Software Industry Overview
Much has been written about Russia’s competitive advantage in programming and Information Technologies (IT) and Russian software development capabilities. Obtaining reliable information on the IT industry, the quality of its leading participants, and its capacity, growth and prospects for sustainability, on the other hand, poses more of a challenge.
The Russian Ministry of Economic Development reports that the Russian IT market grew by 6.7 percent in 2012 as compared to 2011, to reach 732 billion rubles ($22.46 billion). This represents a downward adjustment of the predictions that the ministry had made of 15.8 percent growth for 2012.
The volume of the market for information technologies at the end of 2013, compared in constant terms with 2012, is projected to have increased by 6.9 percent to 762.3 billion rubles ($21.38 billion) according to an updated development forecast for 2014-2016 prepared by the Ministry of Economic Development. The government forecast predicts growth to fall slightly in 2014 to 5 percent before climbing slightly from there to 5.3 percent in 2015 and 5.5 percent in 2016.
IDC figures released at the beginning of 2013 show that the Russian IT market grew by 3.9 percent in 2012 — to $36 billion — with $24 billion accounted for by the sale of equipment, $7 billion by IT Services and the remaining $5 billion generated by the sale of software.
Robert Farish, an analyst with IDC states that the Russian IT market was worth $33 billion in 2013, compared to $34 billion in 2012. The Russian hardware market fell by 7 percent in 2013, while the software development market grew by 2 percent. IT services gained 8 percent. His forecast for 2014 is 5 percent growth for the entire Russian IT market, using the argument that the negative impact the Olympic Games had on the industry will no longer be an issue.
The overall change in the business climate has resulted in reduced sales and lower margins for the 2,300 software companies Russoft estimates that operate in Russia.
In 2012, the volume of the Russian information and communication technology market (ICT) increased by 1.2 percent. The IT market performed slightly better, growing by approximately 4 percent according to IDC. Russia’s Ministry of Telecom and Mass Communications puts growth at nearly twice that amount, or 7 percent.
Against the background of a rapid increase in the ICT market during the period following the crisis of 2008-2009, the market showed zero growth in real terms in 2012.
A year ago, analysts expected the growth of the Russian ICT market to slow, but not to such a degree. IDC analysts see two main causes for the deceleration. First is a general slowdown in the Russian economy and the resulting cost-cutting measures implemented by clients for IT services as a result. Second, the expansion of cloud and telecom technologies have provided new tools to reduce communication and IT costs. New commercial data centers in Russia now allow companies to increase capacity without purchasing new servers, while IP telephony has begun to replace more expensive voice communication.
The saturation of the Russian ICT market in cellular communications has, according to most analysts, accounted for the most significant reductions in growth. Likewise, the market for personal computers has reached saturation. The relatively small amount of growth that still remains in this segment is supported mainly by the replacement of desktops computers with portable devices.
Compared to more economically developed countries, the Russian ICT market cannot yet be considered mature, although signs of its eventual maturation are visible and the gap is quickly closing.
In the sphere of communications, Russia lags behind the West only in the share of smart phones as part of the total number of mobile communication devices and in the share of mobile Internet users among the total number of Internet users.
Due to the size of the country and to rapid development in recent years, the Russian Internet sector has became one of the largest in Europe. In the past few years, Russia has moved into first place for having the highest number of unique visitors online in Europe (comScore), and in the number of imported PCs in the EMEA region (IDC). 3.6 percent of all Internet users worldwide reside in Russia, which is home to less than 2 percent of the global population. By number of broadband Internet users, the country is ranked sixth and seventh by J'son & Partners Consulting and Broadband-Forum.org, respectively.
Russia took 16th place among 224 countries for average data downloading speed in 2011(Pando Networks), while the Internet access rate in the Russian regions grew 440 percent over the past year (based on the number of new contracts). Internet connectivity in Moscow and St. Petersburg already match the levels of advanced countries with over 80 percent of households receiving Internet service. The rest of the country is expected reach similar levels in the next several years.
A survey by Ipsos, an analytics firm, conducted on behalf of Reuters, shows that Russians lead the world in the use of VoIP technology.
In 2011, Russia moved into 27th place among 193 countries in the UN rating on eGovernment development, having overtaken Ireland, Italy, Greece, Lithuania, Poland and a number of other European nations. In the previous UN ranking, Russia stood in 59th place.
The overall Russian software market grew by 10 percent in 2012 while the sales of information security solutions saw even greater increases. In the next few years, the cumulative sales by software companies will most likely grow by at least 10 percent per year. In particular, J'son & Partners Consulting predicts rapid growth in the mobile application market. Between 2014 and 2016 they expect to see an 800 percent increase with volume reaching $1.3 billion.
Based on an analysis of all the available predictions — from government agencies, independent analysts and sales figures from the various companies operating in the sector — it can be assumed that the growth of the Russian IT market in 2013, once comprehensive figures become available, should be slightly better than in 2012. IDC predicts an 8 percent year-on-year increase over the next five years, while a number of analysts anticipate more significant growth rates in mobile applications, mobile Internet access, software development, navigation equipment and services, and cloud technologies.
- Why Russia
- In focus
- Doing IT business in Russia
- Who’s Who
- News & Events
- About us