russian software developing industry and software exports

Chapter 1.
Position of Russia in the Global Market of Software
and Software Development Services
but could not overcome bureaucratic barriers for a
long time. And active construction was launched only
with the crisis. The president of Technopolis named
a number of factors favorable for the activation of
company’s operations in Russia. These include the
reduction of construction costs and the fundamental
change in the attitude of officials to company offers.
The analysis of the situation leads to the following
conclusion: the crisis may be beneficial for the
Russian software industry rather than problematic
if its negative effects are mitigated and positive are
enhanced.
Russian ICT Market
In late 2008 and early 2009, the Russian ICT market
dropped by 20-30%. Depending on the segment the
indicators of this reduction greatly differ. For some
types of technologies sales decreased by more than
30% whereas there is a little growth for others.
The changes in the Russian ICT market may seem
disastrous for citizens of countries with a stable
economy. However, it should be taken into account
that the growth of this market in recent years is
comparable with its current reduction. IT companies
and communications enterprises rolled back to
turnovers of the previous year. Plus, the period analyzed
here includes only several months. At the year-end the
reduction may be less significant. In spring the market
has become more active and oil prices that the Russian
ICT market depends on started to rise.
However, analysts do not to make optimistic
forecasts, but are ready to review them any time,
which they do once in 2-3 months. Some say that the
IT market growth would resume in H2 2009, others –
only in 2010.
Russian company executives also see positive
sides of the reduced demand for their services and
solutions. After a boosting growth there is a chance
to revise the development strategy (earlier there
was no time for this), optimize business-processes
that were altered on the move accompanying the
rapid company growth. Moreover, participants
characterized by inefficient management have left
the market.
Some software developers that successfully
compete with world leaders in the Russian market
received more stimuli to activate their operations far
abroad. If previously the market presence in Russia
and the CIS was sufficient for their rapid growth, now
it’s time expand in other markets. The first steps in
the direction of Western markets were made by them
before the crisis, but they were very cautious. These
companies should compete as equals with the leading
international companies in all markets to secure their
future. Otherwise they can be forced out from the
Russian market, too.
Working globally companies are less dependent
on demand fluctuations (often unpredictable) in
certain markets. The situation in the Russian ICT
market makes Russian software developers and
service companies think about it. If at the year-end
2007 this market increased by 28%, in 2008 it slumped
to 17% (Source: Russian Telecoms), and in 2009 this
figure may become negative. Last year enterprises
representing the ICT sector earned RUR 1.7 trln or
USD 58 bn at the rate of the year-end 2008. The
biggest part of this revenue went to mobile operators.
According to preliminary estimates of Russian
Telecoms, the total revenue of communications
enterprises by all types of operations amounted to
RUB 1.2 trln (18% growth). Out of this sum RUB 0.8
trln fall on services provided to the public (annual
growth also makes 18%).
According to the research conducted by KPMG,
the majority of the largest telecommunications
companies sequestered all their investment programs.
58% of respondents reduced investments up to 30%,
and for 17% of other respondents it will range from
30% to 60%. But it should be remembered that many
companies planned to cut their investment programs
before the crisis because they heavily invested into
the development of network infrastructure in the last
2 years, though they planned a smaller reduction.
Based on different estimates, the volume of
the IT market in 2008 grew by approximately 10%
(in 2007 – by 17-18%) and totaled around RUB 0.5 trln
(around USD 19 bn taking into account the changing
currency rate).
According to PMR Consulting, in 2008 the IT
market in Russia grew by 9.3% to RUB 538.6 bn.
Similar growth was recorded by IDC – 10.5%.
According to the estimates of this company, in 2009
Russian IT market will reduce by 22.1% (software
sales will drop by 30.8%, equipment costs – by 28.4%,
budgets on IT of the big business – by 25-30%). IDC
expects the reduction in IT expenses (in dollars) by
20% and the IT market – by 22%, and PMR predicts
the decline in the IT market by 14.2%.
The poll of IT companies conducted by the League
of Independent Experts (LINEX) states, that Russian IT
market dropped by 18% in Q1 2009. The segment of
computer equipment decreased by 37% and made
RUB 35.3 bn. The sales of network equipment and
software declined by 6% and 3%, respectively.
The IT services segment has even grown by 13%.
According to LINEX estimations, total revenue
of independent producers of computer equipment
decreased over the quarter by 34%, distributors – by
27% and diversified IT companies – by 15%. Total
revenue of independent producers of software
somewhat increased – by 1%.
According to IDC, the IT services market in Russia
grew by tens of percent annually, but in 2009 it is
expected to drop by 28.4%. IDC thinks that in the
situation of the crisis customers can optimize IT
costs through outsourcing. In this connection, new
international players came to the Russian market
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