Getting Qualified People is Not the Problem in the German Software Industry

Posted July 23, 2013

Staff is not a problem

A recent study in Germany concluded that there is no significant relationship between global growth in the German software industry and the availability of qualified staff.

The study is a part of the research project called “German Software Champions,” which is a scientific cooperation between the German Federal Ministry of Education and Research (BMBF), the Institute for Information, Organization and Management (IOM), the Institute for Computer Science and New Media (WIM) and the Center for Digital Technology and Management (CDTM).

We wrote a summary of the conclusions from the ”German Software Champions” research project presented at the “Parlamentarischen Abend” in Berlin, June 5th this year.

Germany is the second largest software market in the world. $79,4B was spent on software and related services in Germany in 2012.

In spite of this huge domestic market, Germany doesn’t foster many global software brands.

Out of the 250 biggest ICT companies in the world, only 6 are from Germany. Out of the top 50 biggest Internet companies in the world, only 4 are from Germany.

Germany represents 5,67% of world demand for software and software related services. While this is a very lucrative domestic market for the local German software vendors, it is not enough for growing to a size that can withstand global competition. 94,33% of the global market for software and software related services remains OUTSIDE Germany!

Getting qualified people is not the problem in the German software industry

The research did show that German software companies face challenges with getting qualified staff; however, there was no significant correlation between the ability to demonstrate international growth and the difficulties recruiting staff.

The five statements to which the respondents could disagree (trifft nich zu), be indifferent (weder noch) or agree (trifft zu) were:

We have difficulties recruiting staff:

to fill all our open positions
with reasonable remuneration expectations
with short learning curves (qualified for the job)
with industry experience
with specific technical qualifications

Although a majority of the respondents did express challenges with staff recruitment the was no correlation to the international growth capability of their companies.

How do companies grow despite shortage of qualified staff?

The research reports that German software companies change the traditional hierarchical command approach and introduce flat organizations, increase delegation of authority and self managing groups making the work environment more attractive. Offering a more attractive working environment works well recruiting staff from bigger companies with more traditional command structures.

If the German software professional (technical or commercial) prefers to work in a flat organization and assume more responsibility, then there is a huge potential in Germany!

My own experience

I moved to Germany in 1998 to take responsibility for growing the market share for Damgaard (now Microsoft Dynamics XAL and AX) in the German speaking countries (DACH = Germany, Austria and Switzerland). I took my Scandinavian management style with me because that was the only thing I knew. I also decided to speak German only. That was initially very painful, but paid off handsomely in the log run.

After a few days in the office in Böblingen one of my staff members asked me if we were to address each other with “Sie” or with “du.” I should have seen this coming, but there were so many other important and urgent things to address that this “detail” hadn’t caught my attention. As I was by far the most ignorant in the office I couldn’t find any argument for abiding to German tradition and demand titular compliance with a “Sie.” I opted for the “du” which made me a part of the team.

From there on the Scandinavian management culture ruled my little German subsidiary. Later we expanded into Austria and Switzerland carefully recruiting country managers who shared the same values.

Even though the economy was booming in those days we didn’t have any problems recruiting qualified staff in Germany, Austria and Switzerland. We had plenty of applicants and one of the reasons was the perception of the Scandinavian Management style as something attractive and more respectful to the individual. I engaged a German headhunter who picked top performers for our most critical positions. Again we didn’t have any problems with luring candidates away from much bigger companies and even accepting lower fixed remuneration (one of my Scandinavian principles), because of the culture and responsibility.

The combination of the Scandinavian management style and the German predilection for structure and processes proved to be very powerful.

Expanding the labour market

What the research fails to report, but we see very often these days, is the outsourcing of technical work to Eastern European countries. Germany has historically close relationships with Eastern European countries where many have German as their second language. The traffic from Eastern (and Southern) Europe to fill vacant jobs in Germany is also quite substantial. Germany actually has a much larger labour market than any other continental European country.

Where there’s a will there’s a way

Ambitious executives always find ways around obstacles. The difference between the successful, the mediocre and the unsuccessful in the software industry is the creativity, persistence, endurance, patience and effort of the people. Yes, the US based software companies benefit from a huge domestic market, but that doesn’t mean all US software companies are successful. The market is so competitive that it still requires creativity, persistence, endurance, patience and effort of the people to outperform their peer group.

However, increasingly the software-driven industries are less and less dependent on location. Software based business models such as XERO (NZ), 37signals (US), Atlassian (AU), Zendesk (DK) and SugarCRM(US) achieve global market penetration without having local offices in each country.

Our own company, TBK Consult, is legally a Danish company, and we are operating in 17 countries. Our financial administration is done in New Zealand, our marketing is done from Chicago, US, our graphical design is done in Estonia and Indonesia, recruitment of new consultants is coordinated out of Portugal and only two of the three BoD members are sitting in Denmark.

Project collaboration platforms, video conferencing and Skype has made virtual organizations possible.

In this area I do believe that many German software companies are doing themselves a huge disfavor, and I will return to that in my next post on the idiosyncrasies of the German software industry.