For Ukrainian IT companies, Germany is one of the most important markets. Germany's GDP is about 40 times that of Ukraine's. The Germans generate more than 4bn euros in online sales per year while Ukraine's eCommerce industry is still in its infancy. With domestic demand extremely low, Ukrainian IT companies can survive and grow only if they sell their services abroad, especially to the US and EU.
So how exactly can you as a Ukrainian IT company start attracting German clients? The first step you need to take is to make sure you have the right reasons why you want to do business with the Germans. This might look like a no-brainer given the fact that Germany's IT industry is within the EU but if you tell your potential clients on your website that you just want a piece of the huge German IT cake, it will be very difficult for you to succeed. You should ask yourself these questions: What exactly are our goals? Why do we create software systems? Do we just enjoy programming and developing websites or is there more we want to do? Attracting large rich clients from Germany might be one of your goals but you have to think beyond your immediate needs if you want to succeed. Develop a keen interest in anything to do with Germany and the Germans. What do you know about the country and the people you want to sell your services to?
German IT companies have German customers so you should study their needs. Learn the language. Yes, it is true — quite a number of executives and even developers in German IT companies have a decent level of English, which means you can communicate with them in English. However, if you want to attract new German clients you need to at least make an effort to also communicate in German. As a Ukrainian IT specialist your English should be at least at B2, otherwise you won't be able to keep up with the developments in your industry. Since English and German belong to the same language family, it should be possible for you to reach at least A2 in German.
The Germans are at least as proud of their nationality and language as you are. Show your potential partners and clients that you are not just interested in their euros but also in their culture and way of thinking. You can do that only by learning German. It's not enough to just employ a few marketing or sales staff who took some German lessons at university. Someone in your company's management needs to speak German, because if you want to do business with German companies, you have to be able to express your thoughts in German and understand legal and technical documents written in German. What's more, your company needs to have a subsidiary in Germany. It's almost impossible for you solely as a Ukrainian company to sign a contract with a German client, because most Germans would never transfer any amount of money into a Ukrainian bank account.
Doing business with a foreign company requires an enormous amount of trust from both parties. If you don't have at least a subsidiary registered in Germany, no German company will purchase any services from you. When Germans think about Ukraine and Ukrainians, the first things that come to their minds are still negative: corruption, prostitution, AIDS, political instability and organized crime. Even German IT managers have rather negative connotations when it comes to Ukraine. It's a rare case that you meet a German business executive who knows that Ukraine is also an exporter of IT services. There are quite a number of reasons for this. First of all, Ukraine is a rather young IT export nation. When US IT companies started outsourcing their programming jobs in the early 70ies, they chose India because it was the only country where they could access cheap IT specialists.
The Soviet Union did already have a large pool of IT talent but it was not available for western companies because of the Iron Curtain. Up until the collapse of the Soviet Union nobody in the west knew that East Europeans also had highly qualified IT specialists. And after the Soviet Union crumbled, an enormous brain drain started during which many IT professionals, especially from places like Novosibirsk, Irkutsk, Omsk and Ukraine, got hired away by IT companies based in Silicon Valley. The vast majority of those IT specialists from the Soviet Union who left the country went to work in the United States. Only a handful went to Germany because the Germans are much more conservative and inflexible when it comes to immigration than the Americans. The Americans focus on opportunity while the German focus on risk. When it comes to IT outsourcing and off-shoring, a German company will always see all the risks first. Their way of thinking goes likes this: “If we hire a Ukraine based company for our IT jobs, we will put our security at risk and become dependent on Ukrainians who are not to be trusted by nature. We might save some money in the beginning but later on we will have to pay for this decision several times as much as we had planned to save initially”.
Do all German business executives think negatively about Ukrainian IT companies? Certainly not. There is a certain percentage of Germans who see the benefits and advantages in outsourcing parts of their IT tasks to Ukrainian companies. Your goal as a Ukrainian IT company should be to find those German clients. Let's say 5% of all German companies are willing to hire a Ukrainian IT company. That's more than enough business for you. Your job is to find just those 5%.
Is it possible for you to pick up a few German clients without having a German subsidiary? It certainly is. Here is an example. The Kharkov based IT company X1Group has created an online shop system, apps and other web sites for the following three west German companies: SALE Onlinemarketing GmbH, meetOne GmbH and IDGV GmbH. I asked Valeriy Bykanov, CEO of X1Group how he was able to sign up those German companies and he said that it was by accident. One of the companies had posted a job on Elance and selected X1Group as the provider. Valeriy doesn't speak any German, all communication was in English as is usually the case on Elance. Since X1Group did a good job, the German client recommended Valeriy and his team to another German company and as result X1Group was able to provide services to 3 German companies. Can this approach produce sustainable results? Well, check X1Group's portfolio from time to time to find the answer.
Most Ukrainian IT companies do want to attract German business but the vast majority of them hope to sign up German clients without having a German subsidiary. They reason like this: “We first want to pick up a few German clients to make sure our German operation is profitable, then we might think about creating a German company”. This is the same approach as going to the bank and asking for some money without having made a deposit first. You as a Ukrainian IT company expect the German client to trust you although you have not yet opened a German office? This means that you yourself don't trust that your expansion into Germany will be successful, otherwise you would register a company in Germany first. In other words, you want your German clients to cover the risk of your German expansion. This is called 'the-poke-it-with-a-stick-approach'. You poke the pig with a stick and to see if it moves. If it doesn't, you simply give up. If you are sure you can provide a better service to German companies than local providers, you need to set for yourself the goal of establishing a company in Germany.