"The Age of Intelligence: A Time for Cooperation" – The World Economic Forum in Davos commenced the year under this collaborative theme. The essence of the summit: With the onset of the intelligent age, we are globally confronted with unprecedented opportunities and challenges. Technologies such as Artificial Intelligence (AI), quantum computing, and blockchain are rapidly evolving, often determining competitive advantage.
Although Germany cannot keep pace with countries like China, Japan, the USA, or European neighbors such as the Netherlands and Scandinavia regarding innovation speed and digital maturity, there is considerable movement across various sectors in the Federal Republic concerning digitalization topics and digital transformation.
Intelligent Digitalization – The Narrative is Shifting
The narrative is shifting from a call for "collective digitalization! Now, immediately" to a more nuanced view of individual needs, competency bundling, and low-code technology, which impresses with low barriers and high practical relevance. In the course of catching up with highly digitized European countries, it is currently the medium-sized businesses that hope for high adaptability and accessibility to modern technologies.
Digitalization and Competitiveness: Awareness is Present
The opinion that digital technologies are indispensable for the German economy is shared across industries by most companies. Reports on the expansion of 5G and fiber optics dominate media coverage in this context, as do the digital patient record and intelligent networking projects aimed at connecting, optimizing, and making cities and municipalities more accessible. Overall, the recently published Digitalization Index 2024 paints a cautiously optimistic picture: Companies across industries and sizes have become more digital. Nevertheless, Germany occupies lower midfield positions in European and global comparisons.
Status Quo of Digitalization in Germany
So, where does Germany currently stand regarding the implementation of digital measures? How is digitalization within companies, especially SMEs? According to data from the Digitalization Index 2024, the Federal Republic has made progress in areas like infrastructure, networks, and availability. However, the digitalization disparities among company sizes, federal state groups, and region types have, in some cases, widened significantly.
Digitalization Index 2024 Highlights Strengths and Weaknesses
While the ICT sector (Information and Communication Technology) remains a leader in digitalization in Germany, other industries, such as construction and utilities, have significant catching up to do. "On the one hand, technical infrastructure continues to improve, and positive demand impulses from society are increasing. On the other hand, there remains a considerable shortage of skilled workers in digitalization professions, external innovation impulses are decreasing, and the expansion of e-government is progressing too slowly. Thus, slow administrative digitalization increasingly threatens to hinder the digital transformation process of the German economy," summarizes the BMWK (Federal Ministry for Economic Affairs and Climate Action).
Bitkom Research: Digital Pioneers vs. Laggards
The differences between companies are also evident in various Bitkom surveys. Small and medium-sized enterprises, in particular, identify themselves as laggards in digitalizing their business and administrative processes. File folders and fax machines have not yet become obsolete here. The reason for the laggard role is primarily due to capacity constraints. Budgets and personnel resources are largely reserved for core business.
Special Challenges for Small and Medium-Sized Enterprises (SMEs)
The significant gap in terms of digitalization level is not surprising. After all, budgets and personnel resources in SMEs* are often much more limited than in large companies with global knowledge and technology pools. The focus is clearly on day-to-day business. Although there are numerous nationwide and regional funding programs that support SMEs in digitalization projects and implementing digital measures, it still requires time and resources to initiate the necessary steps related to technological innovation.
*Small and medium-sized enterprises, i.e., companies with up to 249 employees and an annual turnover of up to 50 million euros.
Challenges Hindering Digitalization in Germany
Moreover, especially small and medium-sized enterprises often face a heterogeneous system landscape, limited digital know-how, uncertainty in handling data protection regulations, and difficulties in adapting or migrating existing systems. Budgets are often capped to remain operational in the event of unforeseen crises.
Lack of Necessary Expertise
The more complex and demanding modern technologies become, the more difficult it is for many companies to address the associated challenges with their own capacities. Sometimes, internal expertise in key digital topics is insufficient—or there are no financial capacities for corresponding hires. A dilemma, as digital competencies are indispensable for cloud migrations, automation projects, or AI implementations. While the lack of in-house expertise in many areas can be compensated by highly qualified external service providers, there is sometimes a lack of fundamental understanding or acceptance of modern technologies and the provision of corresponding budgets. Experts warn: Concrete application examples are needed here. Only when managers and employees understand how technology can ease their work and drive the business forward will they allocate capacities or feel curiosity and willingness to learn.
Investment Reluctance
In light of ongoing polycrises and the very cautious economic recovery forecasts for the German economy in 2025, investment reluctance is not surprising. However, the fact that companies are investing less in key technologies such as artificial intelligence, cloud computing, or big data weakens their competitiveness, especially in international comparison, in the long term.
Regulatory Complexity
Additionally, there is a high level of regulatory complexity. Requirements related to data protection (GDPR) and ESG guidelines are perceived as burdensome, especially in small and medium-sized enterprises. Companies sometimes have to undergo lengthy audits and certifications before they can deploy digital technologies. Digital strategies, which SMEs often struggle with in practice, are also hampered by changing regulations and requirements.
Strategies and Solutions for Digitalization
But what approaches exist to advance digitalization in Germany more comprehensively and practically? Here, precise digital strategies, the targeted use of low-code technology*, and a flexible knowledge pool through internal training and collaboration with external partners come into play.
*Low-code technology refers to applications that can be used or customized with minimal programming effort.
Developing a Clear Digital Strategy
A suitable digital strategy is essential for digital development. Whether the strategy relies primarily on in-house expertise or highly specialized external service providers: by documenting the current status and defining goals, the digitalization project becomes more tangible. Competent IT partners with expertise and in-depth industry knowledge can assist in developing the digitalization strategy. While budgets are also required here, the costs are generally scalable. An external, trained perspective can also reveal sensible reallocation possibilities.
Utilizing Innovative Technologies
Whether cloud technology or AI: the technologies to drive innovation and process optimization in companies are already available. Numerous pilot projects and international studies highlight their importance, especially concerning modern industry. The problem: many of these applications seem hardly feasible for SMEs due to high costs and effort. However, to make innovative technologies usable at all levels, broader awareness and access to low-code technologies are needed. Lower Saxony aptly states in a recent position paper: "While AI and robotics are reshaping the technological landscape, it is low-code technology that makes digitalization tangible and easily implementable for companies and public institutions of all sizes."
Building Digital Competencies
Even a good and coherent digital strategy often cannot prevent internal resistance within companies. Studies show that many employees fear potential complexity and increased workloads with the introduction of new technologies. Therefore, it is crucial to build digital competencies within the company as needed and maintain a network of competent IT service providers. These can provide expert and individualized support on all questions regarding the implementation, application, and security of digital solutions and systems. Employee training and further education can also be beneficial if they relate specifically to the employees' tasks and fields. The acceptance of such measures is significantly higher when the concrete benefit is in the foreground, and everyone understands how the technologies actually make their work more efficient and productive.
Entering Partnerships with IT Experts
Given the complexity of modern digitalization projects, purely in-house coverage is utopian for most companies. Especially due to the high speed of innovation, framework conditions change quickly. For many companies, this is a reason to enter partnerships with experienced IT experts. This cooperation ensures, on the one hand, a thorough analysis and consultation that identifies digitalization potentials and jointly develops tailored strategies. On the other hand, there is often the possibility to obtain highly scalable solutions that can be tailored to the company's needs with minimal effort – including maintenance and advice on all relevant security issues.
Making Advantages Tangible: Competent IT Partners Highlight Potential
In 2025, it's hardly necessary to state that there's no way around digitalization. Highly disruptive technologies are present and available. To remain competitive, there's no alternative to them. And yet, the digital divide in Germany remains significant. Especially in SMEs, the focus is on core competencies. If in doubt, the digital strategy has to wait when pressing, current challenges can also be managed with proven traditional means. Consequently, consistent implementation of digitalization measures simply fails due to capacity hurdles, a demanding daily business, and apprehensions. The crux: in our global world, competition is rapid, and those who miss the connection can quickly be left behind. Often, it only becomes apparent afterward how significant the efficiency and productivity gains through digitalization measures actually were.
Here, companies of all sizes benefit from the long-standing expertise of established IT service providers. To examine individual possibilities, an initial non-binding consultation is generally worthwhile. Together, one can determine the company's current status, where opportunities lie, and how technology can be used efficiently and without unnecessary effort.
