When attending the last annual Summit of the European Outsourcing Association (EOA) in Madrid a few weeks ago, I was impressed by the presence of service providers headquartered in South America, particularly from Brazil. Although the case studies presented focused on customers who are located in Spain or Portugal, the type of services provided and especially the size of the South American service providers left a positive impression on many potential customers from Germany.
For Central Europe in general and Germany in particular, procuring IT services from South America has some interesting angles:
- Although for large corporations, India is still the main location for offshore services, availability of qualified staff is limited for German customers. One reason is that working for US or UK customers might be favored due to language affinity and relatives already being deployed in those markets.
- Germans perceive that cultural differences between them and India are significantly greater than compared to Brazil or other South American cultures. When thinking about the need to visit an operations or development center, German managers by far prefer going to Brazil, which is perceived as a holiday destination, rather than to India.
- In the past, German companies favored a Nearshore approach to Eastern Europe against offshoring to India. Due to the limited size of service providers and the already experienced lack of scalability concerning further qualified staff, bigger service providers from South America might be a compelling alternative.
Most importantly, the German economy is currently showing the best performance across Europe, while economies in Portugal and Spain are experiencing an ongoing crisis. According to media reports in Spain and Germany, a lot of highly educated and motivated people in Spain cannot get a rewarding job at home and move to Germany where their skills are highly welcome. This could serve as a facilitator to offshoring to South America by using the Iberian workforce as a mediator for language and cultural differences.
In contrast to the US and UK market, German customers have been cautious concerning outsourcing in general, and offshoring or Nearshoring in particular. This situation has been changing, and the so-far untapped market provides a unique potential for growth.
First examples of successful projects and established relationships between South American service providers and German customers are out there. It will be interesting to see the further development of this exciting market. Here’s a suggestion: How about South American service providers joining forces to set up a conference specifically addressing their value propositions for customers in Germany?
Dr. Joerg Stimmer is Vice President of the German Chapter of the European Outsourcing Association and a regular speaker at sourcing conferences. He is also Founder and Managing Director of pliXos GmbH, a venture capital-funded startup with cloud-based tools for the industrialization of global services delivery. He previously headed the Central European business of Tech Mahindra. You can reach him at email@example.com.