The German software and IT industry has seen dramatic developments since its beginnings in the 1950s. Since the presentation of Konrad Zuse’s very first prototype of a computer, the infamous Z1, the world of German IT has developed at an exponential rate. Today, the industry boasts a market capitalization of about 180 billion euros (2023) – accounting for 4.2% of the global market volume. The recent pandemic has given an additional boost to the already booming ICT sector. Companies, organizations and government institutions saw the pressing need to digitize their operations by using cloud services, big data, machine learning and artificial intelligence to their advantage. As a result, innovations in this sector boosted the economy and businesses even felt better off than before, allowing for solutions to the pandemic such as cost reduction and cloud-enabled remote work. Many of these changes have stayed with us after the pandemic – for example, 23.5% of employees were working remotely in 2023, as compared to a mere 12.9% in 2019. This, in turn, of course requires employers to keep their digital infrastructure up to date, ensuring continued growth for the ICT industry.

Software & IT landscape in numbers

Germany’s IT and software sector is 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 players such as T-Systems, Atos and IBM are present. However, the market is characterized and dominated by a large number of specialized SMEs – of the 99,390 ICT companies registered in 2022, 85,239 were small businesses, 13,687 medium-sized businesses and 410 large businesses. By the end of 2025, the industry association of the German ICT industry Bitkom estimates that 1.42 million people will be employed in the ICT industry, which is expected to create 47,000 additional jobs.

How does the german ICT sector compare globally?

ICT at its core is one of the crucial building blocks of globalization, which is why this industry is quintessentially global. Nevertheless, there have been some domestic trends such as “Hosting made in Germany”, which has gained popularity largely due to data protection considerations and policies. However, it is precisely these strict bureaucratic regulations which are holding back German digitalization to a certain extent. Due to the lengthy approval processes, German companies are often slower to introduce new digital solutions than is the case in other countries with less strict data protection regulations.

This is why Germany’s level of digitalization is in the middle in an EU comparison, while Scandinavian countries such as Finland and Denmark take the lead. Germany recently took 23rd place in the IMD World Digital Competitiveness Ranking 2024. This means that Germany is still far from lagging behind but should certainly watch out for countries such as Romania, India and Co. whose ICT industries have recently been getting stronger. However, with the help of numerous funding programs and plans to reduce bureaucratic hurdles recently launched by the federal and state governments, Germany should be able to sustain its international competitiveness in years to come.

ICT trends

In recent years, Germany’s cloud market has experienced rapid growth. According to Bitkom’s Cloud Report 2024, 81% of businesses use cloud computing, with an additional 14% planning or discussing to implement cloud computing in their work.

In Industry 4.0, technologies such as Internet of Things (IoT), industrial cloud platforms (ICTs), and generative AI (GenAI) are gaining popularity. Various reports also show that in a stable domestic sector, the number of public and private cloud computing providers has been steadily increasing. Prospectively, Germany’s public cloud sector is expected to show an annual growth rate of 16.7%.

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 for companies that have not yet adopted cloud technologies. In 2024, the German economy suffered a total loss of 178.6 billion euros due to cybercrime, and the share of German companies’ IT spending on cyber security almost tripled between 2017 and 2023, demonstrating a huge demand for specialists in this field.

Another important issue is the difficulty of cloud migration – and the degree of difficulty to which it can be integrated into internal IT infrastructures. While international expansion is critical to the competitiveness of any software company, businesses that expand their regional footprint in Germany while designing hybrid cloud technologies to meet growing domestic demand will benefit substantially from a strategic market position within the EU.

Increasing demand for software and it specialists in germany

In 2024, software services was the fastest growing area in the German IT market and for 2025, this area is expected to grow by 10%. Software specialists are more in demand than ever in Germany. The federal government specifically stated that the corona pandemic revealed a significant deficit in Germany’s digital transformation. Therefore, the Federal Ministry of Digital Affairs and Transport has formulated a “digital strategy” to advance digitalization in civil society, business, education and science. With concrete projects such as the comprehensive digitalization of administrative services, the introduction of digital patient files, the development of an interoperable education ecosystem that opens access to digital education, and the strengthening of a skilled workforce for digitalization the federal government wants to actively promote digital transformation. Keeping these aspects in mind, many opportunities are opening up in the German market, while experts in these areas are greatly sought for.

However, the growing demand for software and IT specialists has recently become rampant. If we were to pinpoint a weak spot in the German ICT sector, we would indeed shout “manpower”. At the end of 2023, Bitkom recorded a record shortage of skilled workers with 149,000 unfilled positions in the IT industry. The recent federal government coalition has addressed this problem by making it easier for skilled workforce to obtain European blue cards and allowing immigration without formal recognition of foreign qualifications. Still, there is a constant struggle to find the right talents to fill the gap in the German ICT workforce, which is why skilled experts from abroad will be greeted with excitement.

Taking the pulse of the industry

Whilst we write this article in January 2025, we still see the health of the German ICT industry, but also the challenges posed by global competition and domestic hurdles like labor shortages and bureaucratic hurdles. One has to acknowledge that Germany (or Europe as a whole) has not been able to match the technological developments coming from Silicon Valley. Nonetheless, new favorable policies and the unprecedented willingness of German companies to venture into new software and IT technologies, offer a promising outlook for the future of the German ICT industry and the opportunities for anyone in the sector looking to expand their business here.

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