Why the next German tech sector boom could be the biggest yet

If there is one thing I have learned in the 30+ years that I have worked as a marketing director in technology companies, it is this: the deeper the economic crisis in the industry, the more impressive the subsequent upswing and recovery. This was the case almost 20 years ago after the bursting of the dotcom bubble, when tech firms went from hype to robust business models. IT companies had very similar experiences in the wake of the financial crisis in 2008, when many processes became more efficient and cheaper thanks to digital technologies. In retrospect, the COVID-19 crisis will also prove to be one of the biggest growth drivers for technology companies in history  especially in the German market. 

After the crisis comes the upswing 

Why is this the case? Each of these economic crises marked the endpoint of developments that had long since got out of hand: the dotcom hype, grotesquely inflated financial markets, the globalisation mania. And each time, it is digital innovations that point the way out of the crisis. Many companies in Germany are still busy cleaning up after the peak of the crisis and developing strategies for the coming years. From 2021 on, they will be focusing fully on growth again. 

No time for digitisation 

In recent years, large parts of the German economy have enjoyed stable growth rates – in particular, several medium-sized companies outside the metropolitan areas have hardly been able to recruit enough skilled workers to keep up with demand for their services. In many places, people were so busy optimising the existing business model within the traditional (usually manual and labour intensive) processes that there was simply no capacity left for digitisation projects – let alone the necessary knowhow.  

As the first wave of the coronavirus pandemic has now rolled over Europe, it is becoming apparent that the German economy will recover from the recession faster and more strongly than other economies. The growth forecasts for the coming years create exactly the climate in which digital innovations can flourish, especially in small and medium-sized enterprises.  

The midmarket is taking action 

Of course, digital transformation has also been on the agenda of medium-sized businesses for many years. The need was understood, but the will to actually tackle digitisation and put it into practice was often lacking. As a result, firms didn’t make appropriate investments in technology and manpower or develop viable IT strategies to support short-term business goals as well as long-term corporate objectives. 

All this has been changed fundamentally by the corona shock. The lockdown of swathes of the German economy forced many companies to develop concepts practically overnight in order to maintain business operations, at least in part, by working from home. Much of this was born out of necessity and met neither the highest demands on IT security nor the achieved state-of-the-art standards. Such solutions, some of which are outdated, are now to be replaced by digital technologies that make employees independent of location, while increasing productivity and motivation through transparency and smart work environments. 

In addition, the effects of the coronavirus pandemic have caused supply chains to collapse in many places, bringing production to a standstill. In order to be less at the mercy of global flows of goods in future, many companies will bring some elements of production back to Germany. This, too, will only be economically feasible through further automation, thus accelerating digital transformation. 

What is most important now? 

While 2020 will be dominated by the deepest recession the German economy has ever experienced, 2021 will be the year to return to the old growth rate as quickly and sustainably as possible. The door to the digitisation of SMEs is thus wide open for technology companies. The next few months will determine which companies will ultimately be able to enter the market and sign long-term contracts. Those who do not position themselves appropriately during this phase will not only miss out on business in the short term, but could also fall behind in the long term. That is why three things count now: 

  • A quick start,to be in the market fast with relevant solutions 
  • Speaking the language of the German midmarket and understanding its values 
  • A reliable marketing partner with a ready-to-use database, relevant business insights and agile deployment 

I would like to hear about your experiences or forecasts regarding the upcoming digitisation drive and would be happy to receive your feedback  on whatever channel. 

alechner@themarketingpractice.com

https://www.linkedin.com/in/andreas-lechner

Written by:


Andreas Lechner
Client Director

Published

8th September 2020

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