Outsourcing in Germany: Stop Talking at and Start Talking to

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Till Hahndorf

About Till Hahndorf

Till Hahndorf is Managing Director of BW Business Bridge, which identifies and certifies high-quality ICT product and service offerings for the German market, and Director of Sourceconomy GmbH. He is an economist, technology entrepreneur and international cooperation architect; a former consultant with Accenture and board member of a US/Asian software company; an accredited business coach on digital technology and entrepreneurship, cofounder of BW Business Bridge, evaluating and supporting foreign companies for the German IT market.

It is common knowledge that the German market for IT services is suffering from a severe shortage of IT skills. While the economy is thriving and order books are full across the production and service sectors, there’s a cap on growth in the IT industry – there are simply not enough people to fulfil all the orders. Since the IT industry is characterised by a high intensity of labour, the lack of developers, project managers, quality assurance professionals and consultants is having a severe impact.

This demand for IT talent creates a huge opportunity for any provider of outsourcing services. The cost of labour is traditionally high in Germany and the combination of the lack of talent and high prices should make Germany the most attractive destination. However, Germany is notoriously hard to penetrate. For outside companies, it’s an arduous exercise to find the right people to talk to, to be invited to meetings and/or to enter into meaningful conversations.  It is true, also, that German companies do stand in their own way when it comes to contracting non-German vendors. 

While most companies tried out “offshore“ world some 10 to 15 years ago, many returned from the adventure with suboptimal experiences and very little desire to try it again. However, the only way out of the supply bottleneck, currently seems to be contracting services from abroad. Since it is universally acknowledged that the German labour market is suffering from a structural flaw, rather than an economy effect, getting outside companies to work on German projects is the only way out – if only the German companies would understand that, too! 

What a noisy market it has become; the global supply of outsourced services is putting tremendous sales’ pressure on German companies. When the southwest-German industry association Baden-Württemberg: Connected (BWCON) surveyed their 600 members what the actual problem with contracting foreign vendors was, the answer was clear: “It’s hard to identify the right vendor in the market, particularly when everybody seems to be out to win clients in Germany. Even if a company somehow manages to get in a shortlist of potential vendors, no one can make sense of the references and the stories these vendors tell. They all sound the same!” 

“It’s always the same story about the best people, the innovative spirit, how clients matter and how one absolutely must get in touch. This generates a kind of stupor — and decision fright sets in with the German companies. When there are no real differentiators, how can anybody make a decision? 

For the vendor side, this means one can only set oneself apart from the competition by speaking competently about the potential client and their challenges and needs (instead of bragging about one’s own company). This will likely strike a nerve and get the clients’ attention. Everybody loves discussing their own business and their road ahead – and we all fear “the sales pitches“.

This approach is based on understanding the market and understanding the target segment: its players, the challenges and shortcomings as well as the developmental paths of industries and individual companies. It requires market insight and a real understanding of the conditions under which business is done in Germany. 

As a result of the survey, the BWCON industry association has kicked off an initiative called BW Business Bridge, to help foreign companies, especially from outside the European Union, understand the German market for IT services and products. It also supports their efforts to be attractive and relevant conversation partners for their German potential clients. In other words: To become signals, in a world of noise.

(Photo: BW Bank Stuttgart, Germany) author: Till Hahndorf

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