Software Industry

• Digitalization driving demand in Germany
• Data storage, collaboration and business applications
• Cloud opportunities in Germany

The ongoing Covid-19 crisis has driven global demand for cloud services to record levels according to industry analyst Canalys. The cloud infrastructure services market grew by 34 percent to USD 31 billion in Q1/20, with the market rush being driven by companies moving to remote working solutions as lockdowns were put in place around the world.

The sudden surge in demand for online collaboration tools, e-commerce and consumer cloud services has precipitated a sharp uptake in cloud consumption that has benefited all of the major cloud providers.  

Digitalization driving demand in Germany

The cloud market in Germany has seen lively development in recent years. Bitkom’s Cloud Monitor 2019 reveals that three out of four companies use cloud computing.

More than half of the cloud users surveyed claim that cloud implementation plays a major role in their overall company digitalization efforts. 

Cloud-based applications are finding favor in Industrie 4.0, e-commerce and data management platform settings. Different studies also show a steadily growing number of public and private cloud computing providers in a healthy domestic market. Last year, 94 percent of companies doing business in the field of cloud computing (e.g. SaaS, IaaS, consultancy) rated their state of business as being very good or good. 

Nevertheless, other studies point to the cloud market in Germany’s relative immaturity compared to other European markets. But with global business increasingly being shaped by digitalization and cloud-related technologies, German companies – mainly SMEs – are concentrating on digital business strategies, with cloud services being imperative to their successful execution. 

Data storage, collaboration and business applications

Companies in Germany use both private and public clouds, with the “hybrid cloud” combining options from both increasingly being the preferred cloud product of choice. Typically, German companies use the cloud for data storage, workforce collaboration and business applications (e.g. ERP, email). Companies turning to cloud models consider faster scalability; location-independent data access to IT applications; increased data security; and improved efficiency and productivity as the most important advantages of cloud adoption. 

Cloud opportunities in Germany

Companies who have not yet implemented cloud solutions cite cloud security as their primary concern. The complexity of cloud migration – and ease of integration into internal IT systems – represents another significant challenge. International expansion is an integral part of cloud provider competitiveness strategy.

Significant opportunities exist for companies who strengthen their regional presence in Germany, while developing hybrid cloud solutions to meet growing domestic demand. 

Ongoing support services that meet industry requirements are intrinsic to cloud offerings, with AI and blockchain services in the cloud also representing interesting growth segments. German companies seeking to mitigate the worst effects and future developments of the ongoing Covid-19 crisis urgently need to increase efficiency and productivity – cloud-computing solutions can help them successfully realize these objectives.

From Asha-Maria Sharma

• Video Conferencing for Pre-School Children
• Emergency Digital Pact for Schools Funding
• Growing Demand for School Digital Learning Solutions
• Remote Learning Solutions Opportunities

Video Conferencing for Pre-School Children

It is half past nine in the morning in Germany. The first video conference has just begun. The 12 participants can see the other participant faces and they start talking. Their parents are present, in some cases both mothers and fathers. They sing children's songs, do children's yoga and read a story about the fireman together. This is the kindergarten group of a Berlin daycare center where the educators are making virtual appointments using the same video conferencing tools normally reserved for adult use. 

Starting in the last week of March,  the virtual meetings have already established themselves. And just like the parents and children in this Berlin day nursery, many in Germany are trying out new digital learning and communication tools as a result of the restrictions on movement put in place to combat the coronavirus disease. 

Digital Apps Bringing Children Together

A number of web- and video conferencing tools have become household names overnight as working from home has become the new norm for many millions of people around the world.  Similar tools are being used to bring children together during the lockdown – one prominent example being the NemBørn tool that digitally connects children, parents and daycare centers, thereby ensuring that everybody know what is happening and what the little ones and grown-ups are learning with and from each other. 

Emergency Digital Pact for Schools Funding

Germany’s Federal Government has approved the release of EUR 100 million for primary and secondary schools as part of its existing “Digital Pact for Schools” program (Digitalpakt Schule in German only) in order to combat the immediate effects of the Covid-19 crisis. The EUR 5 billion initiative, put in place to help schools upgrade their digital infrastructure, is part of the country’s broader digital transformation objectives. The emergency funding has been made available to ease the transition to “home learning” using cloud platforms and solutions. 

The Hasso Plattner Institute (HPI) School Cloud, a learning platform developed exclusively for schools, has also received extra federal funding as part of the new measures. The HPI school cloud will be made available to all schools which cannot use a comparable platform solution provided by the state or school authorities. Working in partnership with Alliance for Free Education members Wikimedia Deutschland e. V. and edu-sharing.net e. V., HPI will oversee the integration of learning content in the learning cloud of the school cloud. 

Growing Demand for School Digital Learning Solutions

Demand for school digital learning platforms and solutions is growing. The current situation has only thrown a spotlight on the very real need for a radical overhaul of digital infrastructure in Germany’s school education system. The individual federal states are reacting at different speeds to make digital teaching services easily available to all schools. Some states are ahead of the curve in this respect, while others are effectively playing catch-up in terms of digital learning provision.  

Remote Learning Solutions Opportunities

Digital learning in schools was a major presence at this year’s LEARNTEC trade fair for digital learning in January. Germany’s Bitkom digital association has repeatedly highlighted shortcomings in Germany’s digital progress to date, hampered in part by the country’s federal system which sees educational competences decided on an individual state basis. Nordic countries, as part of a project initiated by education start-ups and “Education Nation” (Estonia), have made a number of remote learning solutions freely available across Europe to support teachers and parents in the current difficult situation. Digital learning solutions providers who make their apps and solutions freely available to schools and educational establishments in Germany may well be permanently integrated into the country’s education landscape after successful test phase completion. Similar opportunities also exist for international companies in the college, university and further education environment, as they too address the current situation and the country’s changing digital learning requirements.

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Fact Sheet: Software and Cybersecurity Market in Germany | © GTAI

Fact Sheet: Software and Cybersecurity Market in Germany

Read more about current market developments in our new fact sheet.

Germany – Excellence in Big Data | © Bitkom, Smart Data Forum and Germany Trade & Invest

Germany – Excellence in Big Data

Germany Trade & Invest, Bitkom, and Smart Data Forum and have jointly presented the report "Germany - Excellence in Big Data", which aims to do this. The report is aimed at an international audience and presents more than 30 scientific organizations, over 60 technology vendors and more than 40 Big Data users with their research priorities, projects and strategies or products and services.

Germany is the single largest software market in Europe. The country accounts for approximately a quarter of the European software market by value, with the UK and France in distant second and third places (18.6 percent and 13.6 percent respectively). Germany’s software market has proven remarkably resistant to the global economic crisis. A study by market researcher Marketline identifies a compound annual growth rate (CAGR) of 6.3 percent for the period 2010 to 2014. In comparison, the respective markets in the UK and France grew by just 5.2 percent and 2 percent during the same period. A study conducted by the European Information Technology Observatory (EITO) revealed German software market revenue growth of 5.7 percent to over EUR 19 billion in 2014. According to Marketline, this growth trend is expected to continue through to 2019, with a CAGR of 5.5 percent forecast for the period 2016 to 2019.

Competition and Opportunities

Big players such as IBM, Microsoft, Oracle, and SAP (one of the largest business software companies originally from Germany) are present on the German software market. However, the market is best characterized by the large number of dynamic and highly specialized SMEs (Germany’s renowned Mittelstand). Companies in the Mittelstand dominate Germany’s economic and industrial landscape; creating a diversified SME environment of highly specialized hidden champions with a global market footprint. These SMEs are simultaneously driving demand for software solutions – thereby creating a significant customer base. As well as strong growth prospects, there are also promising opportunities for less established suppliers and market entrants. The most significant market potential exists for expert suppliers of industry-specific software products and services.

German Software Market 2014 - 2019 | © Marketline 2015 + GTAI

Hermann Wimmer, President Europe - Middle East - Africa, TERADATA GmbH | © Teradata GmbH/GTAI

"As a highly developed technology industry location at the heart of Europe, Germany is doubly interesting to Teradata: as an attractive market with many strong businesses, and as the ideal gateway to eastern European markets."
Hermann Wimmer, President Europe - Middle East - Africa

“Big data” is more than just a buzzword. It is very probably the most important concept in the digital world today. According to Frost & Sullivan, the big data concept overarches all other relevant software megatrends including mobile and cloud computing, the Internet of Things (IoT), enterprise resource planning (ERP), customer relation management (CRM), smart grids, and networks. Moreover, according to the German IT industry association BITKOM, big data has the potential to cause significant changes in numerous economic sectors in the years ahead. Big data technology use may have its origins in North America, but Europe – and Germany in particular – is quickly catching up.

Although the German big data market still appears to be at an early stage, the Experton Group expects the German big data market to grow from EUR 1.4 billion in 2015 to almost EUR 3.8 billion in 2020. Correspondingly, annual growth rates during this period are predicted at 23 percent on average. At present, big data technology in Germany is largely driven by the internet, e-commerce, and advertising sectors. However, thanks to its competitiveness and export orientation, the German economy is expected to quickly adapt to the needs for optimized production, logistics, and sales process to become an international “big data champion,” according to BITKOM. Accordingly, the most important investment opportunity areas for suppliers are hardware and infrastructure, bandwidth and related acceleration services, and, more particularly, database and analytics technologies.

The development of the German big data market in million Euros | © BITKOM/The Experton Group 2015 + GTAI

The market outlook for cloud computing in Germany is promising, with cloud solutions gaining in importance on corporate management agendas. Cost effectiveness and flexibility are the main reasons for considering cloud computing solutions. According to a joint study by BITKOM and KPMG, the attitude of German companies towards cloud computing has improved significantly during the period 2013 to 2015. Forty-four percent of all German enterprises already use cloud computing solutions while an additional 24 percent are planning or considering their introduction in the coming years. Cloud solutions are also of relevance to private consumers. While most private users still opt for free cloud services (e.g. for document storage), some two million users already pay for their cloud services – typically following an upgrade or extension of an initially free service according to BITKOM.

Assessing the overall cloud computing market, independent ICT consultancy the Experton Group forecasts growth rates in the high double-digit percentage range for the year ahead. For instance, in 2016 growth is forecast at 35 percent leading to an overall market value of nearly EUR 12 billion. Cloud computing expenditure accounts for approximately five percent of all business IT spending in Germany. The main requirement for cloud computing customers is that the data centers are physically located in Germany.

Cloud Computing in Germany 2012 - 2016 | Investments and spendings in million Euro per segment | © Experton Group 2016 + GTAI

The increased digitization of life, business, and industry – with technological advances such as big data, cloud computing, Industrie. 4.0, and IoT – creates increased complexity and stronger interrelations between infrastructures and ICT systems. This also leads to increased vulnerability in terms of potential security risks. As the Association of German Engineers (VDI) has noted, high-profile computer worm and virus attacks provide just a flavor of the gravity of the damage potential to IT infrastructures when hacked.

This means that established solutions such as firewalls, encryption, virus scanners, and signature verification will remain relevant. However, increased interconnectedness between infrastructures and ICT systems requires holistic security approaches. Growth potential in the area of ICT and software almost inevitably means growth potential in the area of IT security. The overall turnover of software and services in the field of IT security has reached EUR 3.7 billion in 2015.

German Market for IT Security 2012 – 2015 | © Bitkom/ IDC 2013, 2015

Enterprise resource planning (ERP) is hardly a new topic in the area of software and ICT. However, given the size of the German economy and its highly differentiated industry landscape, Germany still holds significant market potential for industry-specific ERP technologies. The Experton Group envisages relatively constant expenditures of more than EUR 2.5 billion per year for ERP technology in Germany through 2016. According to a study conducted by the Center for Enterprise Research at the University of Potsdam, current ERP market participant offerings still fall short of meeting certain customer ERP solution demands.

The best market opportunities exist for those ERP products with the distinct
competitive advantages of being industry-specific solutions paired with improved usability, business analytics capabilities for processing big data, and coupling and integration with in-situ business processes and systems. Demand for individualized ERP solutions – as opposed to highly standardized solutions – remains high according to the Experton Group.

New business models emerging within “smart factory” concepts are also expected to drive further demand for integrated ERP systems. Manufacturing components equipped with cyber-physical- and ID systems enable increased flexibility and decentralization of manufacturing
processes.

The deployment of social business platforms in companies is much more than a short-lived hype. Instead, the use of such platforms for internal company purposes is increasingly proving to be a sustainable trend. More and more company decision makers are recognizing the advantages of enabling and facilitating collaboration, information flow, and productivity that come with the internal implementation of social business platforms. The best known providers of social business solutions in Germany are Microsoft, IBM and Jive. Significant opportunities also exist for smaller providers.

A recent BITKOM study finds that 83 percent of all German ICT companies attribute an important if not decisive role to social business solutions with customer demand expected to grow significantly. According to the Experton Group, the growth potential of the smart social business platforms (also “social business for communication and collaboration” – SB4CC) market is one of the highest in the ICT sector in Germany. Investments in on-site smart social business platforms – as opposed to cloud-based services – currently account for nine percent of overall investments in unified communications and collaboration systems (UCC).

This share is expected to grow to around one quarter of total UCC spending in 2016. Between 2015 and 2019, average market growth of the SB4CC industry in Germany is expected to be over 50 percent. This will lead to an overall spending of approximately EUR 2 billion in this field in 2016.

Germany’s Energiewende (“Energy Transition”) is driven by the German Federal Government’s aim to establish a reliable, economically viable and environmentally sound energy supply to make Germany one of the most energy-efficient and green economies in the world. Germany’s “E-Energy” concept allows ICT to be implemented at all power grid levels. All stages of energy generation and supply will be equipped with ICT technology, starting from the production sites – which will be increasingly decentralized as a result of increased renewable energy share – right through to the end-consumption location.

This is the prerequisite for managing supply and demand within the energy grid to make it a “smart grid.” The complexity of this undertaking makes the Energiewende one of the largest German infrastructural projects in modern times. The establishment of smart grids requires significant investment in grid infrastructure. According to BITKOM, European smart grid investment of EUR 500 billion is needed up to 2030. In Germany alone, E-Energy/smart grid market revenue will grow from a 2010 level of EUR 1 billion to EUR 10 billion by 2020 (equivalent to an annual growth rate of 21 percent).

• BITKOM - German Association for Information Technology, Telecommunications and New Media
• BVDW - Federal Association for Digital Economy (in German only)
• DFG - German Research Foundation
• ECO - German Internet Industry Association
• Federal Network Agency
• Fraunhofer Society
• Helmholtz Association
• Max Planck Society
• VATM - Association of Telecommunications and Value-Added Service Providers