The IT consultant with an Indian accent is familiar to anyone who has ever contacted an English-language software hotline. Most international software companies and many other companies moved their call centers to Asia in the early 2000s. Now they are realizing that customers do not want to be advised from New Delhi and that labor costs are rising in Asia.
While the trend in the call center industry is going in the opposite direction, German companies are outsourcing more and more work, such as IT processes or payroll processing. But what saves costs in the short term may lead to problems in the medium and long term. Time differences, cultural differences or legal uncertainty are just some of the factors that have led many a German offshore project to a dead end.
41,000 IT jobs unfilled in Germany
The shortage of skilled workers in the IT industry is a labor market problem that German companies inevitably have to face. According to the latest count by the high-tech association Bitkom, 41,000 jobs are unfilled in Germany, 16,500 in the ICT industry, 20,500 in the user industry. The pressure triggered by these vacancies is a main reason why German entrepreneurs are relocating work processes abroad, be it programming or services. “BPO” (Business Process Outsourcing) is a much-used abbreviation in the management floors, meaning the outsourcing of internal processes, such as
Outsourcing abroad can easily become expensive – offshoring, often a dead end
The advantages of such solutions are obvious, the disadvantages often reveal themselves later. Those who relocate work abroad save costs, free up resources in their own company, can concentrate on their core competence and have access to specialists who are not available on the domestic labour market. So far so good. But cooperation easily stalls on many levels – and often costs more than planned. It may turn out that the distance alone and the resulting difficult coordination incur costs that make the project more expensive. Differences in culture, mentality and language often hinder cooperation. Political instability can be a factor, depending on the partner’s headquarters, and there can also be legal problems, for example if the offshore partner works with personal data for payroll that the company is not allowed to disseminate outside the EU. All this easily leads to the fact that in the end the costs are higher than they would have been if the company had preferred a solution in Germany.
European “Silicon Valley” in Sofia
Word of the disadvantages is getting around among entrepreneurs, and more and more voices are being raised in the political arena that want to restrict offshoring in order to protect domestic markets. Therefore, in the recent past, there has been a trend towards nearshoring, i.e. outsourcing to providers in neighboring countries. Physical proximity mitigates some of the difficulties that offshoring can bring. In addition, personal exchange and knowledge transfer is much more likely to be possible if the partner is located in another European country and not on another continent. Bulgaria in particular, with its low labor costs, is increasingly becoming a center of IT services. With more than 40 million euros, the EU is supporting the development of a European “Silicon Valley” in Sofia. In the USA, meanwhile, companies are moving to nearshoring in Mexico or Canada.
Solution to the German shortage of skilled workers in sight
Nearshoring may have fewer unpleasant side effects than offshoring in the short term, but it is still only a substitute for the ideal solution: well-trained domestic specialists. Also because of their social responsibility, but primarily out of tangible self-interest, numerous German companies are trying to solve their problem of skilled workers at home. There are many approaches, first of all cooperation with German BPO and other providers, from whom entrepreneurs expect higher quality , for example in financial accounting . Especially in the IT sector, companies are increasingly discovering cooperation with universities. And they train the skilled workers today who will be needed tomorrow in order to retain them at an early stage. The shortage of skilled workers is an acute problem in Germany, but it is unlikely to be permanent.
What strategy are you pursuing with regard to the shortage of skilled workers? Is outsourcing an interesting solution for you? Write us a comment – we look forward to your experiences.
Image Credit: Fotolia.com, Photographer: Jakub Jirsák
