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The results of the work of the software development industry in Russia in 2014

According to figures for 2014, Russian software developing companies’ total volume of sales in the domestic market amounted approximately to $6 billion

Sep 22, 2015
According to figures for 2014, Russian software developing companies’ total volume of sales in the domestic market amounted approximately to $6 billion. This is almost as much as it was a year earlier. In ruble terms, the sales in the domestic market grew even after adjustments for inflation, which amounted to 11.2%.

In 2014, exports of software and software development services increased by 11% and reached $6 billion. This is slightly less than was forecasted a year ago (growth by 15% and sales volume of $6.3 billion, respectively). The slowdown in export growth, compared to the forecast, is mainly due to the deteriorating geopolitical situation. The decline in export growth occurred primarily through the reduction in sales volume of services provided by foreign software development centers to their parent companies. If in the previous years, the export of such services steadily increased by 8–12%, then, according to figures for 2014, it has decreased by about 5%.

Such a reduction was due to a number of factors at once, the two major ones of which are the following:

1. The majority of the software development centers are owned by companies in the US and Western Europe, with which Russia’s relations have recently deteriorated.

2. The western companies met the personal data protection law with caution.

The Russian software companies’ aggregate sales turnover amounted to at least $12 billion, having risen in one year by 5%.

It can be noted that the export and the domestic sale bring to the Russian companies approximately the same amount of revenues — $6 billion each.

If we take into account the expectations of the surveyed companies, the software export growth for 2015 should amount to 16% and the turnover growth — to 10%. However, various factors may impact both the increase and decrease of these indicators.

Distribution of exports based on the size of the business

The main indicators of companies’ performance have traditionally depended on their size. The larger is a company, the greater is the growth in its exports and turnover. However, in the last 3 years the indicators of large and small businesses have evened out, largely due to lowering the threshold in the number of staff, making it possible for the small companies to get benefits in social taxation (in 2013 from 50 to 30 persons, and as of January 2014 — to 7 persons). Sometimes, it is the small businesses that demonstrate growth.

Software exports in total Russian exports

The proportion of exports of software and software development services in the overall export earnings of Russia continues to grow. By the end of 2014, this figure amounted to 1.2% (in 2013 — 1%, in 2012 — 0.88%, and in 2011 — 0.8%). Last year’s increase in the export share is due not only to the software export growth, but also to the 5% reduction in Russia’s export revenues from $523.2 billion to $498 billion.

In terms of its proportion in Russia’s exports, the software industry is already quite significant for the Russian economy. For comparison: the proportion of food products is 3.8% of the total Russian exports (including grains — 1.4%), chemical industry — 5.9%, machinery and equipment — 5.3%, non-ferrous metals and products from them — 3.2%, weapons — 3.1%, timber and pulp-and-paper products — 2.3%.

Achievement of these figures may serve for the software industry as immediate and quite achievable benchmarks.