Outsourcing 4.0

Driven by digitalization, the market for corporate services in Germany is growing. More corporations and SMEs than ever are outsourcing their business processes and many are choosing to operate customer-delivery centers directly from Germany.

June, 2019

Ask Thomas Güther, managing director of outsourcing solutions provider Capita Europe, to list the biggest changes his industry is facing right now, and he answers with a scenario: “Imagine a classic customer service case in which a customer wants to switch electricity or telecommunications providers…” He describes a complex, and largely manually-controlled process that begins at the back end: data is forwarded from one “IT input screen” (a template to which inputted data must conform) to the next and is subject to various approvals. Many companies already outsource this process to service providers such as Capita. “The processing of a service case like this takes two to three weeks,” says Güther.

Inside the Leipzig office of Competence Call Center (CCC). Today, nine of their 22 international locations are based in Germany, Europe’s biggest market, because of its progressive economic values and the innovation of its SMEs.

Photo: 1998–2019 © CCC Holding GmbH

Today, thankfully, things are changing. “We train artificial intelligence (AI) to automatically take over click work from screen to screen,” he explains. “And suddenly we can reduce the processing time for the entire process by 80 percent. It only takes a few weeks to develop and train such an algorithm. “Without the company itself having to change its IT infrastructure, we, as a service provider, can accelerate its processes in customer service enormously and at the same time relieve our own employees of this click work and employ them in more demanding activities.”

Digitalization is becoming a great opportunity for business process outsourcers and shared service centers to position themselves as supporters and partners for companies in the era of digital transformation. This is because of the drive of corporations and small and medium-sized enterprises (SMEs) in Germany to offer their customers faster, more up-to-date digital services. “Many companies in Germany, however, lack the internal specialists and expertise to implement the necessary automation in the back office themselves,” says Stephan Fricke, board member and chairman of the advisory board of the German Outsourcing Association (see interview). “Many companies therefore use external service providers in the IT and back office areas.”

»Without the company itself having to change its IT infrastructure, we as a service provider can use automation and artificial intelligence to accelerate its customer service processes enormously.«

Thomas Güther, Capita Europe

Photo: Capita

This trend is contributing to major changes across the German economy. Germany has primarily been known internationally for its industrial production. Its reputation as a service location has rarely extended beyond its own borders. But B2B companies that offer services to corporate customers are now booming in the country – and opportunities for growth extend to their foreign providers.

Now SMEs are outsourcing too

The outsourcing of processes in the areas of human resources, accounting, IT, and customer care is no longer solely something for large corporations. Even SMEs, which typify Germany’s economy, are increasingly open to cooperation with external service providers, if only under certain conditions, explains Josefine Dutschmann, industry expert at GTAI. “German SMEs are often so-called ‘hidden champions’ – they are internationally very successful in their respective niches, but at the same time they are also strongly anchored in their home market,” she says.

“In order to win the trust of German corporate customers, it is therefore very important to have a local team that is familiar with the local market conditions.” That doesn’t necessarily mean that foreign providers of corporate services have to set up large local teams, or that they can’t offer services from foreign locations, “but at least one German-speaking sales team should be based locally if you want to be successful here, and ideally there is a German-speaking delivery center with specialists who are in close contact with corporate customers.”

Facts & Figures

80 %

of German contactcenters are in-house, with the remaining 20% in the hands
of service providers.

21 bn

Turnover generated by the 7,000 call centers in ¬Germany, which employ around 540,000 people.

50 %

of contact centers are active in the financial services, telecommunications, and IT sectors.

2.5 %

Annual growth rate of the business and IT service market in Germany since 2014

Source: GTAI Fact Sheet Business Centers in Germany 2018

A trend toward more flexibility in purchasing outsourcing services can be seen in both large and small companies in Germany. “Companies are increasingly looking for specialists for certain IT topics and process optimizations,” says Dutschmann. “This is a reaction to the acceleration of innovation and product development processes.”

Local knowledge is key

Thomas Güther of Capita Europe takes a similar view. The international outsourcing service provider, which is headquartered in London, took over the German business process service provider Avocis in 2015 in order to gain a foothold in the German market. “Capita was thus able to plug into existing customer relationships with large corporations and medium-sized companies and could depend on an experienced local team,” says Güther. This is of great strategic importance for foreign companies entering the German market: local service providers help to build the necessary trust.

Service provider core activities (top answers)

Source: Call Center Profi 2018; multiple responses possible

“When choosing their service partners, German companies want to be sure that they are familiar with German peculiarities such as industry regulations and labor law,” he says. This is particularly true because service providers are increasingly becoming strategic partners in digitalization. “And digitalization projects can only be successfully implemented in Germany if the complex regulations of German and European data protection and labor law, for example, are observed very carefully,” he says.

Capita’s services in Germany focus on customer experience. “In this area, many companies are currently looking for innovation partners who can help them offer contemporary customer service across all communication channels and can advise them on the potential of new technological possibilities such as artificial intelligence and robotics in customer service,” says Güther.

»There is increasing demand for a combination of digital services and support from highly trained professionals.«

Thorsten Meyer, Competence Call Center (CCC)

Only when local customer-facing teams are integrated into an international team of specialists can providers of corporate services be successful in the German market, explains Thorsten Meyer, director of German call centers at the Austrian service provider Competence Call Center (CCC). CCC has been active in the German market for 18 years. The Austrian company established its first location in Berlin in 2001. Today, nine out of 22 of their international locations are based in Germany. “Germany is the most important European market for us, because of the innovative strength of the local companies and the overall very progressive economic structure, which also attracts many foreign companies wanting to gain customers here,” says Meyer.

Mixing AI and human intelligence

Services in the social media domain are currently just as much in demand in the German market as automation solutions. “There is increasing demand for a combination of digital services and support from highly-trained specialists,” explains Meyer. Simple services should be delivered quickly and efficiently using robotics and AI solutions. At the same time, emotional and complex customer enquiries should end up with customer advisors.

DACH: A Competitive Business Location

Source: ISG Index 2019

High-quality consulting is important because when it comes to customer service, German consumers have particularly high expectations and can easily become resentful. That is the result of a recent study by Zen­desk, a customer service platform provider, focusing on the interaction between customer service operatives and consumers in Germany, Great Britain, and France. Not only do 81 percent of respondents in Germany remember bad customer service experiences a year or more in the past, they also tell others about those experiences.

Despite rising expectations, the outsourcing industry is still very cost-driven. “The access to skilled labor is crucial for our choice of location in Germany,” says Meyer. “The skilled labor situation in Germany is tense. Today it is hardly possible to build up a large location with 1,000 people.

Real estate costs in Germany are affordable

Source: IVD-Gewerbe-Preisspiegel 2018/2019; Note: without ancillary costs

We therefore tend to focus on decentralized, smaller, distributed locations with two or three hundred employees in towns with good transport connections. In addition to Berlin, the leading examples are Leipzig, Dresden, Essen, Dortmund, and Aachen.”

Pathway to success

The advantage of this decentralized location strategy is that the provider is able to be close to company locations and economic centers in Germany (which are also very decentralized) and therefore establish good proximity to the customer.

Adapting to the needs of the dispersed, medium-sized economic structure of Germany, positioning as a partner even for highly-­complex outsourcing projects, and setting up an experienced local team with local knowledge: these are the three strategies for success that foreign providers of corporate services should follow when entering the German market.