“IT-based business models among the most attractive in Germany”

Germany’s days as a digital straggler are over. The country is getting up to speed, and both international companies and foreign IT specialists are discovering Germany’s advantages as place to do business and work. Germany Trade & Invest Director for the Digital and Service Economy Marc Rohr tells us why.

March 2021

Recent surveys show a surge of interest among international IT specialists in German cities like Berlin and Munich. Why is that?

They increasingly see Germany as a modern, cosmopolitan business location. That’s thanks in part to the “blue card” program that makes it easier for highly skilled people to get work and residence permits. In addition, English is now the working language at many SMEs and listed companies, and it’s easier to integrate into Germany’s bigger cities without knowing German. German cities have a high quality of life. Berlin is the country’s start-up capital and still has low rents and living costs – especially when compared to Silicon Valley. Munich is attractive because a great number of industry leaders, for example, Siemens, BMW, Celonis and Microsoft, have their German headquarters there.

Why have companies like Apple stepped up their activities in Germany?

The main reason is access to highly qualified employees – a recent AmCham Germany survey returned a 100 percent rate of satisfaction with the available workforce. Germany’s practically oriented dual education system, which combines education with apprenticeships, is also a plus. Then we have a number of IT clusters and an excellent research infrastructure, for instance in quantum computing, with the Max Planck and Fraunhofer Institutes and other public and private bodies. As Europe’s largest IT market, Germany is a good place to test out new products and applications, and its logistical infrastructure means that companies can access other EU markets as well. Germany’s legal system and emphasis on data protection means that companies can plan and develop products securely. Finally, Germany has an attractive landscape of subsidies for knowledge-intensive and research oriented businesses and partnerships.

Can you tell us about the government’s role in bolstering Germany as an IT location?

Around ten years ago the government recognized IT as a crucial industry for Germany and increased its support. That’s reflected in the fact that we now have a Minister for Digitalization directly attached to the Chancellor’s Office. Since around 2014, the government has intensively promoted the digitalization of industrial production, and in the past two to four years it has formulated concrete state strategies for digitalization, AI and data. We also have national, state-supported programs like the Digital Hub Initiative and the clusters that support start-ups and attract IT companies to Germany.

How do you see things developing in the coming five to ten years?

We expect increased investment in new technologies, for example in start-ups working in AI and data security. The government has already allocated new funds to support this sector. Work will continue on Gaia-X to ensure Europe’s sovereignty with data and platforms. There are also EUR 5 billion in support available for AI between now and 2025 and EUR 2 billion under the Quantum Computing Roadmap.

Who are the major domestic and international players in the sector in Germany, and what do they have in common?

There are important IT players in almost every segment of industry, as a rule offering specific technologies and applications. The mobility sector has proven to be very open to new IT solutions in recent years in areas like electric autonomous vehicles. Companies like Tesla and Google have committed themselves to the German market. On top of that a number of German companies in the ecommerce sector like Zalando, Lieferheld and HelloFresh have grown to such an extent that they have become part of the German leading indexes. In the software sector we could name SAP and Software AG as well as medium-sized international companies like Init.  And of course giants like Amazon, Google. Facebook, IBM and others all have large German subsidiaries and are constantly expanding.

Will Germany continue to produce IT unicorns at the rate it has in the past few months?

We see this development continuing in 2021. Amidst the coronavirus pandemic, IT-based business models remain among the most attractive investment alternatives. The run of high valuations is exclusively down to the companies themselves. Internationally and generally, we’re seeing an increase in high valuation, and I think German start-ups are profiting from that.

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