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Unknown unknowns

Severe lack of IT personnel is hindering growth at German companies

By: Kevin Knitterscheidt

Germany is losing out in competition for IT specialists. Many companies aren't well-known enough so they struggle to draw workers to their brands.

picture alliance / Luo Wei/Imagi

Meet the Mittelstand.

Whoever does not go with the times, goes in time. This core message of digital innovation has reached most companies by now.

In 2018, there was hardly a sector that did not have the digital issue at the top of its agenda. Industrial groups are busy networking their locations and automating production. Logistics experts optimize the flow of goods digitally in real time. Financial institutions are also in the midst of the digital revolution — as are textile manufacturers, law firms and even agricultural businesses.

While that brings optimism to boardrooms, it's giving human resources a headache. This year alone, Germany was short of 82,000 IT staff who would otherwise have been busy shaping that digital transition across all industries — almost 50 percent more than the previous year. According to the latest study by Bitkom, an industry association, four out of five firms lack personnel with the IT qualifications they need.

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Germany lacks nearly 340,000 specialists in engineering and tech jobs, and the gap would be much bigger without immigrants, including refugees. If it doesn’t slash red tape, the problem will grow, experts warn.

There can be no revolution without revolutionaries. More and more, the job market is becoming the biggest growth risk for the German economy — right after cybersecurity, which also requires IT specialists. And yet the next generation can no longer meet the growing demand: About half of the 40,000 or so new students who start their studies in computer science every year drop out, often in their second semester.

To make matters worse, companies generally need software developers and data experts, virtual reality and AI designers — highly qualified experts who currently can command princely compensation for their services, in accordance with the law of supply and demand. Six-figure annual salaries, even for employees without management responsibility, are no longer a rarity — and therefore only of limited use as a lure.

The Mittelstand: big fish in a small pond

Germany needs to come up with some answers to avoid losing out in the global battle for talent, against big competitors from the US and China. When choosing a job, what IT developers want most, say numerous studies, is an exciting field of activity.

Companies have to offer this, as well as the prospect of further professional development and prestige, too. It's easy for companies which are internationally well-known to use these assets to attract talent. It is tougher for many German medium-sized companies that are often leaders in their niche but have yet to build a global brand.

In times of a growing shortage of IT specialists, it is becoming increasingly important for smaller companies in Germany to adapt not only their sales activities but also their personnel marketing to the needs of the world market.

Because whether the software is developed for a product or a process in Düsseldorf, Tel Aviv or Beijing does not initially play a role in business success — but it does matter whether a company has the right people and can retain them in the long term.

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Think tanks have cut their 2019 growth forecasts amid concerns about trade with China, the impact of Brexit, and weak corporate investment.

This also requires a feeling for national sensibilities: For example, Indian workers often want health insurance that covers their entire family. Those who know this can offer it and advertise it. After the US, India is the country with the most developers in the world.

A serious omission

But the vast majority of German companies are still looking for new employees in their home country. According to a study by the internet portal Stack Overflow, only 24 percent of the companies surveyed looked outside the EU for developers in 2017. A good third even limited their search to Germany alone.

While it is now normal for most medium-sized companies to check their purchasing and sales offers abroad, this is far from being the case for staff. That is a serious omission.

At the moment, nobody expects demand and supply on the German market for IT specialists to converge in the near future. And so those companies are at an advantage that have already made a name for themselves as attractive employers in foreign markets. Some start-up companies have outsourced the development process for their own software to subsidiaries in Romania. This could also be a viable option for industrial groups.

All the others are postponing the digital transformation of their processes and products until they develop suitable personnel. Or until digital innovation takes place here too. Companies that go under due to a lack of personnel, meanwhile, won't need job advertisements.

Kevin Knitterscheidt covers industrial sectors for Handelsblatt. To contact the author: [email protected].

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