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How much do companies invest in digitization?

The question of the costs and investments for digitization drives many companies - especially those who are new to the topic. Each company has its own requirements and needs, of course, but some general statements and recommendations can be made

At least this is the opinion of the business graduate Henning Osterkamp and industrial engineer Carsten Timmermann. The two management consultants set up their own company "dieersten GmbH" in Bremen in autumn 2019. We talked to them about how much companies are spending on digitization, how digitization processes work in Corona times and how digitally they both actually work.

Mr. Osterkamp, ​​Mr. Timmermann, as a consultant you can feel the corona crisis, many companies have tighter belts. How does the current situation affect the willingness to invest and innovate? What are you observing there?

Timmermann: We notice a certain reluctance - it shows which companies are prepared for a crisis and which are not. Some customers are very active in investing. They know that the real valley of the recession is yet to come and only the strong will be left in the end. You now want to do everything you can to belong.

You work a lot for medium-sized industry. What types of digital projects are acute now? Is it about the networking of machines, home office or the introduction of software such as enterprise resource planning systems (ERP) or cloud structures?

Timmermann: We see two focal points: On the one hand, collaboration tools, the desire to work together digitally in the company. On the other hand, the topic of overarching data and information management and thus also ERP.

Osterkamp: Both approaches are about the challenge: How can we make the amount of information that is accumulated by employees nowadays (for example from emails and other systems) accessible to everyone without overwhelming the workforce with too much information? The art is to collect information, to bundle it and to create added value from it.

Let's take a look at the cost side - how do companies deal with the costs of digitization?

Timmermann: Many departments want the egg-laying woolly milk pig with new digital technologies, project over too long periods of time, think “too big”. Then of course the digital project will be very expensive. The management often does not go along with this because the costs seem immense. We do it differently. We want to use what is already there today and implement it quickly.

An example: Anyone who is considering using data glasses to guide technicians around the world is faced with an extensive process with a lot of new hardware and software. It is easier to first use the technician's cell phone and camera - everything is there for that. The data glasses can then come in the second step. We want to get the best out of today and at the same time prepare for the quantum leap.

Osterkamp: Especially since digitization can often also avoid costs because it simplifies processes and relieves employees. Many companies are currently realizing that to do this, digitization has to be viewed more independently of costs. Not completely independent - but a look at the "Return-on-Invest within X years" is often not expedient. Digitization processes are more extensive and have an impact on the general direction of the company and rarely only on a single project.

Can you still fix the costs of digitization to a specific number? How much do companies invest in digitization?

Osterkamp: We have calculated what the digitization of an employee only costs at the resource level, i.e. work equipment, software, purchases. We came up with a total cost of 150 to 200 euros per month and employee. With such a budget, employees can work from anywhere. Of course, that depends on the size of the company and the industry. The ideal case is that digitization is self-financing.

How do you classify the topic of costs for training and further education?

Osterkamp: We estimate that around 10 to 15 percent of the costs go into training. The digitization providers that exist today rely heavily on existing prior knowledge. Smartphone, chats, videos, we know all of this from everyday life and we don't have to train anyone for it. It is therefore often very easy to get started.

Timmermann: Many German companies want to plan and think through the digitization process precisely. That still comes from the engineering mindset - many find it difficult to just start and see what you end up with. You now want to implement something that will then run for ten years. In the digital age, however, we are talking about much smaller time cycles and this is very difficult for companies. We have to do some persuasion.

Osterkamp: But we also notice that a new generation is slowly coming into middle management who also make new demands and want to work more dynamically. That forces companies to rethink.