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Mould-breaking times reveal new opportunities for the Estonian IT sector in Germany

EASi ja KredExi ühendasutus
25. November 2020
9 min

The Estonian IT companies participating in Enterprise Estonia’s Mission Germany programme see new opportunities in Germany in light of COVID-19. However, the market is not easy to navigate and it is important to find your niche.

FOB Solutions OÜ has been active on the German market for years and joined the programme in order to grow their business there. CEO Raigo Õunapuu admits that they have participated in both successful and less successful programmes, but the general trend is positive. They still do not have anyone working in Germany but are planning to expand sales and marketing there in the long term.

“We want to run our main business from Estonia,” says Õunapuu.

To date, FOB Solutions has made strong progress in Berlin, the second largest city in the European Union, with a focus on the logistics sector.

“We are mainly targeting the logistics sector. Our current clients are from the automotive and software sectors. We have long cooperated with the HERE Technologies German unit. This client relationship has allowed us to work with the German automotive companies – Audi, Volkswagen and others,” Õunapuu says, highlighting well-known end customers. FOB Solutions helps clients to build software and ensure its high quality.

German clients have not disappeared

Raigo Õunapuu recalls that the business volumes of their clients dropped in spring when the crisis began. The company hedged its risks and entered into smaller and short-term contracts. This meant quarterly agreements instead of monthly and annual ones.

“While in some places the volumes suffered a significant decrease and clients disappeared altogether, we managed to maintain our business in Germany. These are strange times because the number of companies who see the usefulness of investing in technology is growing even in Germany,” says Õunapuu. “At the same time, the company does not take great risks and focuses above all on keeping its main business on course. Investment decisions have been postponed.”

According to Õunapuu, the sense and view of the future are positive. “The need for our service has increased. At the same time, the problem lies in very tight competition, especially in Germany. German companies are also looking for cooperation opportunities from Ukraine and Poland,” Õunapuu explains.

Therefore, Estonian IT companies face the challenge of explaining their value creation. How can additional value be created that no one else can offer? Õunapuu believes that Estonia’s reputation as a digital state is of great help, but there is nothing to be done – Poland and Ukraine are closer and beat them in terms of affordability.

The programme has been useful

Raigo Õunapuu applauds Enterprise Estonia’s Mission Germany programme in which they are participating for the third time. The company has found actual clients via the programme and this has also helped them to advance their business. He has been most impressed by the consultants, who know the local market and have contacts.

“Managing everything on your own, which is undoubtedly doable, would definitely be considerably more capital intensive. The programme’s value is that it allows you to gain a foothold by making smaller investments. Or at least try to.”

Consultants have given them good feedback on both competitors and the value offer. To whom is the service offered? What is the purpose and how is it done? He believes that they would not have achieved these ideas and analyses so quickly without help.

“This allows us to improve our general value offer – also in broader terms,” says Õunapuu, pointing to the fact that ideas gained from German consultants can also be used on other markets.

Above all, it takes time

Raigo Õunapuu believes that a company that offers IT and software services should above all have time and funds when entering the German market. The former is a priority. FOB Solutions has also suffered setbacks. For instance, when the person who was responsible for the market left the company. It is also important to target a specific sector and conduct market research to that end. Õunapuu recommends avoiding entering the fight at cost and admits that thankfully Estonian IT companies do not usually do that.

“It definitely takes 50,000 to 100,000 euros, either as human resources or time-related expenses or other costs,” says Õunapuu.

This year, the goal of FOB Solutions was to gain at least one new client, but COVID-19 has brought the search to a halt. They focused on existing clients in order to retain them and develop relationships further. They are hoping to gain at least 1-2 clients with the help of the programme next year.

“The goal is to increase our turnover by at least 100,000 euros and focus mainly on the logistics sector,” says Õunapuu. “We also detect interest and quite a bit of need from their side. We have plenty of experience in this field.”

Consultants help

ADM Interactive has operated in Germany for several years, mainly via different global clients. They already participated in the last Mission Germany programme, where the consultants advised them how to shape their value offer for the German market.

“These changes were not great, but they were significant. We also gained insight into the German market and contacts,” recalls CEO Riho Pihelpuu. As an experienced exporter, Pihelpuu values the programme above all for its consultation element, which is specifically focused on Germany and its sectors. He believes that being active in the German-Baltic Chamber of Commerce and using different German-oriented services offered by Enterprise Estonia, for example, participating in contact trips, complement each other nicely.

“Consultants are aware of what goes on in the market these days. They know the current needs and wishes and the messages that currently work in Germany. This is useful,” says Pihelpuu.

Consultants also help to gain a better understanding of the local differences in Germany, which is not actually one great Germany but rather a set of different federal states with their own specific characteristics and nuances.

Consider local specificities

“Germany is more closed, traditional and, depending on the sector, more hierarchical than it may seem from small Estonia. The fact that trade fair sales, which we had long abandoned, still worked in Germany even in the IT sector – at least before COVID-19 – was a surprise. Germans would certainly like to cooperate and communicate with an expert in their field. ADM is a group of companies that offers a wide range of digital services. We need to learn how to explain better why we are like this,” says the company’s CEO.

Cooperation with local companies

Even though Estonia has a good reputation in Germany as an e-state, it is no use imagining it as shooting fish in a barrel and thinking that we know how things should be done. According to Pihelpuu, you may shoot yourself in the foot this way. People there have different attitudes towards data protection and privacy, a significantly different jurisdiction, etc. This should be taken into account in relation to e-services and solutions.

To date, COVID-19 has not brought any significant changes to the IT development volumes of the ADM Group in Germany. Just like in many other countries, the government invests a lot of money in the digitalisation of medicine, healthcare and education.

Pihelpuu notes that Germans who previously preferred to communicate in person have now moved online and certain meetings can even be agreed quicker than before. Whether these contacts are of high quality and how many actual clients are gained from this is a whole other story. This remains to be seen.

Concise Systems gains momentum

The newcomer of the programme, Concise Systems OÜ, is at the beginning of its German journey. To date, they have organised different events and seminars in Germany and learned which events to avoid. According to business manager Hannu Kikkas, they have understood that they need to find a niche to focus their efforts on.

“There are many general service providers. We are planning to review our strategy in order to find one or several niches. One of them is medical technology, which is one of the most difficult due to regulations,” says Kikkas. “We cooperate with specialists and currently have a client whom we are helping in this field and we are planning to expand this expertise to Germany.”

Focus on Berlin

Germany is a new country for Concise Systems and Kikkas believes that the programme consultant could help them further and offer possible niches themselves. This should be a joint effort of the company and the consultant.

“In Germany you need to stand out and find your niche. There is a lot of competition and you need to stand out either in terms of quality or a more comprehensive offer,” says Kikkas.

Estonian IT company consultant: your solutions have proven themselves 

Scandinavian Business Hub partner Matti Kawecki is a Mission Germany Programme Consultant in Germany. According to him, COVID-19 showed companies that there is no escape from digitalisation, and this became clear even to a late bloomer such as Germany.

“As many Estonian solutions have proved themselves over the years, they are safer options for Germans because Germany is not generally a testing site,” says Kawecki.

He sees Estonia as being digitally some years ahead of Germany and able to guide Germans safely towards increased digitalisation. At the same time, it must be understood that Germany is a quite big country with a complicated market. Additionally, Germany is characterised by a regional approach. Berlin, Hamburg, Cologne, Frankfurt and Munich are all separate ecosystems, not one and the same Germany,” he explains.

According to Kawecki, Germans like to optimise but are averse to quick changes and learning from their mistakes. People try to avoid failure.

The experienced consultant also has good advice:

“Estonian entrepreneurs should remain calm in this process and not enter the market hoping for miracles in three months, but consider that it may take years. At the same time there is a need for commitment – my experience shows that many companies are passive and expect ‘something’. You need to stand out and market presence contributes to that significantly. It is highly recommended to communicate in German outside of Berlin. Especially if we are talking to someone outside the IT sector,” says Kawecki.

The Mission Germany programme is funded by the European Regional Development Fund.



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