German IT landscape: even more opportunities than expected?

The German IT market is the largest in Europe and number 4 in the world (behind US, China and Japan). According to market research it is forecast to grow at a CAGR of 4% over 2011-2015. The addressable domestic market for IT products and services is projected by BMI to reach US$60.8bn in 2011 and US$71.8bn by 2015.

German IT services spending is forecast to reach US$24.8bn in 2011 and to rise to US$29.9bn in 2015. Demand drivers will include emerging technologies, such as projects to enable SaaS use, and reducing costs through data centre infrastructure outsourcing.

Despite the fact that German market is relatively mature, there is plenty of potential for ERP implementations in industries such as consumer products, telecommunications, energy, engineering transport and retail. ERP demand drivers include boosting the efficiency of global supply chains and logistics processes. Meantime, business intelligence will continue to be one of the fastest-growing product areas in 2011.

Industry Developments Government funding for technology policy measures amounted to EUR2.3bn. The German has announced it will provide an additional EUR12bn for education as well as research and development (R&D). Among other priorities, the government is determined to encourage German companies to innovate, to cope in the economic upturn.

In 2011, software vendors in the German market will focus increasingly on cloud computing. In October 2010, Microsoft launched a cloud computing alliance with German-based Datapoint, a provider of ICT services to the public sector. Meanwhile, SAP launched a new version of its hosted CRM software product SalesOnDemand, after the first version, released five years before, had failed to really take off.
One distinctive feature of the market is the influence of medium-sized companies. The German software market is competitive, with smaller companies having a niche alongside major players such as German software giant SAP, Oracle and Microsoft. Around 300 software providers compete in the enterprise resource planning (ERP) market for the small and medium-sized enterprise (SME) segment alone. Other major players across all segments include Sage, SoftM and Infor Global Solutions.
As far as German market characteristics are concerned, the German market differs from other European markets: German market is peripheral. If you want to sell to France, you have to be in Paris – and you have 90% of the market nearby. If you sell to the UK, you have to be in London – and you have 90% of the market nearby. If you sell to Germany you have to be everywhere. There is no single town dominating everything – particularly not Berlin. There are core areas for some market sectors. Frankfurt is such a core area for the finance market, Berlin for the governmental business and Munich for the IT companies. But Hamburg, Düsseldorf, Cologne, Stuttgart, Nuremberg are also important places for the business. And we shouldn`t forget about Bremen, Hannover, Mannheim, Karlsruhe, Leipzig .

German IT market seems to be rather perspective for market players. But we shouldn`t forget that in order to be a successful market player we should follow “the receiving party rules”.

Anna Kozik

Business Development Manager