In the last 30 years, there has been a strong trend towards global value chains in German industry and also in other countries. Many companies relocated parts or their entire production abroad. Currently, however, the benefits of this strategy for companies in Western industrialized countries are often under scrutiny.
Reshoring instead of offshoring: Made in Germany is very popular
In the last 10 years, a counter-trend has developed to offshoring, in which companies are bringing their previously outsourced production activities back to their home country. This reversal movement, the reshoring, is also accompanied by a wave of relocation to Germany.
In addition to flexibility and delivery capability, the reasons for the change are quality requirements as well as a changed personnel cost situation and technological development. Foreign countries have so far offered cheaper labour. But now wages are rising. Keeping many personnel resources abroad is no longer attractive. It is interesting to take advantage of existing technological possibilities and decreasing personnel costs in Germany. Robots and AI can take over the low-cost tasks that have been given abroad. Higher-qualified personnel for controlling and testing activities are available in Germany.
Backsourcing and onshore outsourcing are becoming more attractive
The development is also evident in the outsourcing of corporate processes. Processes at foreign service providers are relocated to service providers in their home country (backsourcing).
Experience from offshore outsourcing projects has shown many times that supposed cost advantages were not realizable. Cost drivers include coordination made more difficult by distance, difficult cooperation due to differences in culture, mentality and language, political instability can be a factor or legal difficulties. This easily leads to the costs being higher than they would have been with a solution in Germany. Companies are therefore increasingly relying on onshore outsourcing. With the service from the same country, they benefit, among other things, from higher quality levels, low linguistic and cultural risks as well as cost advantages due to economies of scale with the external service provider from home.
[nextpage title=”Payroll and accounting service in the hands of local experts”]Accounting and payroll accounting made in Germany
Especially in commercial processes such as accounting and payroll accounting, high quality is directly linked to the existing technical know-how.
Special features in payroll accounting must be handled competently, payroll accounting must be legally secure, all laws and collective bargaining provisions must be taken into account and reporting obligations must be met. Financial accountants in their own country are secure and competent. Risks are known and can be avoided.
Entrepreneurs outsource these support processes because they do not directly contribute to their value creation. Professional service providers specialize in these processes. For the outsourcing service provider, it is core processes into which all energy flows.
Technological progress also makes Business Process Outsourcing (BPO) in Germany smart and ensures a good price-performance ratio.
Advantages of Onshore Outsourcing Germany
- Higher quality through qualified personnel with specialized process and technical know-how
- Leading IT solutions – Leveraging Germany’s strong position in the ICT sector
- Reliability thanks to modern, high-performance German data centers
- Data Security – Archiving and Data Storage in Germany
- Digitalization technologies and smart automation solutions – highly automated processes lead to more attractive conditions with increased added value
- Greater flexibility – service customization, faster and more efficient communication and responsiveness
- Equal legal systems
- Better value for money
Smart BPO – Symbiosis of people and IT for unbeatable service from Germany
Digitalization, workflows, robotic process automation (RPA), AI – more and more companies are relying on modern IT solutions to simplify and automate time-consuming activities. BPO partners in Germany are familiar with the new technologies and integrate digital workflows, RPA or AI into customer processes. The highest level of technical and IT expertise thus ensures greater efficiency and the more flexible use of capacities.
In addition to individual expert knowledge and time management, commercial processes require a lot of repetitive work, such as compiling and transmitting data and creating reports. Such tasks are often highly standardized, precisely documented and predominantly rule-based. This forms the ideal basis for the integration of automation.
The processing quality can be significantly increased. Manual recording effort and thus the occurrence of errors decrease. Sources of error are minimized. Throughput times and processing times are shortened. Tasks that are suitable for offshoring can be performed in better quality with fewer staff.
The effects of technological progress and the technical and process expertise make outsourcing in Germany just as cheap, or even cheaper, than in distant countries.
What has been your experience with offshore outsourcing? How do you perceive the backward trend? What opportunities and risks do you see in this? We look forward to your comments.
Image source: iStock, Photographer: flik47
Author
Claudia Herrmann
Marketing Consultant
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May 7, 2020
