Wiktor Doktór: Doing business with Germany is not very easy task, although a number of CEE based outsourcing providers are successful to build long term outsourcing contracts with German organizations. How does German business choose the outsourcing provider?
Stephan Fricke: Essentially German companies are looking for nothing different than companies in any other countries – good results to fair conditions. Instead of describing the entire process, I would rather take a look at one aspect – the scenario of trying to end up on a buyer company’s short list.
One thing that makes the Germans difficult is their sensitivity for risks and with that a certain distrust towards specifically foreign service providers. With that German companies are standing in their own way, while carrying such an absolute pride for the way they do business. Reality is that companies are falling behind rapidly.
The reality is also that the risk when working with a foreign partner (when evaluated and chosen correctly) is not higher than the risk in working with a German service provider. In some cases you wonder if the disaster could have been avoided when working with an experienced partner from abroad.
It is also true that the service provider landscape is still lacking transparency and also the information that service providers provide on their websites is rarely good enough for a quick pre-evaluation.
Imaging the responsible person tasked with putting together a short list for sending out the Request for Proposal. In this situation you want to know if a company fits your technical/skill requirements and if this company is any good and/or verify if the company is as good as they say they are. And after all you want to know whom you are dealing with. Guess what, the job of putting together a shortlist with such information is surprisingly difficult.
The other way is to go to a number of conferences, talk to as much service providers you can, collect their business cards and make some notes. I know a few people who do it like that. But there are two flaws in it. First is that you only get the sales pitch, rarely any honest meetings. But at least you have met someone and seen their presentation. Second is that if you go to German conferences, with German programs, German speakers and German food 😉 you mostly meet only the German service providers.
Third way is to hire a sourcing consultant. Not so cheap, but at least you don’t have to deal with the selection process and can trust that any somewhat experienced consultant knows a few companies a bit better and can give some recommendations.
Despite this rather difficult scenario, more and more companies (have) build successfully cross-boarder co-operations.
WD: Is outsourcing in the nearshoring or offshoring model really increasing or perhaps German clients rather prefer onshoring business partners?
SF: There surely is a preference for the onshoring model. However, reality is that the desired combination of availability of resources, skills, timely delivery and quality to attractive conditions is basically not available in Germany, at least not in IT services.
Recent market studies and surveys as well as our talks with German companies show that many people have past their reservation and after a couple of experiences are rather concerned with finding partners for a long term co-operation. Also the question of destination is not so much a critical terminator anymore, due to the advancements in the different destinations, such as Poland, Romania, Bulgaria and other markets.
WD: What kind of services are the most frequently outsourced by German companies?
SF: This depends a little on the way you look at it and on the industry sector we are talking a bout. Like call center services are outsourced a lot (within Germany though) as well as HR services. Then the models in organizing IT services go way back, when companies started to hive their IT departments into separate entities. Or the automotive industry, where development and manufacturing of single parts or components is outsourced to external companies.
Compare to that the outsourcing of finance and accounting (at least to today’s measures) or IT systems and development is relatively new and carries therefore a great potential for both – the companies, that can free themselves from maintenance, support and ongoing developments as well as for the service providers who can take the next step towards business innovation / transformation partners.
WD: In Poland within last two years we are observing increased interest, coming from German companies, in looking for outsourcing services providers on various fields – IT, Accounting, Call Contact Center. But as a final result only some of them decide to either use services provided from Poland or to open own operation centre. We have found out it is very important for the outsourcing providers to fluently communicate in German. English is not enough. Can you confirm this?
SF: Personally I think, some German companies simply go a little to far with their demand for German language services / native language. But of course in a lot of sectors and business cases the local language is a must, like call centers targeting the Polish market, need to be able to provide Polish language services too.
But also here this depends on the sector and the companies. Call centers for instance need to provide German language services, ideally native level. IT services often don’t need German, like software can be translated after the development is finished and so on.
So, yes, I know cases where a very good German language knowledge is a strong requirement and I also know cases where this is not a question at all (assumed the service partner provides communication in a proficient English). Generally you can say for BPO the provider needs to demonstrate at least delivery in German language and for ITO the demand for German language is significantly lower.
Another aspect here is the contracting. Ideally both parties agree on a third language (like English).
WD: Let’s come back to the field of nearshoring or offshoring outsourcing partners. What are the most active outsourcing destinations for German companies? Is it Poland, Romania, other CEE Countries or perhaps India and Philippines?
SF: Again, this is closely connected to the industry and the size of the company. Like large corporations with a global presence won’t be able to operate effectively without service partners (mostly captive) that can provide for instance services in Asian language. Therefore operating centers e.g. in the Philippines, like Deutsche Bank or Continental do is a necessity.
If we are looking at German midmarket companies, with a limited global market presence or in case of looking at the European operations only (like some of the automotive suppliers or retail, even banking/finance companies) than the nearshoring model is more suitable. Poland has proven to be a very good destination for both, sourcing from external partners and for captive centres. But also other markets like Romania, Bulgaria and even Slovakia and Hungary (specifically for captive centres) provide very good conditions.
However in the case of voice services (customer support, partly help desk) then the most active destination is Germany. This is based on the preference of German users to have native German customer support.
WD: If you were to advice the outsourcing providers who are interested in doing business with German companies where to go to get help in starting their selling process – what would it be?
SF: There are a couple of resources I recommend:
1) The internet in combination with a German speaking marketing person. There are a number of market studies available free of charge, but mostly in German. Also if you are looking for suitable events to go to, you would need German language, as most of them are in German and less international orientated.
2) Industry associations and the foreign chambers of commerce as well as embassies / commercial representations. This is more about taking part in the organizations initiatives, being seen and recognized. The services the organizations provide differ. We for instance include free advertising, free advisory and access to our internal network as well as to our information.
3) Local investment promotion agencies and municipalities. We know of a number of regions that professionally present their region for investments and co-operations. There are events, visits and other initiatives organized and partly financed.
4) EU or foreign development agencies like CBI (Dutch), USAID (US) or GIZ (German). There are many programs and initiatives to support the economic development of emerging industries in export markets.
5) Local marketing partner. If you can afford it, either hire an internal person form Germany or and external consultant or an external agency, that guide you in the singularities of the German market.
For information on setting up an own office in Germany, you can turn to Germany Trade & Invest, Germany’s investment promotion agency (www.gtai.com), who provides detailed information on regulations, state support programs and free advisory also in English language.
WD: Closing question and coming back to your own field. You are the CEO of German Outsourcing Association and also the editor of Outsourcing-Journal.org – what are the main goals of your activities and how do you help the outsourcing industry to grow?
SF: Our main goal is to influence the market conditions and growth in the German language countries. In order to do that and to involve all market attendees – buyers, consultants, providers, government – we are organized as independent member organization, registered as association and working after non-profit principles.
Our initiatives can be divided in three main areas: information, contacts and business support. Again herewith we support both service buyers and service providers.
With our publications we provide mostly non-promotional information, that leading experts, researcher and practitioners from our but also from many international markets share with us. We publish the Outsourcing Journal as special editions (as pdf, with a print subscription in preparation), and as Online edition. Both are available absolutely free of charge, the special editions require at least a free subscription membership.
With our insights into a number of service providers we provide more detailed company information and contacts for buyers and for investors we support with our network of industry associations, like Pro Progressio in Poland for instance. For service providers we provide ways and advisory to identify suitable companies in our markets and to initiate the contact.
Further we support buyers and service providers with number of services. We provide market insights, public relations and marketing services, share our industry insights and we assist in finding suitable service partners.