russian software developing industry and software exports

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Chapter 5. Geographical Distribution and Key Vertical Markets of respondents have been working in this market for a long time already, and 5–10% more companies are trying to strengthen their positions there, but as a rule their attempts fail. Companies with export revenues less than 50% of total revenue are more than other exporters oriented at the markets of Ukraine (51%), Belarus (40%) and «Other countries of the former USSR» (35%). The number of records of far-abroad markets by these companies is below average (only few of them view developed countries as key markets). Naturally, the situation is reverse for companies with export revenues over 51%. It will be logical to conclude that small companies are more often present in the markets close to Russia. Almost half of the largest companies with the turnover over 20 MUSD operate in all markets, but they focus on the advanced markets of America and Europe and do not regard as their top priorities the markets of Ukraine, Belarus, South-East Asia and the region «Australia, Africa and South America». St. Petersburg companies are to a greater extent than other respondents oriented at European markets. Around one third of St. Petersburg companies are present in the neighboring market of Northern Europe (primarily in Finland). Moscow companies (mainly small and mediumsized) most frequently named as their key markets Ukraine, Belarus and «Other countries of the former USSR». In 2009, the significance of markets for software developers should not drastically change. A small part of respondents expects the decline in demand in the markets of Russia and other countries of the former USSR caused by consequences of the crisis for their economies dependent on the production of raw materials. Therefore, they are planning to switch to markets more distant from Russia. It does not make sense to make any conclusions about the year 2010 since many of the respondents were not ready to answer this question due to the growing crisis. The research conducted by Global Services 100 reveals what potentially interesting markets remain unexplored (or poorly explored) by Russian companies. The distribution of clients in the top 100 world service companies is absolutely different that of the major Russian software exporters. Russian companies are far less often represented in the markets of Africa, Australia, Japan, India, China and Canada. Probably their only advantage against world leaders is the market presence in Eastern Europe. Only 9 of 100 world leading service companies have their own staff in Russia. By this indicator Russia ranks 15 among 31 countries. Recently Russian producers have been trying to enter new markets. For instance, as reported by CNews, a group of companies involved in software development and the delegation of the Russian Federation government came to the capital of Venezuela Caracas in April 2009 to participate in the Week of Russian IT. The long voyage was made by heads of the following companies: ALT Linux, ASCON, ABBYY, Digital Design and PROMT. ACS Systems representing Kaspersky Lab in the market of Venezuela also took part in the event. It is also worth to mention that Exigen Services entered the Chinese market. The company opened its development center in China that would partially deal with orders from the local market. Probably, it is reasonable to enter huge markets in China and India only by establishing own centers for development and sales support. Certain progress can be expected in the economic cooperation with Latin America and a number of African countries that Dmitry Medvedev, President of Russia visited this June. International clients of top 100 service companies according to Global Services 100 in Africa in Australia in Canada in China in India in Japan in Western Europe/ Great Britain in Eastern Europe in South America/ Mexico in the USA in Middle East 8% in Asia-Pacific Region (excl. India and China) 18% 18% 27% 36% 32% 42% VERTICAL MARKETS 0% 20% 40% 60% 80% 100% 54% 52% 84% Source: Global Services and NeoIT, 2009 Global Services 100 Study 95% 95% Significant changes in the distribution of companies by vertical markets where they operate (and the overall decrease in the number of priority vertical markets mentioned by respondents) are mainly due to the consequences of the global economic crisis. The respondents have to focus on either vertical markets where they can get competitive advantages owing to their competencies or on narrow technology niches. Hence, the general reduction of respondents’ participation in vertical segments of the economy. 41
Chapter 5. Geographical Distribution and Key Vertical Markets Another factor contributing to the reduction of industry preferences is a growing participation in the poll of small companies’ representatives that are usually oriented at a limited number of industries. Industry priorities of Russian export companies remained unchanged. 60% 50% Share of exporting companies with remote developing centers by turnover 56% 56% Vertical markets of exporting companies Information Technology Banking & Financial Services Telecom Industries Hospitality, Travel & Transportation Government Power supply, Gas & Oil Healthcare & Pharmaceuticals Retail & Distribution Science & Research Gambling & Entertainment Other 0% 20% 40% 60% 80% 100% 11% 18% 5% 19% 24% 25% 24% 23% 24% 24% 23% 20% GEOGRAPHICAL DISTRIBUTION OF DEVELOPMENT CENTERS Around 32% of export companies have one or several remote software development centers. For all respondents, including non-exporting companies, this indicator equals 26%. Companies focused on the home market rarely set up remote centers. Probably, they are not even considering such an option. 36% 33% 31% 29% 27% 31% 29% 35% 36% 34% 31% 28% 40% 38% 35% 32% 38% 36% 44% 69% 89% 88% Poll 2007 Poll 2008 Poll 2009 40% 30% 20% 10% 0% 23% 34% 16% 14% 11% 7% 7% 0% up to 0.5 MUSD not specified from 0.5 MUSD to 4 MUSD in Russia The smallest of export companies participating in the poll stated they have development centers in Russia and its neighboring states (in the CIS countries and Lithuania). Only 5% of companies with the turnover less than 0.5 MUSD have more than one center. In the group of companies with the turnover ranging from 0.5 MUSD to 4 MUSD 34% established remote production branches. 14% in this category are able to maintain development centers located far abroad (in Russia – 16%, in other countries including neighbor states – 20.5%). 9% of companies have more than one center. During the previous poll about 10% of companies with the turnover less than 4 MUSD said that they set up their own branch located in another city or abroad. This year the same group brings a much higher indicator – 28.5%. Partially, this may be explained by the changed wording of the question (a «branch» from the last year survey is replaced with a «remote development center»). However, most likely following the general pre-crisis trend when the growth of resources was provided owing to development centers based in other cities, many small companies used to actively establish such centers in H1 2008. Companies with the turnover more than 4 MUSD have long ago got interested in labor markets of other cities and countries. The majority opened at least one remote development center before 2008, and now they are expanding their branch networks. Therefore, the share of major companies (turnover over 4 MUSD) with a remote development center has changed insignificantly. For export companies with the turnover from 4 MUSD to 20 MUSD it makes 41%, and for companies with the turnover more than 20 MUSD – 56%. The share of respondents who mentioned more than one remote development center in these two categories is 25% and 33%, respectively. Almost every fifth export company has a remote development center in Russia. St. Petersburg and 41% 35% 18% 7% from 4 MUSD to 20 MUSD in neighboring countries 33% 11% over 20 MUSD in far-abroad countries 42
Page 1 and 2: RUSSIAN SOFTWARE DEVELOPING INDUSTR
Page 3 and 4: CONTENTS METHODOLOGY...............
Page 5 and 6: Methodology As in previous years th
Page 7 and 8: CHAPTER 1. POSITION OF RUSSIA IN TH
Page 9 and 10: Chapter 1. Position of Russia in th
Page 19 and 20: CHAPTER 2. VOLUME AND STRUCTURE OF
Page 21 and 22: Chapter 2. Volume and Structure of
Page 27 and 28: CHAPTER 3. MAJOR TRENDS IN THE RUSS
Page 29 and 30: Chapter 3. Major Trends in the Russ
Page 31 and 32: CHAPTER 4. OVERVIEW OF BUSINESS ENV
Page 33 and 34: Chapter 4. TAXATION SYSTEM The shar
Page 35 and 36: Chapter 4. AVAILABILITY OF UP-TO-DA
Page 37 and 38: Chapter 4. Overview of Business Env
Page 39 and 40: Chapter 4. Overview of Business Env
Page 41: Chapter 5. Geographical Distributio
Page 45 and 46: Chapter 5. Geographical Distributio
Page 47 and 48: Chapter 6. Human Resources and the
Page 61 and 62: Chapter 7. Technologies The results
Page 63 and 64: Chapter 7. Technologies Reduction r
Page 65 and 66: CONCLUSIONS
Page 67 and 68: Conclusions Owing to PR activities
Page 69 and 70: Participants of the survey Elite So
Page 71 and 72: Participants of the survey Exigen S
Page 73 and 74: Participants of the survey Luxoft F
Page 75 and 76: Participants of the survey URL Cont
Page 93:
Participants of the survey THANKS T
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russian software developing industry and software exports

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