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Home Business Our top 3 points on the German ITO/BPO market 2016

By Stephan Fricke, CEO, Head of Advisory Board Deutscher Outsourcing Verband e.V. (German Outsourcing Association) – Are you preparing for 2016? Then have a look on our predictions and suggestions for the German Market for ITO and BPO Services in 2016.


The general conditions for users and providers of IT and BPO services will improve – somewhat.

Germany is still not an easy terrain for the majority of the service provides that are about to enter the market or have started in the last 12 months. Here are the top 3 reasons why:

1) The German preference for co-operations with solely German service providers.

This is to a certain degree a grey area as German IT-service providers have already build strategic partnerships with foreign service providers.

Actually this preference of the German end-users is a very valid threat to the competitiveness of the German economy. Today German companies spend more money and even more time to build, maintain and grow their IT-capabilities and support functions. Reasons for that are the shortage of IT-talent and the comparably low prioritization of the educational policy in Germany.

In some regions companies pay up to 120.000 EUR yearly gross salaries for a senior developer, and still won’t reach their desired project results in terms of quality and outcome. True, this is an exceptional example, but it’s symptomatic for the German market. Now the cost is only one aspect, but when looking at the time and efforts companies spend on recruiting and binding IT-talent, a necessity of cross-boarder co-operations is hard to argue.


2) Limited patience, resources and insufficient international marketing skills on provider side – still an issue, but with a good side

It is no secret that the “fast buck” is laying in the high risk taking societies as the US, UK, Australia and even in some of the northern European markets. So the motivation to invest in a mid- and long-term market strategy for Germany is in a lot of cases relatively low, understandably, but there is a good side to it too.

Because many service providers e.g. from Eastern-European markets have built their business, made their experiences and some financial savings on other markets and are now way better equipped to take on with the differences on the German market.

And that’s exactly what we have seen in the past 12-24 months: more mature service providers to enter the market with a more serious approach who are better prepared to go the extra mile.


3) The transparency on the service provider landscape is improving

Problems with hard to see-through markets and its attendees is to a large degree connected to the differences in the quality and regularity of the marketing output of service providers.

Regarding the marketing and communication quality we see four main categories:

A) Marketing activities from small companies from emerging economies that use automatic email address crawlers and send randomly unsolicited bad quality marketing emails.

B) Companies that have good technical skills and experiences, but still no real market or communication strategy. These companies usually place an advert once or twice, go to the most popular industry events, like the CeBit etc. Still, the marketing outcome is comparably lower than for companies in the third category.

C) The companies with a thought through communication, which invest in PR and professional marketing and maintain their market strategies. These are usually companies with more than hundred employees and a good international experience. Some of those are specialized, e.g. on SAP or Microsoft solutions, others have a more general portfolio.

D) The large national or multinational companies with several thousand employees. These companies mostly live from their brand and capabilities. The quality of the marketing is very good, but the actual advantage of these companies is a structured sales operation. Disadvantage is that these companies often neglect the mid-market client segment as they are focusing on large deals. This is from an economical point of view not to criticize, but in economies with 98% are small and mid-market businesses this doesn’t help much the general market development.

Fortunately we’ve been seeing and were also talking to many service providers that show a better or even very professional approach when entering or expanding on new markets. End-users and German partners can therefore expect in 2016 a generally better presentation and communication from provider side, which should lead to a better transparency of the outsourcing service provider landscape.

Our suggestions for the service provider side:

A quick suggestion especially for those companies that understand the need to market their services more professionally, but still don’t have enough resources and internal capabilities is:

1) Less is more, if it’s better. Invest in good quality marketing material. Easiest thing to do is get your website in order. See how much you can reduce the information on your website and if you present sufficient enough and relevant information for your visitors. If you export services, translate your website to the languages of your target markets (don’t use google-translate, the outcome can be terribly wrong).

2) Benchmark. This is one of the easiest ways to optimize your communication and even service portfolio. Why is this easy? Because you have a large pool to benchmark with. Check other providers from other markets, see what they do especially good and use it for yourself.

3) You don’t have to have a full-page advertisement. If you have a smaller budget start small but make sure you have a regular output. Advertising once is not getting you wherever you want to be. Choose inexpensive methods and platforms and be consistent.

4) Take your time and take it per target market. An under-prepared campaign can harm your business. Rather take a couple of weeks more and make sure you would “push the right buttons”.

Our suggestions for the buyer side:

From our experiences the capabilities, risks and availability of co-operations with external service providers outside of Germany are not an issue anymore. Of course it still takes efforts to evaluate solutions, potential co-operation partners and co-operation models, but this is barely different from the efforts you have when looking for a partner within Germany. Where we rather see potentials are the internal conditions to easily implement co-operations with external partners. We suggest two things:

1) To check your organization for the fit of using external partners. Do you have an employee representation? Include them in an open discussion on where and under which conditions the use of external resources and knowledge can help your organization and its employees.

2) Identify key personnel within your organization who could take a leading role in evaluating the opportunities of outsourcing IT or business processes and invest in information and education. After all successful outsourcing can be learned.


Interest representation

Because of the current situation the need to formulate, to communicate and to align interests among the parties is inevitable. There is a significant amount of confusion on buyer side, provider side and even on consulting side that creates hesitation and wrong impressions about the market situation.

At this point our association (Deutscher Outsourcing Verband e.V.) provides a completely independent platform and network that offers relevant information, industry insights, contacts and occasions for discussions and networking. The initiatives, like publications, events and education programs are free or non-profit, thus anyone has the possibility to attend.

You can find more information on these and other topics on our website www.outsourcing-verband.org


About the author: Stephan Fricke, CEO and Head of the Advisory Board at Deutscher Outsourcing Verband (German Outsourcing Association) – http://www.outsourcing-verband.org. Before initiating and co-founding the German Outsourcing Association, Stephan gained experiences invarious management, marketing and communication functions in Germany, Austria and Eastern Europe. He worked for international technology research organizations; globalbusinessservices provider and software companies. Today he focuses on building co-operation opportunities for the German market for ITO and BPO services. He is leading the editorial board of the Outsourcing Journal and provides his insights and expertise to international companies, government and non-governmental organizations that wish to optimize their impact on the market. You can connect with Stephan via Xing and LinkedIn or send an email to office@outsourcing-verband.org