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Outsourcing is second nature in the UK. But across the channel, in the major economies of Germany, France, Spain and Italy very different views prevail, which ultimately will be paid for in increasingly uncompetitive back-office operations, says Paul Morrison.
Ask any outsourcing supplier about their goals for the year ahead, and you will certainly hear “sell more in Europe”. At least since the turn of the millennium, continental Europe has been seen as the next major business process outsourcing (BPO) growth area. But one decade and a credit crunch on, it has yet to fulfil its promise. What is Europe playing at?
BPO is rather old hat in the US and UK. If your organisation is not already outsourcing and offshoring to a third party at least some of its payroll, finance, HR or procurement functions, then it is in a distinguished and dwindling minority. On the continent, au contraire – or so it would appear.
The UK remains by far Europe’s largest BPO market, and although Switzerland, Benelux and the Nordics punch above their weight, the French, Germans, Italians and Spanish still don’t appear to be all that excited. Many BPO suppliers – even a leading French supplier selling to French customers – complain of a crushing lack of interest in their outsourcing wares.
Different world view?
That reluctance might be explained away as a difference of world view: while cold-blooded Anglo-Saxons would outsource their grandmothers if they could, those conservative and consensus-driven Europeans prefer to keep the back offices close to home.
Don’t forget about the works councils, the unions and the Acquired Rights Directive. And isn’t all BPO based on offshoring everything to anglophone India – which simply wouldn’t work for my French, German, Italian or Spanish back office?
Finally, there’s also the small matter of the credit crunch and economic recession. Net result: no BPO please, we’re European.
A simple, persuasive picture – but it is also nonsense. In reality there is a breed of global firm – often British, Dutch, Nordic or particularly American – that have been doing European BPO for years, and who are now accelerating down this path.
Top of the list come businesses working in the most global industries such as financial services, manufacturing and energy, but every sector has seen BPO success of some sort and their common trait is that they have been conducted at a pan-European level.
Local versus global
It seems concerns about BPO’s incompatibility with Europe have real currency at a local level, and as a result many local French, German or Italian organisations instinctively baulk at the prospect of externalisation. But the likes of Philips, Axa or American Express have proven that the barriers can be overcome.
They have seen shared services, BPO and offshoring work elsewhere within their operations; they have accumulated the skills to know how to deploy them; they know that complex European language requirements can be handled well by low-cost east European locations.
In short they know that BPO works, and that there are only imagined barriers to it working well in Europe. As a result pan-European BPO is alive and well, while French, German or Italian BPO is not.
So European companies choose to play by European rules – so what? Well, in the short term, that tendency is perhaps no big deal. BPO is not a panacea, and it can still be complicated to get right.
Lower operating costs
However, more and more companies are finding that they can get it right, lowering operating costs and improving back-office quality and compliance as a result.
European companies can opt out of this potential if they choose. But in the long-term this stance will condemn them to ever less competitive back-office operations, and the alternatives to BPO are not compelling.
Internal transformation is almost always botched or unfulfilled, and despite claims to the contrary, insourcing – in other words, taking outsourced work back in-house – is a rare beast indeed. Then there is always the do-nothing option, which is how many European businesses are responding to the challenge of BPO now.
Inaction will not help European businesses to compete. Global companies have shown that BPO works in Europe. Now it’s Europe’s turn.