Rapid growth despite shortage of skilled workers

Around 20,000 additional jobs were created by medium-sized IT companies in Germany within a year. The number of employees subject to social insurance contributions in IT companies with 10 to 499 employees rose by 4 percent to a good 495,000.

This is the key finding of the IT SME Report 2019 published by the digital association Bitkom.

"The IT midmarket creates thousands of new jobs every year. But the increasingly difficult search for qualified personnel is limiting growth for many companies."

says Bitkom's SME spokesman Dirk Röhrborn.

"Medium-sized companies in particular are the IT providers and users that drive the economy with great flexibility and dynamism, create new jobs and strengthen Germany as a business location."

Shortage of skilled workers reduces revenue

The intensified shortage of skilled workers is putting particular pressure on medium-sized companies.

"It is a real challenge for IT SMEs to attract skilled workers. Every unfilled position has a negative impact on the value creation and innovative strength of the company.

says Röhrborn.

To counteract the shortage of skilled workers in the long term, Bitkom advocates promoting digital skills as early as school. Röhrborn:

"In career and study orientation, IT professions should be advertised much more intensively. We also need to strengthen dual vocational training and dual study programs in the IT sector.

The range of computer science courses should also be expanded, for example in combination with engineering and social sciences."

In the short term, he said, labor law needs to be adapted to the requirements and opportunities of the digital age, for example to meet the increasing desire for more self-determined work.

For example, the mandatory eleven-hour rest break clashes with the daily schedules of many homeworkers. In addition, the IT SME sector, which is predominantly located in rural areas, faces major challenges in many places due to a lack of digital infrastructure.

Policymakers are called upon to create optimum framework conditions for the rapid roll-out of broadband and 5G mobile networks.

IT freelancer market grows

The IT freelancer market has been one of the fastest-growing in the German economy for almost ten years. While the sales volume of the ten leading IT freelancer agencies with services related to the recruitment, placement and management of IT freelancers was still just one billion euros in 2008, it is already over 2.4 billion euros in 2018.

IT freelancer agencies grew somewhat more strongly with other services, such as employee leasing, so that total revenue in Germany increased by an average of 7.5 percent.

The background to this is the legal uncertainty created on the customer side by the reform of the German Personnel Leasing Act (AÜG), which came into force in April 2017.

The consequence of this uncertainty: according to estimates by IT freelancer agencies, every tenth client company no longer wants to use freelancers.

"The mix of legal uncertainty and a lack of knowledge on the customer side has meant that numerous IT projects could not be staffed and have been delayed, in some cases significantly. Providers are responding to this situation by building up expertise to advise customers on the legally compliant use of IT freelancers."

Jonas Lünendonk, Managing Director of Lünendonk & Hossenfelder, describes the current market situation.

Both management and IT consultancies often complain that they do not have enough specialists with an IT background. These two important B2B service industries, which play a key role in helping client companies digitize, exemplify the shortage.

According to the German IT association Bitkom, the shortage of IT specialists reached a new high in December 2018 with around 82,000 vacant IT positions. The legal uncertainty surrounding the deployment of IT specialists is now leading to project delays, a slowdown in digitization and a partial exodus of the IT specialists so urgently needed.

The leading staffing service providers for IT specialists suspect that around ten percent of IT freelancers will turn their backs on Germany and work abroad, as temporary employment is not an option for them.

Despite the difficulties created by the employee leasing reform, leading providers expect double-digit sales growth again.