Elsevier does provide a service.* They manage paper submissions, format papers, sometimes edit them, publish them, etc. Without Elsevier (or other traditional publishers), this work has to be done elsewhere. It thus may make sense for universities to outsource the publishing to a dedicated company. However, Elsevier has become big enough to dictate the terms of the contract. The German universities are doing a very smart thing in pooling their market power. They don't want anything for free, but they want to pay a reasonable price.

* Edit: Of course, they don't do it in a particularly good way.