IT and emerging technologies in Russia

All the world’s eyes have been on Russia since the Winter Olympic Games in Sochi followed by the referendum in the Crimea. In response the US and EU have imposed sanctions and travel bans on Russian politicians and individuals. While the state of Russian economy has almost no impact on the US business, it still remains the leading natural gas provider to the European countries.

Despite political and economic challenges, Russia has continued to evolve as a place to do business. Two years ago, Vladimir Putin set an ambitious goal – to raise the country’s ranking in the World Bank’s annual Doing Business report, which measures the ease of doing business in 189 countries worldwide, to number 20 by 2018. This year Russia is ranked 62^nd in the report, up from 92^nd a year earlier. In comparison, China, the world’s second largest economy, ranked number 90, and the US, the largest economy, ranked 7^th.

The modernization of the Russian economy is also reflected in the growth in IT spending since the global economic crisis in 2009.  Since then, IT investments grew at a double digit pace (PMR) until 2013 when the total sales of IT products and services dipped slightly to Euros 16.8bn. Today, analysts predict an 8 per cent increase every year till 2016, when total IT sales revenue is expected to reach $47.3 bn.

The slowdown in the Russian IT market in 2013, in part reflected the devaluation of the Russian ruble against the US dollar. Since the Russian IT market still largely depends on imported software and hardware, many IT projects have been impacted by the exchange rate with the dollar. The downturn also reflects the 6.5% inflation rate in 2013 (Rosstat) and a slowdown of major infrastructural projects that made up a big chunk of revenues in 2012 and 2013.

IT industry leaders are hoping that growth in demand from the banking and government sectors, interested in the cloud computing and big data analytics, will now offset the reduction in projects in the metal, oil and gas, and atomic industries that fuelled the IT market’s earlier success. Last year, among the enterprise software leaders in business analytics chosen by vendors were SAP (the company constituted 21.3% of the market), Oracle (13.9%), IBM (12.7%), SAS Institute (11.8%), and Microsoft (9.6%). (IT Weekly)

Improving IT services has become a top priority for the largest financial institutions and insurance companies in the country and, as a result, the financial services sector became the IT industry’s largest customer last year accounting for 22.2% of total revenues.

In addition, government institutions are spending more on IT. Last November, Dmitry Medvedev, the Prime Minister of Russia, singed the strategic development plan of IT in Russia for the period 2014-2020. The plan includes proposals to digitize documents, broaden Internet access in the country, and create data centers to store the mountains of big data generated in Russia.

Leading IT companies in the country are also betting on the growth of mobile and cloud technologies to help spur a new round of IT growth. For example last year the nascent market for cloud services grew by 32% to $633 million (Gazeta.ru), a faster pace than many other European nations including Germany and France.

This article is published in collaboration with SAP Community Network. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Diana Abroskina writes for SAP Community Network.

Image: A general view shows the Moscow International Business Center and the Mercury City Tower (R) after a ceremony to present it as Europe’s tallest skyscraper in Moscow, November 1, 2012. REUTERS/Sergei Karpukhin.