Lack of digital skills is hampering German SMEs’ digitalisation efforts

• Four fifths of enterprises rely on workers with digital skills
• But one third cannot meet their digital skill requirements
• Costs and absence from work are main barriers to further training
• E-learning is an opportunity, especially for smaller enterprises

The digital transformation has gradually entered the SME sector in Germany. More and more small and medium-sized enterprises are conducting digitalisation projects. They are increasingly using digital technologies in their processes, products and communication. But digitalisation in the SME sector is being increasingly hampered by a lack of relevant skills in the workforce. One third of small and medium-sized enterprises is currently unable to meet their demand for digital expertise and skills. A new representative analysis by KfW Research shows that in 2019, 38% of enterprises perceived the lack of skills in their workforce as a barrier to digitalisation. Two years before, that share was just 29%.

A special survey conducted on the basis of the KfW SME Panel showed that the vast majority of SMEs in Germany rely on basic digital skills. Seventy-eight per cent reported a strong need to use standard software and digital devices. Online skills such as Internet research, online marketing and interaction on social media platforms are very important for half (51%) of SMEs. The ability to use specialised software or digital production equipment is important for another 45%. And a notable 24% of SMEs require employees with advanced digital skills such as programming or statistical data analysis.

In summary, at least one digital skill is of great importance to eight in ten SMEs in Germany. But one third of these enterprises cannot meet these requirements. 34% of them have an unmet need for at least one digital skill, and 14% face considerable constraints, meaning they cannot even partly meet the need for at least one digital skill. The shortage of more complex skills is particularly severe. Nearly half of all SMEs (45%) that need data analysts have difficulty meeting their requirements.

There are three ways in which enterprises can acquire digital skills: through recruitment, outsourcing and further training. SMEs use the latter strategy most often. Training plays a role in building digital skills for the 70% of enterprises. But short training measures with often limited skill-building effects predominate. The barriers to more intensive training are mostly financial. Direct costs are a challenge for one third of enterprises (32%), while absence from work is a problem for one fourth (26%). This barrier is particularly high for small enterprises with more limited human resources because it is harder for them to find substitutes for absent workers.

The Chief Economist of KfW, Dr Fritzi Köhler-Geib, commented on the findings of the survey as follows: “Although digitalisation has gathered momentum in the SME sector in the past years, one obstacle is becoming increasingly clearer. The digital skills of the workforce are lagging behind the developments. Further training is the most important strategy to solve this but is too often neglected for cost and time reasons. Digital learning formats have improved technically and didactically in the past years and can stimulate further training in Germany. E-learning enables people to learn at any time or place, making it particularly well suited for the needs of small businesses.”

The current Focus on Economics by KfW Research on the topic of digital skills and further training is available at www.kfw.de/fokus