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The shortage of workers is putting a strain on the economy. Some companies respond to this with “outstaffing” – an entire team working abroad. A model for the German economy?
L-One Systems is a software service provider: The small company from Darmstadt develops software projects for other companies – especially for the heart of the German economy, medium-sized businesses. In 2012, founder Lionel Born started with a small team of developers and programmers on site. But as the company grew and the shortage of skilled workers increased, it became increasingly difficult to find new employees and retain long-standing ones.
“High level of motivation”
A Syrian working student had the idea of looking for skilled workers in Damascus. Born got involved – and was absolutely positively surprised: “I didn’t expect that we would find such a high level of motivation, that we would find such talented and well-trained people there,” reports Born from the early days. “The team absolutely convinced me from day one.”
The shortage of skilled workers is becoming an ongoing issue in the German economy – and a permanent problem. The demographic aging of our society will worsen the situation because more and more people are retiring and the number of employed people is therefore decreasing. For companies and businesses it therefore means taking new paths when searching for personnel. Is the path of so-called “outstaffing” that L-One is taking a model that could set a precedent in Germany?
“Outsourcing” and “outstaffing” – what’s the difference?
When one software company commissions another to carry out a specific project, for example the digitalization of a company area from start to finish: then this is called “outsourcing“. More and more software companies are looking for developers abroad. Either companies employ them as freelancers. Or they hire them as regular employees, sometimes entire teams – with a rented office abroad. This is called “outstaffing”.
“In this very specific case, it basically works very well when it comes to skilled workers who speak English,” says Bernd Fitzenberger, director of the Institute for Labor Market and Occupational Research (IAB). “Comparable models have long been observed in the IT business or, for example, in the publishing industry when digital tasks can be outsourced.”
Import from Services
Programming tasks can also be completed in the home office. Shifting work abroad also helps to save costs because wages are lower in many locations than in Germany.
Employees are often only needed for a limited time, which is why they are only employed as freelancers. This also helps to keep personnel costs low, because freelance employees are only paid when their services are needed. Above all, personnel costs remain manageable and easy to calculate. In India, for example, German software companies commission subcontractors or hire freelancers.
“A trend that is likely to increase in the future,” predicts Fitzenberger. “Especially when it comes to simple or standardizable digital services, we will see more often that these are provided abroad and imported into Germany.”
Model only suitable for some industries
However, this doesn’t work in every industry or every profession. It is not a model in the nursing or education sector, in the skilled trades or construction industry, where there are a large number of vacancies that cannot be filled.
“There we will have to continue to focus on attracting employees at home and on migration,” said Fitzenberger. “Where people have been specifically recruited for jobs abroad, companies have had good experiences with this and integration has usually worked well – if companies accompanied the induction phase with training and language courses, for example.”