With a 25% market share, the German software and IT industry is the single largest market for telecommunications, information technology and consumer electronics in Europe. In 2020, market capitalization amounted to around 170bn €, which accounted to a 4% market volume worldwide. Although, during 2020, economic activity slowed down and decreased extensively – with furloughs, remote and short-time work as critical measures against unemployment – corporations, organizations and government institutions saw the need to digitize their operations by using cloud services, big data as well as machine learning and artificial intelligence to their advantage. Hereof, innovations in this segment boosted the economy and businesses even felt to be better off than before, allowing for solutions to the pandemic such as cost reductions and cloud-enabled remote work to take place.

Software & IT landscape in Numbers

Germany’s IT and software sector is considered to be one of the most innovative in the world and thus, a highly lucrative market. Due to recent events, governmental incentives and support programs, favorable interest rates and the acute need for digitalized services in all sectors of the German economy have created a huge demand that is also frequently off- and nearshored in the CEE and APAC region.

The market for software and IT products and services in Germany is dynamic and highly competitive. Big industry players such as T-Systems, Atos and IBM are present, yet, the market is characterized and dominated by a large number of specialized SMEs (88,181 small businesses, 11,577 medium-sized businesses and 328 large businesses ). Until the end of 2021, Bitkom estimates for 1.2 million people to be employed in the ICT industry, which is assumed to create 39,000 additional jobs.

Furthermore, the country annually hosts the world’s largest trade fair for the IT industry, CeBIT, bringing together 3300 exhibitors from more than 70 countries.

ICT Trends

In recent years, Germany’s cloud market has experienced rapid growth. According to Bitkom’s Cloud Monitor 2019, three out of every four businesses that have been evaluated use cloud computing.

In Industrie 4.0, e-commerce and data management platform environments, cloud-based applications are gaining popularity. Various reports also show that in a stable domestic sector, the number of public and private cloud computing providers is gradually increasing. Last year, 94 percent of companies in the cloud computing industry ranked their current state of operations as very good or good.

As digitalization and cloud-related technology continues to influence global business, German organizations, primarily SMEs, are focusing on digital business strategies, with cloud services (preferably hybrid cloud services) significant to their success.

Cyber security is the prime concern in companies that have not yet adopted cloud technologies. During 2019, approximately 88mio Euro of financial damages have been caused by cyber-attacks (a 30% year-on-year increase), demonstrating a huge demand for specialists in this field.

Another important problem is the difficulty of cloud migration – and the degree of difficulty with which it can be integrated into internal IT infrastructures. While international expansion is critical for any software company’s competitiveness, companies who expand their regional footprint in Germany while designing hybrid cloud technologies to satisfy rising domestic demand will benefit substantially from a strategic market position within the EU.

Increasing demand for software and IT specialists in Germany

For 2021, revenue of software services in Germany is expected to grow by 4%, implicating a rise in demand not only for software specialists but also for innovations and adjustments of deficiencies. The federal government specifically stated that the corona pandemic revealed a significant deficit in Germany’s digital transformation. To emerge stronger from the crisis and to profit from the pandemic-induced digitalization push in the long-term, the federal government wants state-led organizations in schools and public administration to be corrected and restructured, to actively force digital transformation, and to embed data security more substantially into general political concern. Keeping these aspects in mind, many opportunities are opening up in the German market, while experts in these areas are greatly sought for.

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