According to PAC, the German public sector is the third-largest vertical sector for software and IT services, with spending amounting to €12.3 billion in 2024 and a projected CAGR of 6.6% through 2029. This growth is driven by increased government budgets, with special funds of €500 billion each allocated to infrastructure and defense modernization. Despite ambitious modernization agendas, progress in digitalizing public administration remains slow due to decentralized decision-making, a lack of standardization, regulatory requirements, and lengthy EU procurement processes. The Online Access Act’s goal of providing all public services digitally by 2022 was missed, and many back-end processes remain analog.
Key initiatives include the Register Modernization program, meant to enable “once only” data provision for citizens by networking public registers. However, implementation is lengthy, and timelines are uncertain. In healthcare, reforms and €50 billion in funding drive the adoption of electronic patient records (ePA), e-prescriptions, and expanded telematics, although the sector faces demographic and cost pressures. In defense, a €500 billion special fund supports modernization, including new IT infrastructures and cloud solutions for the German Armed Forces (Bundeswehr). However, complex requirements and bureaucratic hurdles cause delays in procurement and project delivery.
Overall, demand is rising for IT security, cloud solutions, and e-government services. Although substantial funding and strategic initiatives are in place, the pace of digital transformation in Germany’s public sector remains challenged by structural and organizational barriers.
Recommended advisory: PAC Leadership Session – Smart Defense Vendor Landscape
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