Russian ICT market is moving forward even with a significant decrease in total sales - RUSSOFT

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Russian ICT market is moving forward even with a significant decrease in total sales

Russian IT market can and must be looked at from various perspectives, not only in terms of total sales

Sep 16, 2015
The analysts of foreign companies mostly view the Russian IT market from the perspective of foreign vendors operating in Russia. From such perspective, a crisis and dramatic decline are obvious: for most, though not all, foreign companies, the income in their basic currency reduced drastically.

From the perspective of domestic developers, such situation is not so catastrophic or even not catastrophic at all. They generally assess the market (first of all the software and IT market) not in US dollars or euros, but in rubles, and in ruble equivalent it does not decrease.

Finally, the situation on the Russian IT market may be viewed from the perspective of Russian technology users (both individual and corporate), or, in other words, in terms of the impact that information technologies have on the citizens’ life and the national economy. From this perspective, there is no crisis, although the market has noticeably slowed down.

An analysis of all the market segments subject to their interrelations shows that over the last years certain technologies (or solutions) have been extensively replaced with others in various market segments. However, from the technology perspective such replacement may be considered as a progress. Here are some of the examples:

  1. With a significant drop in the sales of personal computers, the sales of tablets have grown.

  2. A decline in the sales of servers and the slowdown of the software market are taking place in the face of the growing market of cloud services.

  3. Smartphones are ousting ordinary mobile phones.

  4. Sales of printers and multi-functional devices are decreasing with a mass-scale transition by companies and state structures to electronic document flow.

  5. A reduction of the infrastructure VC products is compensated by growing sales of videoconferencing software.

Thus, a decrease in one segment is compensated by an increase in another (partially or fully alternative) segment.

In 2014, there was no evident effect (across the whole IT market) of import substitution. We can only assume that the Chinese companies increased their market share at the expense of American producers of electronic equipment. However, Russian IT companies expect this effect to take place in the nearest future and take certain actions to attain it. We should probably get ready for the changes in the market structure (positive from the perspective of users and domestic developers).

There is no doubt that as of the end of 2015, the IT market decrease in dollar terms will be more than the previous year. The reason is a greater drop in the ruble/dollar exchange rate.

Key indicators of the Russian ICT market in 2014

IndicatorAbsolute value as of the end of 2014Decrease (-)/ Increase (+) as of the end of 2014Decrease (-)/ Increase (+) as of the end of 2013Source
Russian IT marketRUB 698 billion (USD 18 billion)+2.2% in comparable prices-11.3%*Ministry of Economic Development
USD 28 billion (RUB 1.05 trillion)-16% (+0.25%)-1%Calculated based on IDC
Total income of Russia’s 60 largest IT companiesRUB 658.7 billion+6%+3%Russia’s Top IT Companies (RIA Rating)
Total turnover of Russia's 100 largest IT companiesRUB 876.3 billion (USD 23 billion)+8.6% (-9%)-TAdviser 100
Total turnover of 100 largest IT companies of RussiaRUB 928 billion (USD 24.4 billion)+1.09% (-15.32%)-CNews100
Total turnover of Russia’s top ICT companies (51 organizations) in the Expert RA ratingRUB 404.8 billion+8%+2%Expert RA
Communication services provided by the companies of all types of activitiesRUB 1,702.6 billion+0.5% in comparable prices-Ministry of Economic Development
Telecommunications market volumeRUB 1,655 trillion (USD 44 billion)+3% (-13%)-TMT Consulting

* — Apparently, two years ago, the Ministry of Economic Development changed the method of calculation. Therefore, the data about the IT market reduction in 2013 are not likely to be representative.

The analysts mostly name the aggravated macro-economic situation as one of the key reasons for the Russian IT market stagnation (from the perspective of foreign vendors) or slowdown (from the perspective of Russian users). However, if we do not take into account other factors of similar significance, we might have a distorted and oversimplified idea of what is going on.

The factors that have impacted the Russian IT market (except for GDP reduction):

1. Higher efficiency of IT investments

After the crisis of 2009, retail buyers and corporate customers became more pragmatic in their spendings. Purchases of computers and investments in information systems are now less tied to any dates (New Year or the end of a financial year) but are made as the need arises.

2. Emergence of alternative technologies

Cloud technologies and electronic document flow let us save substantially on initial IT investments.

3. Saturation in certain segments

For example, the vast majority of Russians have personal computers. The corporate market also seems saturated. According to Docflow, only 2% of companies do not use and do not plan to use IT solutions for corporate content management (vs. 23% in 2012).

4. Price reduction

Reduced prices for various devices is another factor that slows down IT spending across the country.

5. Lack of boom novelties

Finally, over the last year the Russian market did not have any fundamental novelties (gadgets, technologies or developments) that could stimulate demand. This factor is less important as compared to the above, yet it is worth mentioning.