russian software developing industry and software exports

Chapter 1.
Position of Russia in the Global Market of Software
and Software Development Services
Global economic turbulence creates favorable
conditions for companies and countries to move in
the rating of world market leaders. However, radical
changes are unlikely to be seen in the coming 1-2 years
because the advantages of this or that country in the
field of software development are gained over the
years, to be more exact – over decades.
The crisis makes business more flexible to find
new options for partnership with international
service companies. World leading analysts expect
the emergence of new customers who are reducing
their own IT services and outsource these functions
instead. Therefore, service companies have chances
to become more remarkable in the market and lay the
foundations to strengthen their positions in future.
In the current context the significance of country
image is growing (i.e. prevailing notions among
potential partners and buyers related to opportunities
of software development in its territory). In the
short-term perspective the image may influence
the projected re-distribution of orders greater than
other more substantial factors. In this area Russia has
the largest resources, since mainly due to political
games in international Mass Media there was formed
a negative image of Russia that has nothing to do
with the reality, but the appropriate reaction of state
authorities has not followed yet.
This situation definitely affects the Russian
economy and exports. The Government can and
should take measures to improve the country image,
which is being done to the extent possible. In 2009,
the budget provides for RUB 49 bn (USD 1.4 bn)
for country image improvement, that is 30% against
year-on-year. However, these funds are distributed
and used without any contact with the real sector
of economy leading to low efficiency of such
investments.
Certainly, all current economic problems in Russia
should not be explained by negative publications and
low ratings alone. For instance, a sharp decrease in
foreign investment is caused by equally important
factors. First, it is the fall of oil prices that Russian
economy and stock market capacity depend on. The
second reason is that due to the crisis many foreign
companies had to cover losses of their headquarters
at the expense of Russian offices. Another important
factor was the growing foreign currency debt faced
by Russian enterprises due to a sharp devaluation
of ruble at the end of last year. Probably, it is also
important that banks became much more cautious
granting credits. The panic on the financial market,
though largely artificial, has also played its role.
In particular, some Mass Media persistently drew
analogies with the 1998 crisis in Russia. At that time
the national currency devalued 4-5 times in the course
of several months. This comparison is incorrect, since
10 years ago the situation was absolutely different as
well as the reasons for the crisis. In the past years the
Russian economy has become more robust and its
regulation more professional and independent from
major companies and banks that acted destructively
prior to the crisis in 1998. Moreover, the government
now has more tools to mitigate effects of the
crisis on the economy owing to gold and currency
reserves that enabled to restrain the paniс in the
currency market.
Actually, in 4-5 months the ruble depreciated
against the dollar by around 50% and by a third
against the euro. In March 2009, the currency rate
stabilized and since then has not significantly changed.
Also, it should be taken into account that the ruble
returned to the level of about 8 years ago. At that
time the exchange rate was approximately 33 rubles
to dollar, that is almost the same as in spring 2009.
As a result of the global crisis Russia’s GDP
decreased by around 10% and the capacity of
different markets reduced from 10% to 40-50%.
However, this was preceded by a comparable growth
and the data adduced here relate only to Q1 2009.
Most likely, the year-end reduction would not be
that significant. It is not impossible that the growth in
Q3-Q4 would compensate for the Q1 reduction.
Consequently, nothing dramatic has happened
to the Russian economy, yet. As a rule, the situation
in other countries is either slightly worse or better.
It is quite possible, that the ruble rate could have
been fixed at a higher level were the actions of
the regulating authority more successful and were
the Mass Media not spreading panic. The slump in
production could have been also less significant has
the Government adopted measures to support and
the real economy and reduced refinancing rate of the
Central Bank of the Russian Federation as it was done
practically all over the world. But we can only guess.
Clearly, the expectations of disastrous
consequences of the crisis for Russia are not
justified. Therefore, Russia’s economy despite being
developing and dependent on fluctuations of prices
on raw materials is quite stable.
Notwithstanding, industry analysts evaluating
political and economic environment in the country still
place Russia on the lowest positions in their ratings
compared to all its competitors. Probably, they mainly
rely on conclusions prevailing amid other experts
who specialize in analyses of the global economy or
national economies or political situation in individual
countries. However, the credibility of these experts
is already undermined, because on the verge of the
crisis they saw no reconditions for economic turmoil.
Here, it is appropriate to remind of a grave
mistake made by experts of the International
Monetary Fund, who predicted a drop in GDP in
Russia at the year-end 1999. In 1998, Russia faced
more serious economic issues than during the present
crisis. However, instead of recession the economy
started to boost. IMF experts could not foresee the
development of the situation in the country even for
several months ahead.
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