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Author: Katharina Grimme, Cornelia Wels-Maug
On the occasion of German ICT association Bitkom's annual user forum on outsourcing in Frankfurt, vice-president Jörg-Menno Harms emphasised that outsourcing offers significant benefits for companies in all industries, but particularly for SMEs, and for the public sector, which to date only accounts for 8% of outsourcing spending in Germany. He emphasised that outsourcing serves as a means to enhance flexibility and innovation and, ultimately, to secure employment.
Bitkom estimates that the deployment of BPO lags around five years behind the UK and US markets, particularly in the public sector where cost savings of up to 30% could be realised through outsourcing, enabling state-of-the-art IT infrastructures and business processes. Key barriers to outsourcing in the public sector are the lack of performance-oriented administrative structures, an outdated legal framework and overcautious employee representatives.
Comment: Bitkom emphasises the two key issues holding back the German outsourcing market. Firstly, the lack of public-sector activity, which locks up large potential cost savings in this sector. But, as we have seen in the UK market in particular, public-sector outsourcing activity also acts as a pioneer and driver for private-sector initiatives, thus promoting the market and spurring on further offerings and initiatives.
Secondly, the underdeveloped BPO market in Germany. German companies are slow to trust an external service provider to effectively run their business processes. Currently, it is mainly basic transactional processes, such as payroll/personnel administration and payment/securities processing that are outsourced. We estimate that BPO revenues in Germany will grow by around 7% per year over the next five years, amounting to €11bn by 2010. It will then still be less than half the size of the UK market.
These two points form the core of the explanation why the German market is behind the UK and the US - and we don't see any signs of major changes that could unleash the locked-up potential.
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