issue 1 - Roland Berger

“Competencies count”
Companies should concentrate on factors that distinguish
them from the competition, says HP director Wolfram Fischer.
For everything else, there’s offshoring.
THINK: ACT What is offshoring all about? Is it
just a lot of hot air as with the new economy,
or is it really the “third revolution in
added value?”
WOLFRAM FISCHER In our intensely competitive,
service-oriented society, it’s not enough to
offer standard products at an average price.
Especially in the solutions business, every component
needs to be cost-effective while also
high quality. Offshoring presents the opportunity
of obtaining more service for less money.
That’s a necessity for international companies—and
a huge future market for providers.
What experience have you personally
gained in low-wage countries?
HP’s global delivery model relies on resources
across the world. In Bangalore (India), Bratislava
(Slovakia) and Warsaw (Poland) we employ
highly motivated, well-trained people
with excellent language skills. Alongside inexpensive
wage and operating costs, they constitute
optimal production factors. Offshoring
also offers advantages as regards flexibility,
process speed and customer orientation. Only
by using these do we create added value according
to the principle of “high-tech, low cost.”
Which branches of industry are particularly
benefiting from offshoring?
In the manufacturing industry the whole issue
has been done and dusted. Nowadays the textile
industry produces almost exclusively in China,
Vietnam, Thailand and Malaysia. With
computers, it’s similar. More than two thirds of
all notebooks come out of Taiwan. Financial
service providers are going to initiate the next
wave. They keep outsourcing more and more
business processes that until recently were still
considered core competencies—not only IT, but
also everything from administration to personnel
management.
Is there anything that shouldn’t
be outsourced?
You should not outsource the core competencies
that make you stand out from the competition,
since there are fewer and fewer of these. Core
elements include all processes that directly add
value, especially product development and customer
interfaces. A company can stand out in
these areas and avoid being seen as a “me too”
player. However, outsourcing is a strong option
in all areas where processes can be defined and
standardized. Already there are companies
that have outsourced all operating activities,
restricting themselves to brand management.
Nike, which has its products manufactured
by 900 partner companies worldwide, springs
to mind.
Are you not understating the hurdles?
Obviously, it’s necessary to have a practice
phase, the length of which is often underestimated.
But any problems are going to be absolutely
manageable and no different from the
issues presented by any new project.
Is offshoring to India not failing on account
of cultural differences?
Not at all. In just a few years, thanks to exceptionally
well-trained IT specialists, the country
has been able to manufacture first-class software
components with significantly lower
costs. Obviously, one has to manage cultural
differences as well, but that hardly presents
WOLFRAM FISCHER is managing director of
Hewlett Packard GmbH. As vice president of the
Technology Solutions Group Germany, one of his
responsibilities is outsourcing. His experience as a
sales manager in the Asia-Pacific region made him
one of the best experts on its IT service market.
Fischer has a bachelor’s degree in business administration
and computer science.
any problems these days, since the Asian
region is increasingly opening up to the
Western world. Even at our locations in China,
most of the workers are locals whose integration
into the company is considered business as
usual. Offshoring gets difficult when physical
and logistical problems are added in. But that’s
no longer an issue with digital products.
Is quality still optimum?
With consumer goods today, price plays a larger
role than top quality. Does a 20 euro running
shoe really need to last me 10 years, or
should I just buy a new pair every year? There
are even countless IT services that have been
standardized for a long time now.
Is outsourcing solely a question of economic
necessity? According to one study, managers
who outsource processes and slash jobs are
making very good money.
It’s wrong to think there’s a direct causal relationship
there. Outsourcing results in cost and
price advantages of up to 40 percent, leading to
improved earnings. Obviously, managers who
are compensated on a success-dependent basis
benefit from that. So what’s wrong with managers
trying to find the most cost-effective solution?
That’s their job, after all.
think: act 47