German enterprises embrace digitalisation across all sectors

• Two thirds of all enterprises are planning digitalisation measures in the next two years Digitalisation projects are spread out broadly across all business areas
• Businesses are more actively pursuing digitalisation, but also facing more challenges
• The most formidable obstacles are data security and data protection, lack of in-house IT skills and a shortage of IT specialists, and difficulties in adapting their organisational structure and work organisation.

Enterprises in Germany are broadly embracing digitalisation. Nearly 66% of businesses plan to carry out digitalisation projects in the next two years. This is the key finding of the business survey 2019 which KfW has conducted together with umbrella organisations as well as professional and regional business associations. The share has increased by seven percentage points since the previous survey and is up by a good one half compared with the year 2017. Under the most recent survey, 17% rule out digitalisation projects in the next two years – a five percentage point decline on the previous year.

The trend towards implementing digitalisation measures can be observed across all enterprises sizes. Large enterprises with annual turnover in excess of EUR 50 million are in the lead, 91% of which have firm plans for digitalisation projects. However, two fifths of small enterprises with annual turnover of up to EUR 1 million (38.8%) are now also planning such projects. Only 9% of enterprises still see no need for digitalisation. That proportion has halved since the 2017 survey.

The shares of enterprises planning digitalisation projects are nearly equal in almost all business areas. Sales is mentioned most often at 64%, followed by administration and materials management at 58% each, as well as creation of goods and services (e.g. production) at 57%. However, businesses face challenges in digitalisation more often than in the survey two years ago. Whereas 21% of businesses did not identify any problems with digitalisation at the time, that share has now dropped to 13%.

The five barriers to digital transformation most frequently mentioned were data security and data protection requirements (46%), lack of in-house IT competences in combination with a lack of IT skills in the workforce (38%), difficulties in adapting their organisational structure and work organisation (36%), difficulties in transitioning existing IT systems (35%), and the inadequate quality of their internet connection (30%). Financing problems were most often mentioned as barriers to digitalisation by small businesses with up to EUR 1 million annual turnover, at 16%, more than four times more often than large enterprises.

“Germany's businesses are embracing digitalisation,” said Dr Volker Zimmermann, Senior Economist at KfW Research. “But the more they focus on this topic, the more they become aware of the specific challenges involved, such as data security and adapting their business structure and work organisation. Some of the barriers they perceive, such as the lack of IT specialists or existing financing difficulties, should be addressed through a more favourable enabling environment or promotional offerings.”

The business survey 2019 entitled “More businesses embrace digitalisation projects and are becoming aware of the barriers” was conducted for the 18th time among enterprises of all size classes, sectors, legal forms and regions. Digitalisation was addressed in the survey for the third time.

Nearly 1,300 businesses from 17 umbrella organisations, trade and regional associations took part in the survey. It was conducted between mid-December 2018 and mid-March 2019. The survey is available for download in German at www.kfw.de/KfW-Konzern/KfW-Research/Unternehmensbefragung