russian software developing industry and software exports

Chapter 3.
Major Trends in the Russian Software Development Industry
The consequences of the global financial crisis have
overshadowed almost all trends that were previously
characteristic of the Russian software industry. It can
be said that during the survey respondents named
the crisis the major cause of all changes taking place
in the sector. All other observed factors have become
less significant.
Indeed, the majority of companies cannot single
out any other important trends in the situation of
uncertainty (when the forecast of analysts change
every month). During the crisis it is much more difficult
to answer the question about what is going on in the
market and describe its general trends.
In this connection, comparisons with the results of
the last year’s poll are not always justified. However,
comparisons of 2009 answers related to every trend
can give food for thought. For instance, it should be
noted that respondents still view sales in the home
market more promising than export operations (44%
against 19%). And this is despite the fact that the IT
market in Russia reduced due to the crisis to a greater
extent than in the USA
and Western Europe, and Russian exporters are
primarily oriented at Western countries.
In previous years priority levels of sales in the home
market and export operations were comparable.
These two trends were named as key by around
60-70% of respondents. But in 2 recent years the
difference in favor of the home market has been
growing. Last year it was referred to by 71% of
respondents, while export growth was mentioned by
56%. Therefore, the crisis has accelerated the increase
in significance of the Russian market for exporters. Its
enormous potential is recognized by almost half of
respondents in spite of its temporarily big reduction.
Even export-oriented companies name the
internal market growth as an important trend more
often than the export growth. But for this category
the difference is less big than for exporters mainly
oriented at the home market. 39% of companies with
the export share of 51% of their revenue consider the
home market growth the major trend. Export growth
was mentioned by 36% of companies mainly focused
on foreign markets.
The number of records for such trend as “Growth
in the Field of IT Outsourcing” increased year-onyear
(from 30% to 34%). Gartner experts expect
that as a result of the crisis the world market of IT
outsourcing would grow, though after a certain
short-term decline.
In Russia this market is in its early stage of
development, therefore its potential is especially big.
Anyway, the majority of respondents (about 80% of
those who chose this trend) do not correlate it with
the growth of sales in the internal market.
Outsourcing growth was more often named by
companies with 51% of revenue falling at export.
Consolidation in the industry as trend has become
less evident (21% against 61% last year). The reason is
that this process has slightly slowed down. Moreover,
Local market growth
Export growth
IT outsourcing growth
(IT infrastructure
support)
Increase in direct sales
through the Internet
Market consolidation
(M&A)
Increase in the share
of Box/Licensed
Software
Increase in the field
of Services
and Solutions
Increase in Custom
Software Development
Quality Management
systems
implementation
Modern trends of Russian
software development industry
0% 10% 20% 30% 40% 50% 60% 70% 80%
10%
14%
19%
21%
21%
18%
30%
27%
34%
31%
32%
38%
38%
44%
2008
50%
56%
61%
2009
71%
former methods to expand resources at the expense
of smaller companies are practically no longer used.
Major companies are still growing faster, however,
not through enticement of employees from small
software firms. Based on the fact that the indicator
of staff turnover stopped to vary in companies with
different turnover, mass transfer of employees to
larger companies observed last year has stopped.
Since last spring there were no major mergers or
acquisitions (during 2-3 recent years mergers in Russia
were one of the main reasons for consolidation in the
industry). The only significant deal was the acquisition
by the major integrator Technoserv of a leading
provider of software development services in Russia –
company Reksoft. Nevertheless, even this deal is likely
to reflect a different trend, i.e. acquisition by large
integrators of major professional software developers
to strengthen their positions in the integration market.
This leads to the conclusion, that the major
companies have become less interested in the Russian
labor market. They have headed for other countries
opening development centers in Belarus, Ukraine and
far-abroad countries (e.g. in China and Vietnam). This
trend is not directly related with small companies.
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