clients and more than a
few off-shore service providers, I’ve learned a fair number of business lessons
about dealing with companies on six continents.
This case study is infused with that experience and those lessons.
With the increase in globalization we see
today, a steadily increasing number of American businesses are now doing – or
are considering doing – business with off-shore clients and service
providers. Many of them are just now discovering
both the benefits of, and the problems with, this kind of commerce. These are
the same challenges and benefits I’ve had to deal with for more than four
decades.
The lessons illustrated in this case study
are intended to assist American firms to more successfully do business overseas
– with a specific focus on working with off-shore service providers.
This Case Study: The purpose of this case study – with lessons – is to help
American companies, as well as American business executives and entrepreneurs to
do business with off-shore service providers. Specifically, I want to help them
be more aware of the challenges – as well as the benefits – they are likely to
face. At the end of this case study are
a series of lessons that can be applied to any off-shore business agreement.
After an overview of the benefits and risk of
working with off-shore service providers, this case study focuses on a single,
specific off-shore agreement. This was
an agreement where nearly everything that could go wrong, did go wrong. As such, this failed relationship makes an
excellent case study illustration of the challenges faced by American
businesses looking for specific services – or lower prices – when dealing with
a service provider in another country.
The American firm featured in this case study
agreed to participate on the condition that they not be identified. “This is not about us – or even about the
company with whom we had so much trouble.
Rather, this is about our willingness to help others American businesses
to learn from our example,” according to that company’s COO, a partner in the
firm. This firm did provide access to
the initial contractual agreement and to a representative sample of email and
other communications between the two firms.
However, the other firm in question did not
agree to participate in the case study – in fact, when the case study was
mentioned, they got defensive, confrontational and even threatening. This company – Screaming Eagle Productions (http://screamingeagle.co.uk/), located in Bristol, England –
is named, because, in my opinion, they are a company that American firms –
based on one American company’s challenging experience – should think twice
about before doing business with Screaming Eagle Productions.
Keep in mind that this case study is very close to a “worst case scenario.” Not all overseas engagements are fraught with problems. In fact, many of them are very successful, with few – if any – problems. My own 40-plus year experience working with off-shore clients and service providers represents a more balanced experience. My two really problematic engagements were with a client that was an arm of the People’s Republic of China, and with an IT service provider firm in Cebu City in the Philippines. However, even there, in both cases, we were able to work through those problems and reach positive resolutions.
So, instead of being warned off from dealing
with off-shore service providers, look to the lessons here, then plan ahead to
avoid or overcome these kinds of challenges.
Benefits: Let’s say it up-front: there
are a significant number of sound reasons for working with off-shore service
providers. Some off-shore providers
offer unique services not readily available in the US. Others offer more standardized services, but
at significantly lower rates, which is why cost is one of the primary reasons
for working offshore. For instance,
there are remarkably well-trained and talented programmers and IT tech service
providers in South Asia, many of which offer quality services for pennies on
the American dollar.
However, there are also serious
down-sides in working with off-shore service providers.
Challenges: These down-sides go beyond the challenges of working with someone
in a radically-different time zone, though that can also be a frustrating and
unsolvable problem. There can be
cultural and language barriers as well, even when all parties speak English.
For instance, we’ve all fallen victim to
overseas call centers and telemarketers where the “English-speaking” operators
speak a very different, often incomprehensible language, one that has little to
do with American English.
However, there are other, more serious
problems that all boil down to the “guarantee.”
Vetting Service Providers – When dealing with American-based
service providers, it is SOP to review their records with their local Better
Business Bureau. Many firms also quiz their local Chamber of Commerce. It has
also become routine to search online for reviews and testimonials, their
D&B rating – and even to check on current and former legal actions that may
have been brought against the firm.
However, when dealing with prospective off-shore service providers, many of these routine ways of vetting them are unavailable – or at least unknown – to American companies and their execs.
Just as important, many execs prefer to have
face-to-face meetings with those potential vendors prior to signing the
contract. It is even possible to meet
with the service providers’ current or former clients. For many business executives, there is no
substitute for pressing the flesh and meeting eye-to-eye. Savvy business decision-makers must – as part
of what makes them successful – have well-honed skills when it comes to
“reading people.”
However, this reading of character can be far
more difficult when all you have is an email, or a very-long-distance phone
call. Even Skype is no substitute for
meeting face-to-face before signing a contract.
Along with this, it is harder to vet an
off-shore service provider by checking with their current and former
clients. Generally, the bulk of those
clients are continents away, in radically different time zones. Some
local-to-them current and former clients will prove to be uncomfortable sharing
negative information about a fellow “local” company, especially to foreigners
from America. Being able to engage these
reference clients in productive and candid discussions about the service
provider’s strengths and weaknesses can prove to be difficult, if not
impossible.
When Communications Break
Down: When those normal business-to-business
problem resolution solutions are either exhausted or fail to provide relief, a
major challenge – as one American firm learned – was that the contractor can
just unilaterally break all forms of contact.
It’s hard to demand resolution when your calls go unanswered and your emails
ignored.
Enforcing Agreements – When dealing with off-shore
service providers – especially those who are in default on their agreements – there
is no reasonably-priced, practical and standardized way to go about enforcing
those agreements.
It can be done, and in specific countries
there are established avenues to help resolve such issues – but when there are
national boundaries to cross, these apparent solutions can too often prove
ephemeral. This is addressed more fully
in the conclusion to this case study.
The Issues: The issues involved in doing business with off-shore service providers – especially when it comes to a guarantee of service – revolve around:
·
Timeliness – does the project complete on
time? If not, and if you’re not the reason
why it’s late, what recourse is available?
·
Coordination – is the time zone difference
going to present a real communications problem?
Is the vendor under consideration clearly willing to work very late or
come in very early to be available to their American client during American
working hours?
·
Quality – is the end-result product
going to be professionally executed?
More important, will it also “work” across the boundaries of cultural and
linguistic differences?
·
“Cultural Map” – different cultures have
different standards which are often subtle, but they are nonetheless very real. This can pose real complications when doing
business off-shore, and it doesn’t just apply to audio tracks. Visual images are also reflective of cultural
biases.
For example, in an off-shore
video production aimed at US-based internet usage, cultural differences can be
critical. Houses and buildings can look
different. Technical equipment definitely
looks different. Even people – based on their clothing and hair styles – look
different. Words don’t always mean the
same thing, and common word-choices in an overseas country can be truly
“foreign” to an American audience. For instance, the term “bloody” has very
different meanings in the US and the UK.
Nobody is “wrong” in a clash-of-cultures
situation like that. However, those differences can nonetheless create
insuperable barriers to business success.
While a computer program may know no “cultural” issues, other business
service products do. As it so often is
when dealing with off-shore call centers, effective communications may not
always be easy – or even possible. At issue when working with an off-shore
company is whether their own cultural map will “bleed over” into the service
they provide. Can they overcome this
ingrained cultural bias and produce an “American” product?
Sadly, the answer is “not
always.” There are solutions, but too
few service providers avail themselves of those solutions.
Twenty years ago, I was
contracted to create a massive four-color brochure to promote a business joint
venture between a Texas-based American firm and a business that was owned by
the government of Belarus, with headquarters in Kiev. This brochure had to “work” in English –
which was why I’d been retained to create it – but it also had to work in both
of the subtly different Belorussian and Russian languages, and I don’t speak
either one of those languages.
Fortunately I was able to hire a local college professor who was native
to Kiev. He was able to ensure the
correct translation – and transliteration, which helps to eliminate cultural
bias in word choices, even in translations – into both of those two Slavic
languages.
However, in my experience,
off-shore service providers rarely retain the services of skilled American
communicators who can help to ensure that their end products and services fit
an American model.
·
Guarantee – if you’re not satisfied with
the work’s quality or timeliness, how can you be sure to get a make-good re-do
or – at last resort – getting your money back from a provider doing business a
continent or two away?
The following case study will examine a
series of mis-steps between an American start-up company and an off-shore
animated video production service provider based in Bristol, England.
The Case Study – Screaming Eagle
Productions
All of these potential problems – and more –
arose with an engagement by an American start-up firm with Screaming Eagle
Productions (http://screamingeagle.co.uk/), an animation video producer
located in Bristol, England. The American
start-up operated as a medical tech-service firm located on the American west
coast; the video was to help them reach out to potential patients with specific
information about their one-of-a-kind medical service.
These two companies were located more than
5,000 miles apart, separated by eight time zones – from England’s GMT Time Zone
to America’s Pacific Time Zone. This was further confused by the different
countries’ differing use of Daylight Savings Time – just knowing what time it
was 5,000 miles away often required an internet search.
Background
A Short, Quick Video: In August of 2014, this west coast start-up company reached out to
Screaming Eagle Productions, seeking the production of a three-to-four-minute
animated video that would introduce the viewers to that firm’s core services.
During negotiations, Screaming Eagle Productions claimed extensive experience
in creating these short, sales-oriented instructional or informational videos
for use in the US market.
Screaming Eagle Productions came recommended
by a colleague of one of the American business’s four partners. Phone contact was made – and during the
“courtship” phase of what came to be the agreement, there was no problem
experienced across the eight time zones.
The executives at Screaming Eagle Productions made themselves available,
even on the weekend, at hours that suited the Americans’ business execs’
schedules. This 24/7 accessibility
created an expectation on the Americans’ part that the time zone difference
would not be a problem.
According to the Americans I interviewed for
this case study, the Screaming Eagle Productions team was very effective during
the sales process. They convincingly built a sense of confidence that they
could indeed get the job done, despite their distance from the American west
coast. Questions about cultural
compatibility – their ability to produce a video that reflects American
sensibilities – were also seemingly laid to rest. Negotiations lasted several months. However,
this time between the opening of the negotiations and the closing of the
agreement was more because the Americans had many other time-demand priorities
that developed while starting their new business than because of any problems
with the negotiations.
A Tight But Doable Deadline: In the initial negotiations, and based on a script draft the
Americans had produced, they were promised a production turn-around of sixty to
ninety days – certainly before the end of 2014.
They were very specifically assured that the production would be
“American” in its look and feel, and that the resultant introductory video
would be useful in the company’s distinctively American target market.
“We work with American companies
all the time,” Screaming Eagle Productions claimed, offering that “fact” as a
guarantee that the product would be one the American start-up firm could use.
Screaming Eagle Productions also guaranteed
that the product would be delivered at the negotiated price and within the
agreed-upon time frame. Finally, they also
pledged that, based on their extensive experience with American client
companies, working across eight time zones would not prove to be a problem.
This American firm’s assessment: Screaming Eagle Productions could do the job.
The Agreement: Finally, the set-price contract was signed, one that provided for
the production of a three-to-four minute animated video that would introduce
the company’s new and innovative service product to the market.
The American business partners, based on
these and other promises, executed that contract. With the contract, they
provided Screaming Eagle Productions with an up-front down payment – 50% of the
agreed-upon total fee. The contract
called for the video to be completed before the end of 2014.
“Based on their representations, as well as
the sample videos the showed us, along with on our initial and very cordial
discussions, we had every confidence that we would get the product we
contracted for, on time and on budget,” according to one of the partners, who
also serves as the chief operating officer for the start-up business. “Having been born in Europe myself, I had no
qualms about dealing with an off-shore company,” he explained.
To date (it’s now mid-September, 2015), all
the Americans have seen are several rough video drafts that included – in its
latest version – only the first 90 seconds of the script’s three-to-four-minute
video.
The Americans’ overall experience – once the
contract was signed and the half-of-fee down payment delivered – fell very
short of what they had expected. Screaming
Eagle Productions seemed to lose that “do anything to make this work for you”
commitment that had been so evident during negotiations.
Repeatedly, the Americans found themselves up
against barriers that were far more difficult to overcome for the simple reason
that the service provider was located 5,138 air miles away. These were problems that, if the service
provider had been an American firm – headquartered locally, or at least in a
nearby time zone – would have been far easier to resolve.
“Some problems are best resolved
face to face,” the American firm’s COO said, “but this wasn’t possible with Screaming
Eagle Productions.”
Among the problems this American healthcare
service-related start-up experienced:
· Delays
A project contracted to take just a few months has already taken a year
– and after that year, the project is still not even half-way completed. Now,
there is apparently no chance that it will ever be completed
·
Suitability:
A project that was intended for an American market was loaded with the
production company’s own subtle – but very real – cultural map, especially in
terms of phrasing and images. The end product, as seen in the rough drafts
we received, would be, at best, confusing to our clients – but more likely, the
final product would prove to be unusable
·
Communications difficulties: When playwright and philosopher
George Bernard Shaw said that “the United States and Great Britain are two
countries separated by a common language,” he knew exactly what he was talking
about.
There were times when the
partners thought they’d achieved a common understanding. However, all too
often, that assumption ultimately proved to not be the case. Finally, the challenge of working across
eight time zones proved nearly insuperable.
·
Guarantee:
A request for either delivery of a finished product or – at the last
resort – a refund of the up-front payment has been ignored. There is no
apparently easy and cost-effective way of enforcing demand of repayment. If Screaming
Eagle Productions won’t take responsibility for breach of contract – and to
date, they have not – it will continue to prove difficult to secure a positive
resolution.
“I have done business all over the world,” the partner and CEO of
the American company explained. In
fact, he has created several successful businesses, each of which conducted
business on three continents – he was no stranger to doing business with
off-shore service providers.
“However, nothing in my experience prepared me for the difficult
challenges we faced in trying to bring this video from concept to broadcast,” he
said.
“Our
relationship with Screaming Eagle Productions finally proved to be a “perfect
storm” – virtually all of the things that could possibly go wrong with a
two-continent business transaction, did go wrong.”
The CEO was quick to point out that these problems aren’t about his company – and they are not really about Screaming Eagle Productions. Rather, this business deal gone sour is an illustrative example of all the many things that can go wrong when working with an off-shore service provider.
“I hope other business execs can learn from the challenges we faced, and the problems we are still facing,” he told me. “There are many valid reasons for doing business with companies located throughout the world, but there are always risks involved as well, including some that, frankly, we hadn’t expected.
“Certainly, these were all problems that were much more difficult
to overcome because we were dealing with a business 5,000 miles and eight time
zones away,” he explained. “If the same
problems had cropped up with a local company, or even one located anywhere in
the United States, they would have been solved more quickly, and more
satisfactorily,” he said.
Over a period of months – often with six weeks or more between
drafts – several other revisions of the video were presented by Screaming Eagle
Productions to the client. With a few
exceptions, each of these succeeding rounds of rough drafts did not include many
of the requested revisions and updates based on previous input offered
concerning earlier drafts. A few edits
were included – including some major ones – but most of the edits were being
left for the production of the final draft, at least according to Screaming
Eagle Productions.
“This choice led to some serious confusion on our part,” the CEO explained. “We began to feel that they weren’t listening to us. I know they told us that all the changes would be made before the final draft – which has yet to be forthcoming. However, when they made some changes but not others, we were not only confused – we grew increasingly skeptical that they were paying attention to our requested changes,” he pointed out.
Timeliness
Three Month Project: From the first discussions in
August, 2014, Screaming Eagle Productions maintained that they would be able to
complete the three-to-four-minute video within no more than three months.
Specifically, they promised to complete the video, by the end of November, 2014.
Allowing for delays and production slippage, the Americans expected their final
draft no later than the end of December, and planned to launch it on their
website and YouTube immediately after the first of January, 2015
Yet, as I write this, Labor Day, 2015 has come and gone – the
stores are already selling Halloween decorations. More than eight months after they’d planned
to start using the video, the four partners have yet to see more than the first
90 seconds of the project, and the indifferent quality of those 90 seconds was
not in any way acceptable.
More
than nine months into the three-month project, they still have no clear idea of
how the final product will look or sound.
Certainly, some of the project’s delays could have been caused by the
Americans’ requested edits and changes. However, since many of those changes
have yet to be implemented, it is difficult to see how those requested edits
turned a three-month project into one that’s been in the works for more than
nine months.
Further, in every video production, clients request changes – that
should have been factored into their promised time-to-deliver.
The
biggest part of the delay has been the weeks – and more typically – months that
stretched between each time the Americans receive a new, updated in-progress
draft.
A local service provider would be able to move this project ahead
by virtue of regular in-progress meetings, and by the ease by which the
Americans could pick up the phone and ask for a status update. However, once the courtship period ended,
because of the eight-zone time difference, such calls were only possible by
pre-arrangement.
Content
Cultural Map: It became clear from a review of
the various video drafts the Americans received, the video’s content suffered
from its creators’ cultural map. Despite
the strong cultural ties between the two English-speaking countries, the
English have a subtly different from the American cultural map.
This factor was reflected in both word choice and visual
images.
These
choices seemed to put lie to Screaming Eagle Productions’ claim that they
worked regularly with American companies, and could deliver an “American” product.
Visual Cultural Map: The visual image problems were
pervasive, and – from my perspective when I reviewed them, and from the
perspective of the clients – troubling. It turned out that, when Screaming
Eagle Productions produces an “animated” client video, the firm uses
pre-existing visual templates in the creation of their videos.
Naturally, these templates reflect their own cultural
sensibilities. This was most obvious in
their selection of buildings, furniture and medical equipment. For instance, the hospital bed and bedside
life support equipment looked nothing like anything the American company’s
prospective clients would recognize.
There
were a myriad of other examples of visual images that weren’t quite right.
“The medical “characters” had an alien look that was nothing like
the look of American medical personnel,” the CEO explained. “Their
character-template choice was odd, to say the least.”
This problem extended to the look of building exteriors and
interiors.
The COO finally wound up having to find and email images of
American hospital equipment, American furniture and American hospital
buildings, along with a host of other quintessentially “American” images.
“Screaming
Eagle Productions’ up-front promise that they did much work for American
companies seems increasingly less plausible as we worked through their
succeeding drafts”
Other Problems: There were other, less obvious problems with the content. I reviewed these examples and agree with the Screaming Eagle Productions’ American client that these were problems that should have been caught and fixed before the production company shared their drafts with their client. Some of the visuals seemed odd, but others were truly problematic.
In
an opening scene image, the prospective “patient” was holding a beer bottle in
a position that was embarrassingly phallic.
Another example of this cultural disconnect was the visual use of
name-brand electronic equipment. Logos
were left on images of equipment, such as a Samsung TV set. To use that image without change, the
Americans would first have had to secured permission from Samsung.
Communications
Time Zone Tag: It turned out that working across
eight time zones did prove to be an almost insuperable problem. First, calls had to be scheduled in advance –
the American client couldn’t just pick up the phone and call Bristol England,
not with any hope of getting someone involved with the project.
Next, those scheduled calls which did take place were almost
always well after the end of the business day in Bristol. For this reason, typically, only one member
of the creative / production team would stay after hours to take the call.
“This led to breakdowns in Screaming Eagle Productions’ internal
communications, which impacted the result we were seeing,” the CEO said. “What one man heard, other men and women on
the creative production team did not hear. Apparently – based on the work
produced – what the creative team heard was, charitably, almost – but not quite
– in the same ballpark with what we’d actually said.”
Almost. But not quite.
This poor internal communications at Screaming Eagle Productions
could happen anywhere. However, it was made worse by the Americans’ inability
to communicate directly with all the creative production team members. This
continued to bedevil Screaming Eagle Productions’ efforts to create a usable
video.
“We
also had a kind of revolving door when it came to critiquing and editing early
drafts of the video.”
“Specifically, Screaming Eagle Productions would send us a draft
video,” the COO pointed out. “We’d take
the time to have our entire team – including two of our partners and our entire
marketing team – review the video and analyze each nuance. Then we would write
up a detailed and exacting critique on a scene-by scene basis, pointing out
errors, difficulties and challenges we felt the video had yet to overcome.
“Then we’d schedule a follow-up phone call with the creative
production team at Screaming Eagle Productions. On these calls, our intent was
to discuss these problems with our entire team and their entire team,” he said,
“allowing us to brainstorm, and to reach a shared understanding of what was
needed.
“However,
these calls generally involved only one Screaming Eagle Productions team member
– for us, these calls ultimately proved to be an exercise in both futility and
frustration.”
“We always hoped to have the entire creative production team on
the other end of the phone – our full team was always on the phone from our end
– but with one sole exception, this would not be the case,” the clearly
frustrated COO explained.
The Americans were unable to make sure that the people who’d
actually do the work understood – and had the chance to ask questions about – the
client’s expectations.
“That
eight hour time difference really worked against us, not just once, but
repeatedly.”
The frustration would only get worse when the next draft arrived.
“When we got the next draft, many of the earlier errors and
problems remained,” the CEO explained. “We
were told that this would all be fixed in the final draft, but their seeming inability
to make requested changes created a real problem in communications, credibility
and customer satisfaction. We frankly
began to wonder if we’d ever get what we were looking for. As it turned out, apparently we never will.”
Refund
As the project approached its first
anniversary, the Americans became increasingly concerned over their investment
in time and money. Six times, the COO reached out to Screaming Eagle
Productions by email, asking for status reports and plans to move forward.
“Six times over a period of two
months we sent emails asking Screaming Eagle Productions to move forward – and
six times we were ignored.”
Finally, the COO wrote them a put-up or
pay-up email, demanding either the finished project or a full refund. That, too, was ignored.
For their apparently wasted effort, the
partners wanted either a usable finished project within the immediate future,
or they wanted a refund on their hard costs.
“If this were a local firm, we would have
options that aren’t easily available to us in this situation,” the CEO said. “Still, we do plan to pursue our legal
options, and are currently reviewing our next course of action.”
Communications – or the lack of communications – has been a barrier to resolution.
“It’s hard to discuss a problem with someone
who ignores you. It was only after we
advised them that, absent some immediate resolution, our company would
participate in this case study, that Screaming Eagle Productions finally replied,”
the COO explained.
“However, instead of trying to resolve
our issues, their reply was hardly satisfactory. It was a combination of
defensiveness, accusations and even threats of published retaliation.”
Having reviewed that correspondence myself, I am forced to agree with that characterization. The communications was filled with blame and finger-pointing, along with threats of unspecific retaliation should the company move forward in participating with this case study.
“At no time – once they resumed communicating
with us – did Screaming Eagle Productions say they’d either complete the
project to our specifications or refund the now-wasted money we have already
invested in the project,” the CEO agreed.
“There’s no way we can get back the time my
partners and I – and our marketing staff – have put into this failed project,
but we had at least hoped to recoup the money we wasted on a firm that
increasingly appears to have never intended to complete the project.”
“This opportunity cost – staff
time that could have been more productively invested on other marketing efforts
– was easily valued at several times the up-front investment that we made with Screaming
Eagle Productions.”
Conclusion: The funds the start-up company invested into
this project were insignificant. “Our
participation in this white paper is not about the money,” the American COO
explained. “However, we are eager to
share with other American companies our unsatisfactory experience with this
video production company’s ‘bad business’ approach to doing business. We hope other
small, start-up or high-tech businesses will find this to be a useful
cautionary tale.”
This stark example makes the case for strong
agreements, graduated payments and other client protections. These are addressed in further detail in the
next and final section of this case study.
As this white paper “goes to press,” the
American company is currently exploring its legal options to recover funds paid
and damages incurred because of non-performance. While the money involved is not a real issue,
“this has, for us, become a matter of principle,” the COO pointed out.
Lessons Learned
There are a number of salient lessons learned
– lessons that any American firm can take to heart before contracting with an
off-shore service provider.
Vet the Service Provider: Talk to at least three American
clients, asking for their strengths and weaknesses. Make sure they are really capable of
providing the services promised, on time and on budget, and to a quality
expected of the three (or more) reference clients.
Contact the local-to-the-service-provider
Chamber of Commerce, and ask if there are any local organizations that field
and try to resolve complaints – the local equivalent to the Better Business
Bureau. Contact this organization and ask for information on complaints and
resolutions.
Search the Internet for praise or complaints
– testimonials – of former clients. If a
company has a pattern of bad corporate behavior, someone will have noted this
on the Internet.
Structure the Contract – Payment Schedule: Instead of
half-up-front and half-at-the-end, negotiate for a stair-step of payments, each
based on achieving the next milestone on the path to completing the
project. This will provide a stronger
“motivation” for the service provider to live up to their promises.
Refund Clause: Also, structure in the agreement
a refund clause to be executed on a material breach of contract. This kind of
clause will help with any post-failure arbitration or adjudication.
Non-Performance Penalties: Also structure the agreement to
include built-in penalties for broken schedules. Give them 30 days’ grace, but then start
deducting 10 percent for each subsequent month’s delay in completing the
project. If nothing else, this will result in a more realistic project
timetable.
Project Management System: Set up a joint “cloud” project management system – several good
ones are available commercially at very reasonable rates. Build into the contract that the service
provider will log updates on all work being done, allowing the client to
monitor progress. This can also be used
for in-process communications, which will help avoid problems that waited until
the next completed draft (or equivalent) to be completed.
Team Calls: Build into the contract a schedule of regular “all-hands” team-to-team
calls. Ensure that the service
provider’s entire team is on each call – this will help to eliminate confusion
that comes naturally when one person tries to summarize an entire call for his
or her colleagues.
Legal Review: Finally, have the agreement reviewed by an attorney who is experienced in cross-border contracts. This is not a common specialty, but such a legal review will help head off problems that are built into the contract.
If nothing else, these built-in metrics will
provide an early warning that the vendor is – or is not – complying with the
terms of the agreement. Early warning
can help nip problems in the bud, before they get out of hand.
However, if it all goes south, be ready to
take action to enforce your agreement.
For instance, include an arbitration
requirement – this will help you avoid costly legal fees and the risks of a
trial. There are international
arbitration standards, and certified arbitrators. Specify the qualifications of
the arbiter who will determine if – and how much – of a refund is appropriate.
Recourse:
Recourse:
Identify local-to-the-vendor governmental and private sector
organizations that might be able to help resolve any problems.
·
Reporting Bodies: Identify the local equivalent of the Better Business Bureau and
the local Chamber of Commerce. They may be able to help resolve issues related
to the non-delivery of paid-for services.
·
Meetings: Arrange for regular “all-hands” meetings.
These will have to be by phone or Skype (if the computer is being used to share
images of the project, Skype may not be an option unless each side is working
with two computers).
·
Legal Notice: Identify options for arbitration and for having local attorneys
write and deliver demand letters.
·
Legal Resolution: File for a refund in American courts – small claims court if the
amount is below their upward limit. You
will find it difficult to enforce overseas, but such action might favorably
influence arbitration.
If you’re in need of enforcing an off-shore agreement, try the
following specific recommendations:
·
Off-shore Chambers of Commerce – these may be found in the
provider’s country. In some countries,
there are also equivalents of Chambers of Commerce or Better Business Bureaus. However, their ability to enforce American
contract claims against local Chamber members or local businesses may sometimes
prove effective, but on many other occasions they are clearly not effective.
o
Great
Britain, for instance, has 52 chambers of commerce – but whether they will do
anything to help an American firm in a dispute with a local company has yet to
be established.
· That
country’s embassy – they have
a commercial department that might choose to advise you on organizations, such
as local equivalents of the Better Business Bureau – or even local government
organizations – that might be able to help you
· Internet
search – you can
use the Internet to search for local-to-the-vendor “Bad Business” websites
where people can post positive or negative reviews – use this bad review as
leverage to force a resolution.
o
In many
cases here in the states, I’ve posted to my own Bad Business blog – then told
the vendor – and got resolution in exchange for removing the blog. One
resolution was valued at nearly $2,500
· The
Legal Option: In most countries, there are
courts that can at least theoretically work with American firms to consider
enforcing a signed service agreement with a local firm. However, the costs of seeking and securing
local off-shore legal counsel can be expensive – and it’s chancy as well.
o
Solicitors
and barristers – “English” for attorneys – will, for a fee, represent an
American company against a British one in their local courts. Yet that is an
expensive roll-of-the-dice “solution” that could wind up costing far more than
any settlement might be worth.
o
In the worst
case, those attorneys – who are themselves off-shore service providers with no
direct accountability – offer no more easily-enforceable guarantees of quality
service than do the service providers who have already let you down.
Conclusion: When dealing with off-shore
service providers, you ultimately have to count on the integrity of those
service providers to ensure that contracted services will be delivered, on time
and on budget, and to the quality anticipated.
To a lesser extent, that is true of any service provider, but the
problems clearly become much more difficult to resolve across oceans and
national borders.
Some service providers I have encountered –
in my own business, as well as in my research for this white paper – seem to
intentionally choose to do a poor job.
Not expecting repeat business and unconcerned about the risks of the
contract being enforced, they seem intent on securing up-front funds, cashing
their checks, then failing to deliver anything, or at least anything useful.
Bottom Line
The bottom line is simple: by working with an
off-shore service provider, you may find it difficult to enforce your contract. Make sure the signed agreement takes this
into account – the stronger the agreement, the more likely that the local
courts, arbitrators and non-profit business organizations will find in your favor,
and help you with ultimate resolution.
When dealing with off-shore service
providers, once burnt, twice shy. Take
steps in advance to help avoid being burnt.
Einstein defined insanity as
doing the same thing over and over, yet expecting a different result – and we’d
be crazy to use off-shore creative services in the future.
American service providers might cost more in
terms of cash, but the ability to more easily either receive a usable product
or receive a refund may prove to be more than worth the extra costs that might
be involved. That decision is yours –
but if you consider doing business with an offshore service provider:
· Conduct due diligence
· Build in all the protections that
you can into the final agreement
· Make an informed, eyes-wide-open
decision
One last observation: If the service provider
balks at providing contractual guarantees of performance – with teeth for
non-performance – this should be an early warning to expect trouble. Be prepared to walk away from even a “sweetheart
deal” if you’ve got no good way of enforcing it.
Note: During
the research and development of this case study, I was party to communications between
the American client and Screaming Eagle Productions. These communications
regarded the issues raised in this case study, and included notification that
the case study was in process. However, instead of cooperation, the responses I
saw were confrontational and defensive, and those comments were not cleared for
print.
Appendix
The following are sources in the United
Kingdom that are available to help American firms with problems they encounter
when doing business with vendors or service providers based in the UK.
These explain where you can complain to
government and other
entities about a "limited company"
entities about a "limited company"
https://www.gov.uk/complain-about-a-limited-company
and
http://www.moneysavingexpert.com/shopping/how-to-complain
Firms can call the UK’s Citizens Advice helpline:
0345 04 05 06.
You also can ask the UK's Ombudsman Services – here’s what they recommend
You also can ask the UK's Ombudsman Services – here’s what they recommend
http://www.consumer-ombudsman.org/
and
http://www.ombudsman-services.org/about-ombudsman-services-os.html
Also, there's "Which?" -- a kind of
British Consumer Reports Magazine equivalent – this publication sometimes
exposes rip-offs. Their Media Relations page is here:
There are 52 chapters of the BCC (British
Chambers of Commerce)
Their contact information is here:
You can search local chapters’ websites for
participation or non-participation by the service provider.
There are similar organizations in many of
the more developed countries which are concerned about their commercial “good
name;” however, the risk of irresolvable problems rises when dealing with firms
in less-developed countries. Do a bit of
research and identify appropriate local-to-the-vendor organizations before
signing any agreement.
