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With annual spending totaling over EUR 67 billion, Germany is the second biggest IT market in Europe after the United Kingdom. Approximately 29% of this sum is spent on hardware, 22% on software and 49% on services. German businesses spent over EUR 35 billion on IT and this amount is expected to rise further still. The German government alone spent over EUR 17 billion on IT. The business-to-business software market share is approximately EUR 18 billion and is growing at a rate of around 3%. In Germany, IT really is big business!
The biggest issue occupying most of the software and IT service suppliers in Germany is the lack of talented professionals. For example, architects with cutting-edge expertise in Service Oriented Architecture, consultants with up-to-date integration knowledge and programmers with the latest skills in Web-based technologies are particularly thin on the ground. This fact could allow more services and products from abroad to access the German market. Traditionally, the German ERP market is heavily dominated by SAP. However, SAP is changing its strategy to the on-demand delivery model and this potentially opens up a point of entry for new players.
Looking at the other side of the equation, German industrial buyers are generally considered to have a clear understanding of what they need and to be very demanding. Nevertheless, their restricted IT budgets are making them keener to experiment.
Many German IT managers are becoming more open to new ideas, especially ones from the U.S. and U.K. On the other hand, IT departments in many German corporations are still resisting the trend towards a more strategic approach to IT and a greater involvement of other departments in their investment decisions. It will be interesting to see how responsive German clients will be to the current trends of more standardized, industrialized IT services, Software as a Service, cloud computing and new application development platforms.
For any IT provider – whether involved in software or services – Germany is the next logical step when it comes to expanding its business in Europe. It’s an interesting market but poses quite a challenge for newcomers – it’s crowded and there are considerable hurdles to overcome. The newcomer must take a whole range of factors into consideration, including the need to potentially modify product positioning to suit the local market, the right channels, and a value proposition and message ideally suited to German industrial buyers. Whether your investment in Germany involves opening a subsidiary or creating a sales channel, you will be aiming to achieve long-term financial success while minimizing the initial risk. Local support from an experienced professional such as a management consultant or interim manager can be crucial in achieving this goal.