We interviewed Mr. Till Hahndorf, CEO of Sourceconomy and BW Business Bridge about his impression of the market situation in Germany, on hurdles for a speedier development and the (mis-)understanding between buyers and service providers.
Till, with your background in professional software services, consulting, working with both end clients in Germany and international service providers, your experiences in Eastern Europe you have a broad perspective on the topic of ITO and BPO in Germany, also in the mid-market segment.
From your perspective, how would you describe the overall current market situation in Germany?
We seem to move towards a two-tier industry: There’s a class of companies embracing the global nature of the IT industry and even shaping it. These aren’t necessarily all courageous pioneers or bold first movers. Rather, they’re focused, determined players who have made the global challenge an intrinsic part of their IT value creation.
And then there’s the much bigger group of companies who still stand ignorant or fearful and seem to be suffering a mental blockade when it comes to outsourcing decisions across national borders.
And while I’m far from applying Global Sourcing as a remedy for every imaginable IT challenge, I’m astounded to see how far away from a rational and fact-based decision making process most companies in IT still are. With a thriving economy and an agonizing shortage of IT skills, these are the days to find yourself a partner outside your own market and utilize this partners’ capacities as an integral part of your value creation. If you can’t do it today, when will you?
Capacities, talents, mature companies and business models are all available very close by at the nearshore destinations in Europe. However the development of the ITO and BPO market in Germany was and is comparably slow. From your conversations with clients and providers, what do you think are the reasons for that?
We asked the member s of the German 600-member-strong IT cluster “bwcon” this exact question, and the answer was quite simple: German companies don’t know who they should talk to. The sales pressure on an average German company is tremendous, they receive literally hundreds of calls, emails, faxes, newsletters, white papers etc. every week. No one knows what to make of all this information. And even if a German company somehow arrives at a shortlist of potential partners abroad, no one can actually evaluate their references. Non-German references don’t work inside Germany, that’s a fact.
This is the buyer side. Which hurdles or gaps do you see on provider side, that prevent German buyers from using ITO/BPO models?
The providers I meet are mostly professional players and I’m regularly impressed by the level of maturity, their process quality, their disciplined approaches in their actual work. And understandably, most providers speak about their successes, their achievements, their skill set, their portfolio with a certain pride and the expectation that certainly this will impress the other side?
To my experience, the contrary is true: All these proud messages about “our skills” and “our clients” and “our technologies” aren’t signals, they’re noise. If just once a provider could seek to understand first, then to be understood, he would rise above the noise level.
Providers should instead speak about their clients’ issues, their clients’ challenges, their clients’ skills shortages. Their deadlines in projects. Maybe one provider really knows what keeps his clients awake at night, what really bothers them? I’d always prefer to speak to someone who I feel has a deep and wide understanding of my situation – rather than being full of himself.
Being cheap is over. Being really good, really reliable and bringing mostly unrecognized value to their clients is the new reality on service provider side. With your personal insights in the different destinations and also the buyer side, what needs to be done that both sides gain more understanding for each other?
The old mantra of walking a mile in your opponent’s shoes is very applicable in the global IT industry. Only if you understand what your partner’s market position is you can be a good counterparty. You’ll avoid being taken for a ride, and you’ll avoid asking for impossible concessions – both of which are highly desirable qualities in any business setting, global or local. Do you really know what fights your partner in a nearshore destination has to put up to recruit and retain his good developers? Do you really have to negotiate another 5% off the daily rate? Or wouldn’t you rather have everybody around the table be able to breathe and be stable, reliable partners who actually love working for you?
Looking at the shortage of skilled labor in Germany it also limits German IT companies and also BPO companies to exploit their actual growth potential. Now investments / mergers / take overs in other countries, specifically the sourcing destinations could be a way for growth. Do you see any examples or trends for that?
When acquisitions in other countries -particularly in the software/services industries- are discussed, we need to be absolutely clear on the expectations: How will the new entity perform, who’s running the show “over there”, how do we handle post-merger hiccups, how do our new colleagues on all levels adapt to the fact that they’re no longer a local company but an international one now. Do we really want the market mechanism of demand and supply between our companies abolished? Is it realistic to assume that the future will be more profitable by acquiring the remote company instead of partnering with them? I rarely find these questions answered satisfactorily, and quite frankly, I have yet to find a successful integration of a “remote” production backend into a German company. What I have seen implemented many times are resilient and profitable partnerships across borders – separate ownership, common goals. Works beautifully if you know how to do it.
Thank you for this interview Till!
Till Hahndorf is economist by education, technology entrepreneur by experience and international cooperation architectby credo. Former consultant with Accenture and board member of a US/Asian software company(Allgeier Group). Accredited business coach on digital technology and entrepreneurship, member of bwcon Management Coaching Group. Leader of bwcon‘s „Special Interest Group Globalisierung“, cofounder and board member of BW Business Bridge, evaluating and supporting foreign companies for the German IT market. Director of Sourceconomy GmbH, handling software development projects involving German clients and foreign vendors.
This interview was published in the Outsourcing Journal Special Edition “The Interview Edition”, which can be downloaded here free of charge: http://www.outsourcing-journal.org/Special-Editions/outsourcing-journal—interview-edition.html