Market Entry Germany
for Software Vendors

Germany is the country of mid-market-businesses. Of the 3.5 million companies more than 99 % are small and mid-market-companies. Therefore, remember that for a profitable market entry, please have a suitable model for mid-market companies in user models and pricing.

Aggregated German companies split into:
- Services 70 %
- Industry 23 %
- Construction 6 %
- Agriculture 1 %

Likewise, the mid-market companies' structure for all businesses, IT companies are also split in many mid-market players broadly.

Software and Service providers are in total 3.000 wherefrom 2.500 are in the range of 50 – 500 employees. Aside from local players like SAP, all large international vendors like Microsoft, Google, AWS have a presence themselves as well as with large partner-eco-systems.

For your market entry it gives you the following good options:

• Build your own practice
• Use existing channels via partners
• Acquire a company in your field of business

The re-union of West- and Eastern Germany goes back to 1989. But the separation of the 40 years before is still significant in almost all areas like number of companies, salaries (purchasing power), political plurality etc..

If your sales model requires onsite visits to customers, you should do research into where your target audience is located and therefore where your sales managers should be located to limit travel time to a minimum.

If you incorporate a legal entity the most common type is the GmbH (Gesellschaft mit beschränkter Haftung) – this is a limited liabilities company. Aside from the fact that this is a common business type, it is efficient in terms of the minimum required staff you need – which is one person as managing director (Geschäftsführer).
Another option would be the stock corp (AG – Aktiengesellschaft) which does come with the requirement of a supervisory board and a notary for many formal meetings. This version is typically chosen if you want to go for an IPO or want to organize the ownership on a broader basis.
There are some other formats and variants, but they are most likely not relevant to your situation.

B2B customers are very thoughtful about investments in software. Decisions are built on quality, ability to reflect their individual processes and longevity. On the one hand, the level of digitalization is lower compared to the US or the Nordics and comes with longer sales cycles – on the other hand very of the you can create a very good benefit and quick ROI since your solution will replace manual processes very often.
All other elements of a go-to-market are similar to all other regions. No matter if it is about finding the right approach of direct versus indirect or the right manager, you will be faced with all elements to get it up and running.

Absolutely yes! You will not close any deals without it. It is a good business habit to go to meetings in Lederhosn. If you do remote meetings, you should find a reason to stand up sometime in the meeting that your customer can prove you really wear them - even in your remote-office. Since Germans drink a lot of beer, it is not common to have a beer during a business meeting or for lunch.

This depends a lot on your product, of course. The general factors like total budget, customer-effort in workshops, set-up, training, and so forth, are similar to any other market. What is specific to Germany? Decisions are made for the long-term and therefore thoughtful. The involvement of the team is also crucial since the acceptance of any tool will be checked upfront. However, the biggest hurdle will be the tendency toward perfectionism. All of these factors add to longer sales cycles in general.

This is more true than false. Due to the pandemic and local datacenters of Microsoft, AWS and Google, at least in Europe, the acceptance of Cloud is good meanwhile. However, OnPrem is still an option for many companies, also because of latency. Especially in the more rural areas, the internet infrastructure does still suffer. So, the good news is that there is a lot to digitalize and if the process is manual or with basic tools like Excel, the ROI and benefits are easy to create.

No, fortunately, it is possible in B2B. But the usage of personal data is restrictive, and you need to have procedures in place to assure the correct handling (and deletion) of personal data.

You can consider two factors. The first is the general behavior. Doing business in Germany requires a very good expertise in the usage scenarios and your offered product. Why? Because Germans want to drill down in details – no matter if they need it or not but we have a culture of accuracy.
Second: Germany does consist of 16 areas (Bundesländer - similar to the Counties in the US). Probably “Bavaria” is the best known of them. This goes hand-in-hand with cultural and slang differences. Small ones but sometimes of relevance.

Due to the number of companies per industry segment, one key to success is to have industry specific functionality in your software. Of course, there are also horizontal solutions but whenever possible, you should keep a close eye on it. For example, a standard ERP will not make it. There are already too many solutions with industry specific processes in the market. If the industry expertise will be phased in with the consulting part, you should have your marketing, sales and consulting enablement with this knowledge in place.

Germany is a late mover in regard to the cloud. Corona has changed a lot but there is still a large number of legacy systems on prem. Even if the general acceptance is given meanwhile, OnPrem and also, one-time licensing are still options to consider.