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Mar 11 2020

Shortage of skilled workers – not only internally, but also externally.

German IT service providers are expecting sales growth of over ten percent in 2020. However, according to a report by Lünendonk, growing numbers of orders are also pushing the consulting and system houses to their limits, due to the scarcity of specialists and managers in many key positions.

 

With around 124,000 unfilled positions (Bitkom, 2019), the IT sector was one of the most seriously affected by the shortage of skilled workers last year – and it continues to be so. The auditing firm Ernst & Young (EY) reached a similar conclusion in its recently published SME Barometer 2020. According to this study, one in three medium-sized companies complains about vacancies in the IT sector.

Due to the lack of employees with adequate digital competence, increasing numbers of companies are dependent on external service providers. In 2020, providers of IT consulting and implementation services are expecting revenue growth of around 10.8 percent. This was the conclusion reached by market researchers at Lünendonk following their 2019 survey of 70 consulting and systems providers and 140 managers working in large and medium-sized user companies.

The demand for IT services is particularly high in the industrial and financial sectors – especially in automotive and banking. Overall, the service providers generated almost half of their turnover in the industrial and financial sectors.

 

Shortage of knowledge workers in application companies

One of the main reasons for the sharp rise in demand is the pressure companies are under to push ahead with digitisation. Many of them lack the necessary know-how to successfully implement the digital transformation under their own steam. To make sure they don’t fall behind the competition in the latest IT trends, many companies are seeking help from outside. The main focus is on topics such as big data analytics, IT security and agile software engineering. Furthermore, a lot of companies’ agendas also include the orchestration of cloud solutions, AI-based applications and the micro-services approach.

Of the IT service providers surveyed, 89 percent expect growing demand for implementation services in 2020. Primarily because the flood of new software solutions and digital products is also driving the need for integration into the customer’s existing IT environment.

 

Agile development methods are becoming increasingly important in software development. Mario Zillmann, partner and author of the Lünendonk study: “We’re seeing increasing numbers of cases where (agile) software development and integration is being outsourced to a service partner as a complete package in an attempt to prevent interface breaks and to keep the implementation speed high.” [original quotation in German: „In immer mehr Fällen wird die (agile) Softwareentwicklung und -integration als Gesamtpaket an einen Dienstleistungspartner vergeben, um Schnittstellenbrüche zu vermeiden und die Umsetzungsgeschwindigkeit hochzuhalten“.]

 

Zillmann believes that another topic that will shape the IT industry and demand in the coming years is the switch to SAP S/4 HANA, the latest business suite from SAP.

 

Skills shortages also affect service providers

In some cases, the increasing number of orders is pushing the consulting and system houses to their absolute limits as they are also faced with a shortage of skilled workers. As a result, they have sometimes had to reject customer orders in the past because they were unable to provide the required manpower for projects. Recently, medium-sized service companies have been more severely hit by this than large, international companies such as Accenture or Capgemini. Where necessary, firms like these have been able to call in consultants from other national companies or draw on external support, for example by working with freelancers.

 

Summary

The shortage of IT specialists and the associated economic problems are not new, but the situation on the market is becoming more acute. If urgently needed know-how is not available – either internally nor externally – digitisation projects that have already started quickly grind to a standstill. The lack of IT specialists is now seen as one of the greatest risk factors contributing to the loss of Germany’s competitiveness on the international stage. To counteract this, the Federal Government has initiated a recruitment offensive. The aim is to attract more IT professionals from abroad. What has long been normal in Silicon Valley could, therefore, become standard in Germany from March this year.

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