The German IT Industry and Innovation Sector is Becoming Increasingly Interesting as an Expansion Direction for Companies from Poland – Despite the Pandemic

Dr. Dominik Wagner, LL.M., TIGGES Rechtsanwälte, Germany

Contrary to expert estimates, the 2020 pandemic period was not as passive in terms of foreign investment in Germany as many predicted. On the contrary: especially entrepreneurs from Poland and other Central European countries in the IT and innovation sector have discovered the German market for themselves in recent months and have set up their own companies or are in the process of preparing for foreign expansion into Germany. This is confirmed by the first observations of the current year.

Why is it so? It is no secret that Poland is one of the leaders in terms of the number of highly qualified IT programmers not only in Central and Eastern Europe, but also in the entire European Union. The slogan “Software made in Polen” has been known in Germany for a long time. For years, Polish IT companies have been offering complex software solutions for the absorptive German economy. Polish software houses have an excellent reputation both in Germany and worldwide.

For years there has been an opinion in Germany that the German economy has slept through the digitalisation boom. Catching up with the leading economies has become a political objective for the German government. The situation is not helped by the labour market, which has been experiencing a shortage of skilled workers for years, especially in the IT sector. It is estimated that there are currently around 80,000 vacancies to be filled by programmers in Germany.

Currently, German IT companies are unable to meet the enormous demand for programming services and are looking for companies in Poland and other CEE countries with which they can enter into close cooperation by offering permanent assignments. The business relationships that are established not only take the form of cooperation on the basis of contracts of mandate or contract for specific work, but also often structures in the form of joint ventures. In this way, German companies want to secure the necessary personnel on a long-term basis.

As mentioned at the beginning, it has recently been observed that IT companies from Poland and other CEE countries are increasingly willing to enter the German market directly. Not only by acting as a contractor for a German client, but also by setting up their own company or in the form of a joint venture with a German partner. Like any foreign expansion, this step requires not only a lot of courage, but also, and perhaps above all, careful planning and preparation.

The initial difficulties that we observe for “start-ups” on the German market are often due to the obvious fact that they do not have a sufficiently stable position on the target market, when they are just starting to establish their own “brand” and business relationships with customers and business partners are still in their infancy. It is also a milestone to learn about market and cultural conditions and behaviour, which often differ from those on the home market. Time is needed to assimilate these principles.

A well thought-out and prepared foreign expansion can be successful, as we have seen time and again in practice. What do successful foreign expansions have in common? Although there are many factors that influence the final success, the essential ones seem to be: the innovation of the product or service; a competitive position on the target market and usually a good position on the home market; a meticulously developed business plan, a strategic approach, a reasonable budget adequate to the conditions on the target market, qualified personnel at home and abroad, and an effective business network on the target market.

 

Author:

Dr. Dominik Wagner, LL.M.

Partner and Rechtsanwalt (lawyer) at TIGGES Rechtsanwälte, Düsseldorf

Certified Specialist in Commercial and Corporate Law and International Business Law