“Focusing on tomorrow, not today”.

A team of more than 30 in-house SAP specialists is making a united transition from a German midsize company to its outsourcing specialist – and taking on its old employer as its first customer. Melina Brandstetter, Managing Partner of management consultancy Brook Valley, talks to Michael Schmidt, CEO of outsourcing specialist Nagarro ES (formerly Allgeier ES), about the hurdles that SMEs, outsourcing providers and employees had to overcome.

Melina Brandstetter: Michael, together we managed to organize the transfer of the in-house SAP team of a large German SME to you. Can you briefly describe the initial situation?

Michael Schmidt: A SME from the north of Germany maintained a location in southern Germany with more than 30 IT specialists, which had grown historically. No one was any longer happy with this spatial separation and the underlying structure of collaboration: neither the company’s management nor the employees at the location in the south. There, they had the feeling that they were not sufficiently integrated into the company’s processes. And on the part of the company, there was the feeling that the quality no longer met the requirements. There was also an investment backlog at the site in terms of buildings, workplace design and technology. In this context, the company approached us in order to tackle these diverse challenges together. It was clear that the company would not be able to do this on its own.

Melina Brandstetter: What possible solutions did you present?

Michael Schmidt: It was quickly clear to us that your impulse towards the management for a complete transfer of the team would have advantages for all sides. The employees could be integrated into our structure and the company was able to buy back the required services on a 1:1 basis via its ‘old’ team. We were able to offer the employees a new perspective for further development. For the company, this meant that it would have access to a much more well-professionalized team in the future, which would also be able to offer a much broader range of IT support with its new colleagues. After all, we naturally have significantly more experts from very different areas working together. In addition, the company now had to build fewer investment reserves for the future, becomes more scalable and can focus on the issues that are actually relevant and on its core business.

Melina Brandstetter: Sounds like a clear win-win-win situation for everyone involved. Of course, getting there wasn’t always easy. It almost threatened to fail a few times. Why?

Michael Schmidt: You probably remember that we first spoke to the five team leaders of the SAP team and presented our ideas. They seemed enthusiastic, as they immediately saw their personal development opportunities. When we then presented it to the entire team together with them, the response was quite different: skepticism, fear, suspicion – no one seemed excited about such a change. I had the feeling that our promises were seen solely as bait. Not as a picture of future reality. Even at this point, our project was in danger of failing, because we had set as a condition for the transaction that 80 percent of the employees would go the way with us.

Melina Brandstetter: I still remember it very well. It was a surprise that we had not expected. But we wouldn’t be talking about the deal today if it hadn’t worked out in the end. How did you handle the problem?

Michael Schmidt: I sensed great distrust and wanted to understand it better. That’s why I spontaneously decided to stay at the location for a few days. I have always packed two to three extra shirts to be flexible in such situations. We then discussed with each of them their opinions and motives. Not to persuade, but first to understand. And it became clear that the employees did not feel sufficiently valued and were therefore unmotivated. Moreover, due to the distance to the headquarters, they did not feel belonging anywhere. The fact that the premises and technical equipment were not suitable added to the problem. A lot of frustration manifested itself.

Melina Brandstetter: How did you manage to gain the trust of the employees?

Michael Schmidt: As I just said – at first I simply listened. I expressed understanding. And I tried to make them understand that this was exactly what was worrying the management, and why they had presented another option with a specialist. And I then explained this option in detail: the transition to a service provider who could offer completely new perspectives for personal, professional as well as material development. The access to a team of more than 8,400 IT experts worldwide who work hand in hand at over 52 locations. The chance to continue working with their previous employer – but at a new, professionalized level through us. And without having to relocate. We have given them the guarantee of being able to stay in the region with their families and not having to travel excessively – and to completely renew the site there and expand it in the future.

Melina Brandstetter: People often asked what noticeable positive change in everyday life would occur for the employee if they continued to work for the customer after all. How did you deal with this question?

Michael Schmidt: That’s right. That’s why, in addition to these general conditions, we have made it clear to them what will change in their everyday working lives. In the future, they will not be a cost factor, but productive forces that contribute to value enhancement. To this end, we will make their performance transparent and structure it better. We will establish clear processes for how future collaboration with their former employer is to take place. Some of them have begun to see the opportunities behind this. A fresh enthusiasm has been kindled in them to take a chance on the new. And they have gradually infected each other with it.

Melina Brandstetter: Did you succeed in meeting the quota of 80 percent?

Michael Schmidt: 100 percent of the employees agreed. We were even able to win back employees who had actually already resigned. All of them are still with us today. We made good on our promise and, together with our lessor, invested over 1 million euros in the location, giving the team a free hand in designing a new office. They opened a great branch at their desired location, where more than 60 IT experts are now working. The company is still a very relevant customer that has made significant progress in terms of IT. We have invested heavily in the professional and personal development of our new colleagues. For all stakeholders, this action has been a complete success so far.

Melina Brandstetter: What were the decisive factors in ensuring that employees were in a positive mood and able to enter into a good working relationship with their old employer?

Michael Schmidt: That’s a good question. In the end, we laid a foundation for successful cooperation right at the beginning with the personal discussions with each individual. These discussions made it clear that there was no personal problem, but rather many small problems that existed in the processes and structures of the collaboration. And from my point of view, they were all solvable if we approached them decisively. We have enough experience to do that. I knew that we would be able to manage this as long as the employees were behind the fundamental transformation. That was the real core issue. And your winning and open manner toward the employees and the works council was a key factor in helping us to solve the problem together.

Melina Brandstetter: How did the IT and digitalization of the company develop with this change? After all, he no longer has large parts of the supply IT in the company himself.

Michael Schmidt: Both have developed very well. We are currently in the midst of evaluating very modern apps for customer communication. Up until a year ago, they had no idea what the potential was and how to implement it. By us taking over the day-to-day operations, the company was able to focus on expanding new business models in e-commerce and developing ideas for a different way of addressing customers. After all, they no longer had to solve the problems in the data center and ERP areas themselves. And they immediately had not only SAP but also cloud, security, and much more know-how that we already had in our company and could make available. So the organization can finally focus on the real core business and tomorrow, not on today and internal IT problems. This is the first business obligation.

Melina Brandstetter: What is your advice for other SMEs whose transformation and liquidity crisis was accelerated by Corona?

Michael Schmidt: I am sure that it is even more important for companies today to be open to radical change processes. In my view, this is often only possible if such a process is moderated by an external third party. Acceptance and trust for change must first be created, and new structures must be established that enable professional collaboration with a partner.

Melina Brandstetter: That’s true. After all, we are talking about employees who have loyally done a good job for decades and whose world we suddenly turn completely upside down as a result of such projects. Thank you very much for the interview, Michael.

About Nagarro ES:

Nagarro ES is a leading German full-service IT provider for critical enterprise applications and complex ERP landscapes in digital transformation. As part of the Nagarro Group, Nagarro ES is one of the most powerful and innovative SAP partners for the German midmarket and large customers with an international footprint.