Aside from the pure e commerce and Internet oriented dot coms, the German market is 
dominated by traditional software and engineering firms developing software products primarily 
as suppliers (such as SAP AG or Software AG) or for their own usage (such as in the automotive 
or telecommunications industry). 
Official statistical data about the German software market provided by the Federal Statistical 
Office are unfortunately not available.  Reliable data is only available in the form of a field study 
by the German Ministry of Education and Research, which reports about 35,800 firms in this 
area. Roughly 35,000 firms are estimated to be companies with less than 50 employees. In total, 
300,000 employees are working in the software industry, and an additional 2.5 million in 
software related industries, developing proprietary solutions for internal usage. Especially in the 
primary software market a concentration process is observable. Large software houses grow by 
acquiring smaller ones, but most of them are not involved in international corporations. Seventy 
seven percent have neither their headquarters nor any establishment outside Germany (GFK 
Focusing on the international versus national development or value creation reveals that 77% of 
the software sold by the German software industry in Germany is developed in Germany. Only 
3% of all software providers develop software solely abroad, while 19% share the development 
internationally. This business model is mainly used by large software houses. A more common 
model is outsourcing of clearly defined software modules to foreign firms. Forty one percent 
used foreign software firms or specialists to support their own development; most do so to gain 
cost reductions and to escape the shortage of software engineering specialists in Germany. 
Although the German software industry produces most of its software in Germany, most firms 
are specialists in a specific industry or in non standardized unique software areas. Consequently, 
the German software market is dominated by large American software providers with their broad 
palette of standardized products, with the exception of the enterprise resource planning (ERP) 
software of SAP AG or the software modeling tools of IDS Scheer AG, which are competitive 
on the international software mass market. Depending on the location of these software 
providers,  hot spots  of software industries are observable in Germany such as the areas 
surrounding SAP AG in Waldorf near Heidelberg or Saarbr cken, where IDS Scheer AG is 
located (GFK 2000).
Overall E Commerce Diffusion 
The overall diffusion of e commerce technologies in Germany can be described as excellent. 
German firms are worldwide leaders in the field of e commerce, as the Global Information 
Technology Report 2002 03 of the World Economic Forum (WEF) indicates (GITR 2003)  The
Economist ranked Germany in eighth place, while WEF ranked Germany in tenth place after 
being 17
 in the previous report. The calculated network readiness indicator is composed of 64 
variables classified into three categories: environment, readiness and usage. In the field of e 
business, German enterprises placed first in usage based on variables such as Internet usage for 
general research, the sophisticated usage of online marketing, and the presence of wireless e 
business applications.  Germany placed third with regard to usage of the Internet to coordinate 
business with customers and suppliers. The e business readiness index ranks Germany in 
fourteenth place worldwide, leading in the field of innovation capacity and the sophisticated 

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