Top 5 Software trends that will impact German Software businesses in 2022
The most important developments in the German software market according to Sven van Berge Henegouwen, Head of DACH activities at Main.
In 2022, we can expect more effort and attention placed on the undertaking of digital transformation, as the new German coalition government has made digital infrastructure a priority. Since software is constantly evolving and is integral for businesses to compete, it is paramount to look at the current technology and business trends, to understand how we can leverage them optimally within the current political and economic climate.
For 20 years, Main Capital Partners has been keeping diligent tabs on the software developments and industry trends, giving us crucial insights and the ability to make the right decisions; and in the past year alone, we’ve acquired 35 European software companies, of which 8 in the DACH region. From our own market research, as well as from the intrepid and industrious companies in our portfolio, we have distilled the top 5 software trends that investors and software businesses can expect in 2022.
1. Digital Security
We start the list with ‘digital security’, and that should not be a surprise to anyone. Data breaches, hacks and scams still impose great risks, in fact, in October 2021 the number of reported data breaches in the US already surpassed the number of the entire previous year, according to the ITRC. Also closer to home we see a similar trend. In the Netherlands, data breaches increased by 30% in 2020, and 2021 has shown no signs of relenting. In Germany, the situation is even more complicated. Data protection requirements are putting companies under constant pressure. The strict regulations are difficult to navigate and understand, especially for smaller companies, which is hampering innovation.
That’s why mitigating data breaches and protecting your internal data continues to be a chief priority, making security software a very valuable growth segment.
However, within this segment, we see that the focus is shifting from technical security (e.g. endpoint security, cybersecurity mesh) to behaviour and processes (awareness level, human error frequency, resilience in the organization). This is no coincidence, since we know cyber-attacks will continue to happen, but what matters is how you can prevent the attacks from succeeding and how you respond to them.
This explains the 19.6% expected growth of security software in the Learning Management Market. Online training has become the custom and is increasing the revenue and demand for education tech platforms. Identity and Access Management (IAM) will also play a critical role for digital security, as adopters of these systems can more effectively manage user access and identities. The global market size of IAM is projected to reach $24.76 billion by 2026, with a CAGR of 13.2%.
Learning Management Systems refer to the online training and education that companies practice. Identity and Access Management refers to a more one-sided activity, where systems and processes are provided in order to assign identities to potential users, and consequently authorize them to access what is offered, but also monitor and manage the lifecycle of those identities.
Both the statistics and the societal urgency reveal that the focus of digital security is shifting more to behaviours and processes and implementing these systems will be a priority in 2022.
2. AI – within our reach and use
Artificial Intelligence (AI) has often been called a buzzword, something discussed in hypothetical terms and to keep conversation from running dry at dinner parties. But that was then. Today, we see AI being implemented in concrete software solutions offering tailored business solutions.
In 2015, Gartner reported that a mere 10% of companies used AI in some way, but in 2019, that same report revealed the use of AI had jumped to 37%. And, a late 2020 survey from McKinsey, disclosed that 50% of companies use AI in at least one business function. In 2022, we fully expect that this number will continue to rise, since we’ve found that the AI software companies that focus on solutions for specific sectors have grown at an exceptional rate.
A prime example of this is HR tech company Textkernel, with offices in Amsterdam, Frankfurt, Paris and Texas, US. Textkernel develops AI and machine learning solutions to extract data from CV’s in bulk and match jobs to the information. In November, they took home the Overall Champion award at the Main Software 50 2021 event, a ranking of the most successful non-listed Dutch software companies. The ranking is based on seven different metrics, and results are checked by an independent research agency. During the pandemic, Textkernel had double-digit revenue growth, with a revenue of several tens of millions.
AI is no longer a gimmick, it now has the reach and relevance, taking an active role providing specific solutions to specific facets of business. In the next year, we expect AI to take a more prominent role, since AI can work through an amount of data that a human cannot even perceive, and in just an incredibly short amount of time, too.
3. Low-Code/No-Code Platforms
It’s no exaggeration, but low-code and no-code platforms are going through a renaissance, and there’s little wonder why. Low-code and no-code platforms enable someone with limited or nearly zero coding ability to perform the same tasks as an experienced full-time developer.
This is an obvious benefit for any business, as these platforms save time and money on resources, training, and recruitment. And it means the gap between professional developers and amateurs is shrinking. But more than that, low-code and no-code software will play a critical role in the enduring war on talent.
Earlier this year, we have asked the CTOs in our network to answer the pertinent questions on finding tech talent. The results speak volumes, as over 90% of companies find it extremely challenging to find the right talent, and this is predicated on several considerations, such as incentive schemes, new ways of working, increased productivity and successful forms of outsourcing.
These conditions are used to assess the success of a newly recruited developer, and as previously stated, that’s precisely the challenge. Our survey shows that over 60% of companies look for developers with more than 3 years of experience, making it even harder to recruit the right talent. And because of this, companies should implement platforms with low-code, or no-code, in order to alleviate the need to bring more and more developers on board.
Expect to see low-code and no-code platforms proliferate in the coming year. Businesses that adopt this type of software, will be able to hire and train talent with ease and without experience.
4. Shift in tech stacks
Just as we’ve seen with low-code and no-code platforms, we are seeing a shift in tech stacks that is likely to proceed into 2022. React, Go, Kotlin, Julia and Python – these frameworks and languages are increasing in popularity, because young, and inexperienced developers have little, if any, desire to learn legacy code, and most often opt for the latest tech.
Adapting to the current trends and interests of the new developers and their preferred tech stacks will be key for companies in 2022; and if a company resists these trends, they will likely have more difficulty finding new talent.
Based on these results, it is safe to assume that the use of these newer, simpler languages will continue to grow. Additionally, older companies will have trouble recruiting younger developers if they do not adapt to these shifting trends.
5. Continuous Delivery = Competitive Advantage
The last trend of this list is Continuous Delivery (CD). Like AI, this trend is no longer merely an aspiration: CD is now a competitive advantage, improving the productivity and allowing DevOps to build, test, and release software faster and more reliably.
Take Netflix, for example – yes that leviathan. Netflix makes use of continuous delivery by enabling their software to update every five minutes. Of course, not all companies have the capacity – or the need – to update software every five minutes. But also for enterprise software companies CD is of great importance.
There are many advantages to implementing continuous delivery: the main reasons to implement CD are to streamline workflows and reduce the need for manual interaction, thus reducing the risk of errors and speeding up the time between releases. By having a good CD-pipeline, DevOps Engineers can focus on adding new services and improving service levels, which will increase the DevOps ROI.
Joachim Herwig, Chief Technology Officer for German procurement software company Onventis, explains: “In general we implement CI/CD as soon as possible in each software project, including automated tests. This also greatly boosts Developers confidence, since all work is continuously checked and tested, making it less error-prone.”
Moving into the new year, those companies, which do not adapt are at risk of losing advantages in the market. Herwig: “There are multiple commercial benefits to adopting CD. Since many top companies are using CI/CD and have proven its value, it’s only a matter of time before everyone else will pick up the drive.”
And we feel, moving forward, that companies need to think of continuous delivery as a must in 2022.
About the author
Sven van Berge Henegouwen is Partner and Head of the Düsseldorf office at Main Capital Partners, overseeing all DACH activities. Sven holds a L.L.M. degree in International Business Law from the London School of Economics. Moreover, Sven holds a Master’s degree in Economics and Business, with a specialization in Financial Economics and a MA in Dutch Law, with a specialization in Financial Law, both from the Erasmus University in Rotterdam.
We will keep you informed on the most relevant developments of Main Capital Partners