For over 15 years, VIALUTIONS has been a competent partner for medium-sized companies in the DACH region as an IT service provider and software developer.
We have recognized that IT departments in companies are often geared toward everyday workloads, such as operating and supporting existing systems. Even if there is capacity to hire developers, skilled workers are often difficult to find. Thanks to trusted partnerships, VIALUTIONS has access to a large pool of software developers from various specialist areas. This enables us to provide close support for projects of all kinds.
Andreas Pohling, Managing Director of Vialutions, answered questions for the Weberbank magazine:
Text: Christian Euler Illustration: Jannik Stegen
Long supply chains are vulnerable. Since the coronavirus pandemic, the past few years have shown how fragile the global supply and production infrastructure is. The successful model of global division of labor is becoming less and less reliable. Even car manufacturers such as VW and BMW were only able to produce in a stop-and-go process in 2020 due to the chip shortage, and a year later there was even a shortage of simple chipboard, steel, and plastic on construction sites. According to an Ifo survey, eight out of ten companies suffered from supply bottlenecks.
This is reason enough for more and more companies to take a look at the map. Nearshoring is the magic word. This refers to the relocation of production facilities from distant continents to nearby foreign countries. This stabilizes the supply chain. Companies from the DACH countries (Germany, Austria, and Switzerland), for example, are ensuring that the factories and suppliers that deliver components for further processing or even finished products to their headquarters are located in neighboring countries.
Proximity to markets enables companies to respond more quickly to changes in demand and avoid bottlenecks. In addition, it allows them to better control the quality of their products. What's more, by relocating production closer to their headquarters, companies can more easily enforce their standards and make their processes more efficient. Nearshoring also has advantages from a data protection perspective. This is because there is greater legal certainty within the EU than for companies based in Asia, for example. The software development industry is paradigmatic for this development. Sustainability also plays a role: by shortening transport routes, companies can reduce their carbon footprint – something that many consumers pay attention to.
With the Chips and Science Act passed in 2022, the US is investing a total of $280 billion over a period of five years to promote the semiconductor industry in “God's Own Country.” The aim is to bring semiconductor production back to the United States from overseas and to promote basic research and technological innovation. In addition, the law is intended to reduce dependence on other countries and strengthen the domestic labor market.
German companies are also responding by focusing on nearshoring and reshoring. This means that the supplier network no longer spans the globe, but only Germany (reshoring) and neighboring countries (nearshoring). Berlin-based software developer and IT service provider Vialutions, for example, has its programs developed for its customers in Wroclaw, Poland. “Nearshoring works,” reports managing director Andreas Pohling. Thanks to the close integration of developers into customer teams and an agile approach, IT projects have already been successfully implemented for more than 60 customers. “The combination of a German-speaking project and support structure and Polish developers has ensured project success for our customers for almost 15 years,” Pohling recalls.
“In view of the shortage of skilled workers, a partnership-based collaboration with nearshoring service providers offers a win-win strategy that provides a quick remedy for the bottleneck in human resources,” adds Davide Criscione, founder and head of the consulting firm dc nearshoring. By outsourcing entire projects to nearby countries or obtaining medium-term project support from foreign IT service providers, companies could access a larger pool of highly qualified talent.
When distances are shorter, companies can often make their processes more efficient.
Vialutions CEO Pohling also sees cost advantages: “The daily rates are still cheaper than in the DACH region, and there are no time differences or cultural discrepancies that could jeopardize the project.” In addition, Poland has excellent IT faculties, which provides access to qualified specialists. For Sören Dressler, professor of international controlling at the Berlin University of Applied Sciences, the Central and Eastern European EU countries are particularly interesting. “In locations such as Budapest, Bratislava, Prague, Krakow, Łódź, Szczecin, and Bucharest, there are sufficient German, English, and French language skills,” says the expert in the field of service nearshoring.
For German companies, nearshoring can mean something completely different than relocating manufacturing to a neighboring country. Sometimes it refers to production close to the respective sales markets. ebm-papst is one of many medium-sized companies in Germany that are concerned about their dependence on China. The fan and motor manufacturer from the Hohenlohe district in northeastern Baden-Württemberg fears that potential Western sanctions or a conflict over Taiwan could disrupt trade.
In order to respond independently and optimally to customer needs and local market requirements in China and to establish independent supply chains, ebm-papst pursues a “local for local” strategy. The company employs nearly 2,000 people at four locations in the People's Republic and in Hong Kong, where it invests in research and development in order to adapt its products quickly. Sales Director Thomas Nürnberger sums up the concept: “We think globally and act locally – this is how we are continuously expanding our locations in the Asia-Pacific, America, and Europe regions and aligning them with local markets.”
The increase in nearshoring not only benefits the companies themselves, but also has a positive impact on the German economy. According to a study by the Swiss Re Institute, the necessary private investment in factories and equipment could give the local gross domestic product an average annual boost of 1.7 percent by 2026, thereby outweighing the potential negative effects of reduced trade flows.
Even if nearshoring is here to stay, globalization is not coming to an end. “Nearshoring is a correction of the excessive expansion of supply chains,” says Sebastian Dullien, scientific director of the Institute for Macroeconomics and Economic Research at the Hans Böckler Foundation of the German Trade Union Confederation. “This makes sense because the relationship between security and profitability has not been well balanced up to now.” Dirk Dohse from the Kiel Institute for the World Economy also does not see a fundamental reversal of the trend: “This is not the end of globalization, but rather an adjustment.”