Germany Software Development Market

Report Code: ITR 0425 Report Format: PDF + Excel
GERMANY Software Development Market size is forecast to reach EUR 75,813 million by 2027, after growing at a CAGR of 3.06% during 2022-2027. Germany is Europe's single largest software market. The country accounts for roughly a quarter of the European software market in terms of value, with the United Kingdom and France coming in second and third, respectively. Germany is also the second largest European market for security technology, the largest cloud market in Europe with an annual growth rate of 25%. Security technologies are supported by the German government's "High-tech Strategy" incentives for various types of projects including "scenario-oriented security research”. Germany has the second-largest number of tech-related start-ups in Europe, which can be a viable target market for software development offshoring. They often cannot afford to employ a large development team, have limited budgets and need solutions fast.

Report Coverage

The report “GERMANY Software Development Market– Forecast (2022-2027)”, by IndustryARC, covers an in-depth analysis of the following segments of the GERMANY Software Development market.

By language: Java, Python, JavaScript, C#, C++, PHPandroid, iOS, Scala, Ruby, PERL, SQL, LISA and Others.
By Market Demand: In-House on Payroll, Hired from Secondment Providers, Hired Freelancers and Fully Outsourced.
By Deployment Type: On-Premise, Cloud.
By Business Size: Small and Medium Business, Enterprise and Government.
By End-use Industry:  Banking and Financial Institution, Insurance Firms, Media and Entertainment, Government, Defense, Telecommunication, Automotive, Consumer Goods and retail, Healthcare, Manufacturing and Others.
Key Takeaways

Some of Europe's top software companies, such as SAP and Software AG, are headquartered in the country. In Germany, there are approximately 195,370 professional software developers. The core factors driving overall market growth are rising demand for information and communication technology (ICT) security, cloud computing services, big data and an increase in the number of IT and software service providers.
In 2021, Technology-focused private equity firm Silver Lake has agreed to invest 344 million euros ($388 million) in Germany’s Software AG.
In 2022, US-based multinational technology company Qualcomm, which specialises in semiconductors, software and services related to wireless innovation, has opened a new office in Berlin, Germany. The branch will help the company expand its presence in the European automotive market. 

Language - Segment Analysis

Python held the largest share in the GERMANY Software Development Market in 2021. Berlin's low cost of living in relation to salary, diversity of tech opportunities and entrepreneurial spirit all appeal to software engineers. Python is widely used in Berlin's software community due to its extremely broad application, which is critical in a city with such a diverse range of industries. Berlin, one of the first European tech hubs, is a massive European tech hub. In 2018, €4.6 billion was invested in German start-ups, with €2.6 billion going to those based in the capital. HelloFresh, SoundCloud and Babble are just a few of the well-known Berlin startups.  For example, Amazon has a development center in Mitte devoted to artificial intelligence and machine learning. The software that now powers Alexa was developed by the team here.

Market Demand - Segment Analysis

In-House on Payroll held the largest share in the GERMANY Software Development Market in 2021. The compensation of German employees is determined on a monthly basis. Overtime hours are paid at various rates based on the company's policies; certain overtime earnings are tax-free. Bonuses, commissions and allowances may be paid to employees based on company agreements. Workers' compensation, often known as accident insurance, is funded by employers at a rate of 1.3 percent of payroll. Employees do not contribute to this fund and rates may vary depending on risk assessment. Payroll and social taxes in Germany are generally regulated by federal law and works councils, which function similarly to unions in other countries. The burden of social responsibility is shared by both employers and employees.

Deployment Type - Segment Analysis

Cloud held the largest share in the GERMANY Software Development Market in 2021. In Industrie 4.0, e-commerce and data management platform settings, cloud-based applications are gaining popularity. Various studies also show that in a healthy domestic market, the number of public and private cloud computing providers is steadily increasing. Last year, 94 percent of cloud computing businesses (e.g., SaaS, IaaS and consultancy) rated their current state of operations as very good or good. According to Bitkom's Cloud Monitor 2019, three out of every four businesses use cloud computing. More than half of the cloud users polled say cloud adoption is critical to their company's overall digitalization efforts. Fujitsu announced the addition of high-availability data centers in Germany to its new-generation IaaS and PaaS Cloud Service K5. This is the only cloud computing platform that allows for digital transformation by deploying OpenStack across all cloud deployment modes.

Business Size - Segment Analysis

Small and Medium Business held the largest share in the GERMANY Software Development Market in 2021. On the German software market, major players such as IBM, Oracle and SAP (one of the largest business software companies founded in Germany) are present. The market, on the other hand, is best defined by the large number of dynamic and highly specialized SMEs (Germany's well-known Mittelstand). The Mittelstand is a diverse SME environment of highly specialized hidden champions with a global market footprint that dominates Germany's economic and industrial landscape.  These SMEs are driving demand for software solutions at the same time, resulting in a sizable customer base. There are also promising opportunities for less established suppliers and market entrants, in addition to strong growth prospects. Expert suppliers of industry-specific software products and services have the greatest market potential.

End-Use Industry - Segment Analysis

Consumer Goods and retail held the largest share in the GERMANY Software Development Market in 2021. The German populace is wealthy and current trends indicate that the country will continue to prosper and grow. Individualistic value-for-money notions are becoming increasingly popular among German consumers. Discount merchants and well-known brand names are equally appealing to the average German consumer across several product categories. The generation of customers aged 50 and over is proven to be particularly appealing as a target demographic because they are the largest consumer group with the most purchasing power. This generation is healthier, more demanding and quality sensitive than their parents were when they were their age. Demand is boosted by e-commerce, flexible hours and novel sales services. Both volume company and specialist suppliers benefit from modern and consumer-friendly arrangements.

Drivers – GERMANY Software Development Market

German technology is becoming more digitalized

The digitalization of the German technology sector resulted in a massive boom. Although there has been some stagnation in recent years, there are signs that the tech sector is poised for a new surge in growth for software development. According to Deloitte’s calculations, the number of IoT endpoints will rise to more than 20 billion globally by the year 2020, whereof 750 million are allotted to Germany. Almost all of these items are highly relevant to the digital growth segments and hence fall into the convergence zone between the technology and other sectors. Moreover, 5G, i.e. the next generation of mobile communications, is becoming a business enabler for even more sophisticated IoT services such as autonomous driving or telemedicine.  Industry 4.0 also benefits from 5G due to the necessity of real-time control and management of networked machines. The implementation of these IoT services of the next generation requires new hardware, software and service expertise, which is contributed by the technology sector to a very high degree.

New Technology Innovation and rise in Adaptation

Outside of the tech sector, technology is now a critical component of business models. This is especially true when it comes to the numerous digital growth areas that have emerged in recent years at the intersection of technology and other industries.  Technology companies' expertise is essential for Industry 4.0, Connected Car, BioTech, FinTech, Insurance-Tech, E-/M-Health and Smart Cities. As a provider of digital input services, the entire technology sector benefits indirectly in more ways than one.

Challenges – GERMANY Software Development Market

Talent Pool Shortage

A large number of top German-trained professionals leave to pursue new opportunities in the United States or Switzerland. Software developers remain the most in-demand and well-liked profession in the tech industry. Experts predict that Germany's talent shortage will not be solved any time soon and that it may even worsen. Data Engineers, Software Engineers, DevOps and platform teams are high in demand particularly. According to a Bitkom study, every third company that had more than one IT position open was looking for programming experts.

Language Barrier

Companies prefer to work and collaborate in German, so there may be some language barriers. In general, you'll need a German intermediary to help you communicate with current and potential clients. One could target German-speaking companies in Austria and Switzerland if you can do business in German. Language hurdles are also a common obstacle for overseas students, according to the poll. The language barrier was cited by more than 35% of respondents as the most difficult issue they faced once they arrived in Germany.

Market Landscape

Technology launches, acquisitions and R&D activities are key strategies adopted by players in the GERMANY Software Development market. In 2021, the GERMANY Software Development Market share has been consolidated by the top ten players accounting for XX% of the share. Major players in the GERMANY Software Development Market are Expleo Germany GmbH, Avira, Team Viewer, Vector and others.
1. GERMANY Software Development Market - Market Overview
1.1 Definitions and Scope
2. GERMANY Software Development Market - Executive Summary
2.1 Market Revenue, Market Size and Key Trends by Company
2.2 Key trends by Languages
2.3 Key trends by Market Demand
2.4 Key trends by Deployment Type
2.5 Key trends by Business Size
2.6 Key trends by End-use Industry
2.7 Key trends by Country
3. GERMANY Software Development Market - Market Forces
3.1 Market Drivers
3.2 Market Constraints
4. GERMANY Software Development Market - Strategic analysis
4.1 Value chain analysis
4.2 Opportunities analysis
4.3 Freelance and Secondment Impact Analysis
4.3.1 Labor Legislations
4.3.2 Economic Developments
4.3.3 Schooling/Education
4.3.4 Corporate Recruitment Plans
5. GERMANY Software Development Market – By Language (Market Size - EUR Million)
5.1 Java
5.2 Python
5.3 JavaScript
5.4 C#
5.5 C++
5.6 PHP
5.7 Android
5.8 iOS
5.9 Scala
5.10 Ruby
5.11 PERL
5.12 SQL
5.13 LISA
5.14 Others
6. GERMANY Software Development Market – By Market Demand (Market Size - EUR Million)
6.1 In-House on Payroll
6.2 Hired from Secondment Providers
6.3 Hired Freelancers
6.4 Fully Outsourced
7. GERMANY Software Development Market – By Deployment Type (Market Size - EUR Million)
7.1 On-Premise
7.2 Cloud
8. GERMANY Software Development Market – By Business Size (Market Size - EUR Million)
8.1 Small and Medium Business
8.2 Enterprise
8.3 Government
9. GERMANY Software Development Market – By End-use Industry (Market Size - EUR Million)
9.1 Banking and Financial Institution
9.2 Insurance Firms
9.3 Media and Entertainment 
9.4 Government
9.5 Defense
9.6 Telecommunication
9.7 Automotive
9.8 Consumer Goods and retail
9.9 Healthcare
9.10 Manufacturing
9.11 Others