Germany's Admirable Perspective on the Baltic IT Sector

  • 2024-04-18
  • Viesturs Bulāns, CEO of

In the Digital Competitiveness Ranking last year, Latvia was ranked 40th out of 64 countries, Estonia was ranked 18th, and Lithuania – 28th. The ranking highlights the ability of IT companies to innovate and integrate digital technologies. The sector's readiness for future challenges is also relatively high. Baltic IT companies regularly receive international recognition and attract investor attention, demonstrating much higher competitiveness than we sometimes believe. This is also evidenced by the interest of Germany, the world's third-largest economy, in cooperation opportunities.

At the beginning of April, a delegation from Hamburg's business and public sectors visited Riga. During the visit, representatives from companies such as “Philips”, “Airbus”, “Stena Line”, “Caps & Collars”, as well as representatives from the Hamburg Ministry of Economy and Innovation and the second administration of Hamburg, met with several local IT and cybersecurity companies. Germany indeed looks at the Baltic IT sector with great respect, especially in the field of public sector digitalization, where all three countries have proven themselves very well. Of course, there are industries highly developed in Germany, such as automotive, however, as the delegation representatives themselves admitted, the Baltic countries have created many examples of good practice in digitalization from which even much larger economies can learn.

The IT industry demonstrates a good price-quality ratio 

Collaborating with German companies and gradually analyzing this target market, both opportunities and challenges can be seen. Geopolitical situations have led to significant changes, so German entrepreneurs are increasingly looking towards the Baltics. What attracts them here? It is undoubtedly the mentioned experience of our IT companies, as well as talents whose competitiveness on the international level is no secret, and the battle for professionals has long been happening beyond national borders. Interest is fuelled by both the knowledge and education of these talents, the experience of industry companies, and also service prices, which, compared to Western European companies, are more competitive. Our IT industry demonstrates a good price-quality ratio, which is noticed and appreciated. Additionally, it should be noted that, for example, Latvia and Germany are traditionally united by active economic cooperation. Germany is one of our largest foreign trade partners, and Germans also share a similar mentality with Latvians, our friendliness, and openness, which also helps in forming business contacts.

Competitiveness of Baltic IT talent

In the experience of the “Helmes” group, cooperation with several German brands has been established. For example, when the financial services company “Bonnfinanz” left the group in 2019, they needed to create their IT systems in less than 18 months, and the construction company “Kurt König Group” needed to create a completely new business model - 24/7 access to “do-it-yourself” construction tools and equipment provided by a mobile application. These projects have demonstrated the competitiveness of Baltic IT talent - the ability to operate professionally, efficiently, and in line with modern standards. A high Net Promoter Score (NPS), measuring customer loyalty and the likelihood of recommending a particular company to others, can also help conquer new markets. According to data from the international research company “Statista”, the average score among software developers is 44 points, whereas in our company, it is 76, which we also highlight as we develop operations in new markets. This international indicator is recognized almost worldwide, so it requires no further comments.

Choosing responsible partners for collaboration who care about the environment and employees

Germany is also a socially responsible economy, so when choosing partners for collaboration, an essential aspect is also caring for the environment and efforts to reduce the CO2 footprint of the IT industry. By paying attention to the fact that the IT industry also has a significant impact on the environment, for example, with a large volume of waste, and by encouraging the choice of sustainable software, we can also encourage much larger economies to think about these issues. Since Germany has highly developed trade unions and companies pay attention to employee welfare, this aspect is also taken into account when considering new collaborations.

A decentralized market with different consumer needs

When looking towards Germany, it must be taken into account that several challenges in this market may need to be addressed. Many companies are concerned about the large population, which may also mean the need for more complex and extensive IT systems, but the aspect that needs attention is fragmentation. Germany's administrative division consists of 16 federal states, such as Berlin and Hamburg, which are separate states. Therefore, when choosing to collaborate, for example, with Hamburg, the story is essentially about a state within a state. Each state has its own needs, which can vary significantly, so decisions are made in a decentralized manner. It should also be noted that Germans are also very reserved and cautious, especially regarding data security. Much of society still wants all information to be provided in analog form, but to make services more accessible, digitalization is crucial. This means that a relatively large amount of work still needs to be done in educating potential customers and changing thinking paradigms.

When talking about cooperation with the public sector in Latvia, we often highlight the lengthy decision-making process, heavy bureaucracy, or the fact that there is a lack of iterative (agile) approaches in the development of significant national-level systems, where development occurs in iterations or stages. However, in Germany, these aspects are even more pronounced - the planning process can sometimes be so long that after system development and implementation, it may no longer be relevant.

Germany, like any potential target market, combines both opportunities and challenges, but it is essential to consider that there are many aspects in which German entrepreneurs and public sector representatives look at Latvian and Baltic IT companies with great respect. This once again reminds us that we can, and often even better than we think.