Germany with a backlog of investment in software and databases

The international success of digitization is reflected primarily in investments in software and databases, but also in investments in research and development (R&D). Since the 1990s, investment in these two segments has also grown at an above-average rate in Germany, proving to be relatively crisis-resistant, quite in contrast to investment in equipment. In the second quarter of 2020, i.e. in the midst of the corona crisis, they even managed to grow overall compared with the previous quarter, as the only component of German gross domestic product apart from government consumption.

In an international comparison, investments in R&D in Germany are of above-average importance for the gross domestic product. In many other countries, however, investments in software and databases play a far greater role than in Germany. Compared with the United States, but also with the United Kingdom, for example, Germany still has a considerable amount of catching up to do in this area, despite the very positive development in recent years.

One of the main reasons for the strong pent-up demand is Germany’s special economic structure. While the computer, software and technology industries play a special role in the USA, Germany is much more concentrated on the manufacturing sector. The manufacturing industry in Germany still accounts for more than 20 percent of the total gross value added. In the United States, this share is only about half as high at 11 percent and in Great Britain it is even lower.

This can also be seen at company level. In Germany, for example, the four companies with the highest spending on R&D all come from the automotive and supplier industries. In the USA, on the other hand, five of the six most important companies for R&D can be assigned to the Software and Computer Services and Technology segments.

Digitization will maintain its dynamic pace of development in the future. Trends such as the „cloud“ and „Industry 4.0“ must be filled with content. Accordingly, investments in software and databases in Germany will have to increase dynamically. Together with investments in R&D, they should exceed the level of investments in machinery and equipment (excluding vehicles) from the middle of the next decade. This is also necessary for Germany to remain internationally competitive.

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