October 2009

German Used IT Market

German Used IT Market

By: Veda Informatics

The German IT market has always been receptive to new innovations, especially in the field of computers, medical devices, synthetic materials, automotives and related technological developments. Germany boasts of having one of the largest Internet user bases in Europe. Therefore, new products in the field of multimedia offer great prospects for entrants in the German IT market.

As far as IT is concerned, Germany is the second-largest market in Europe, with annual spending of more than €66
billion. A little over one third of the spending is on hardware, over 20% on software and close to half on services. In 2007, the German government alone spent €17 billion on IT. The used IT market is an integral part of this market.

Overview: Used IT Market

Against the backdrop of cost cutting and limited corporate budgets, the used IT market has emerged as the right place to approach for IT needs. With the images of crashing stock markets and credit crisis fresh in their minds, sellers are on the lookout for profitable disposals, while buyers are seeking economical purchases. This has led to the spiraling popularity of the used IT market. This market has transformed into a coveted hunting ground for the best software and hardware at the most affordable prices.

Enterprise Software Licensee’s Bill of Rights

Ever since a few modifications have been made to the ‘Enterprise Software Licensee’s Bill of Rights,’ the balance has titled in favor of the customer. Earlier there were restrictions on buyers of software licenses for reselling any software product. However, companies, looking to dispose or acquire technology in a cost effective way, can now approach the used IT market and transact without any legal complications.

This flexibility has catalyzed many new platforms for the used IT market in Germany.  Within the German IT Market, the Internet is leading the charge with numerous such online shops. These online shops have fueled the trend of companies exhibiting their used IT equipment and prospective clients inquiring about them online. The success of the used IT market within the German IT Market can be attributed to the several German vendors (such as Preo Software, Used Soft and SusenSoftware) that have contributed to educating the clients and organizing the used IT market.

 Besides the skirmish over licenses, the used IT market faces other challenges. While the license issue has been addressed, the other seller-specific challenges are:

  • Maintenance agreements
  • Support contracts
  • Training
  • Consulting services

Country-specific criteria can also impact the growth of the used IT market, including the German IT Market. Some countries have levied heavy taxes on imported used goods or technology. This can obliterate the positives of the used IT market.

The used IT market is plagued by rumors and false notions. One such area is the durability of used products. For some organizations, reliability is a very high priority. This makes used IT products unattractive, despite the cost benefit. The fear of unreliability has been fuelled by several companies that manufacture IT products. Rumors also surround areas such as permission clauses, which ask resellers to acquire documented permission before attempting a resale. This makes the whole procedure lengthy and complex, whereas there is really no need for such measures.

The Anti-Gray Market Alliance (AGMA) attempts at educating buyers on the various risks involved in purchasing IT hardware through unauthorized channels. However, in the formal used IT market, hardware and software are tested by the resellers and are sold with guarantees (1 year warranty as per German law). Many resellers offer the option of trying out the products before the deal matures within the used IT market.

Strategic Importance of the Used IT Market

 The used IT market offers cost optimization opportunities for enterprises looking to enhance their technology infrastructure. An informed purchasing of used IT products that complement the mainstay infrastructure can add value, efficiency and productivity with extremely affordable investments.

With the sentiments of the judiciary supporting resellers and customers, the used IT market is at the threshold of spreading rapidly across the corporate and government sectors.
Information Industry and Growth Opportunities in the German IT Market

The German IT market and industry has exhibited growth over the past several years. With broadband and more efficient mobile technology being offered, Information and Communication Technology has become the backbone of all the major businesses operating in Germany.

Although industrial buyers within the German IT Market are extremely demanding, they have limited IT budgets. This makes them attractive for sellers of used IT within the used IT market. Germany is an extremely strategic location for companies looking at expanding their business in Europe. While there is stiff competition and the need to tweak product positioning and marketing to suit German clients, this market is an extremely attractive one. This is not only because Germany is the largest consumer market in the European Union, but also because this is the location at which a huge volume of global trade takes place.

Used IT and the used IT market can be more than a way of purchasing IT at economical prices. More and more companies in Germany see the importance of being ecologically sensitive and of course this implies the IT infrastructure as well. In the German IT Market, many companies also see the benefit of getting some money for their used IT equipment when they switch to something new instead of paying for the waste disposal of their “old” equipment. On the other hand some companies also prefer to buy used IT equipment from resellers to upgrade their availability because they can save a lot of money and conserve the ambiance within the used IT market. This process is amongst others one reason why the used IT market is getting more interest and still growing here in Germany. On this account many companies see their chance to jump on the bandwagon because the potential of the used IT market attracts more than barriers may alienate.

Barriers to Doing Business in the German IT Market

The barriers that a business may face in Germany include:

  • Construction permits
  • Employing workers
  • Registering workers
  • Getting credit
  • Protecting investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Language

 Germany has shown a gradual decline in the ranks. However, there are a few areas that have exhibited a slight improvement, such as construction permits and enforcing contracts. The rigidity of the workforce and the stringent government rules are still barriers that businesses in Germany need to contend with.

Trading With the US: German IT Market

Germany is the keystone for any country looking to establish a strong hold in Europe. Germany enjoys a strategic location that allows it to impose heavy taxes on imported goods from the US and other countries.

Germany and the US have been strong trade partners for several years. Germany attracts US investments with its highly developed infrastructure and varied demand for goods. Germany and USA feature as the top trading partners on their respective lists. In the first half of 2009, Germany imported goods and services worth $21.2 billion from the US, while its exports to the US stood at $32.7 billion. The German IT Market is a growing area to take advantage of;

Germany is becoming increasingly open to new ideas. The trend is for the IT departments to follow a more strategic
approach and be more involvement with other departments. However, bureaucratic procedures can make it very challenging for a company wishing to do business in Germany. Thus, several companies seek a local partner and form strategic alliances (through franchising, joint ventures and hiring agents) to gain an entry into the German IT market and the German used IT market.