Russia Information Technology Report Q1 2010
- ID: 1207610
- January 2010
- Region: Russia
- 61 Pages
- Business Monitor International
The Russia Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's information technology industry.
The Russian IT market is expected to start to recover in 2010 from a steep contraction in 2009. The Russian market was buffeted by strong economic headwinds, with conditions continuing to worsen in the first half of 2009. A contraction in PC sales in H109 continued the negative trend of Q408, with leading economic indicator data showing little sign of improvement through Q309. Looking forward, Russia is still on course to emerge as one of the largest IT markets in Europe, even if this is at a slower rate than previously expected. In 2010, the Russian IT market is forecast to recover to US$15.9bn, up 12% on 2009, but still short of the 2008 pre-crisis level. While purchasing power remains relatively low in the consumer sector, the low level of computer penetration should mean organic growth opportunities for vendors.
Growing computer penetration, government ICT projects and immense potential for IT spending by Russia's traditional industries could drive an increase in IT spending per capita from around US$113 to US$185 over the 2010-2014 period.
The Russian government has suggested that it will consider new measures if necessary to drive Russian government bodies to achieve key e-government targets. In a strongly worded speech in August 2009, President Dmitry Medvedev said that progress on e-government projects had been 'a disgrace' and threatened to introduce financial penalties for government bodies that failed to meet targets. The Russian president pointed to a number of projects where 'no real progress' had been made. These included:
- The development of the inter-agency electronic document management system;
- Setting up a fully fledged online public procurement system;
- Establishing a unified system of state registration of the results of scientific research and experiment and design work. The president's address echoed similar remarks made in May 2009 by Prime Minister Vladimir Putin, who also called for urgent drafting of a new e-government programme for the period up to 2015. Meanwhile, in a meeting with the Russian Free and Open Source Software (RFOSS) industry sector in February 2009, Ministry of Communications chief Igor Schegolev called for Russia to strengthen its capabilities in this area. The Minister was cautious, however, about the prospects for an exclusively 'Russian' operating system.
Acer brand Packard Bell said that it plans to achieve a 10% share of the Russian notebook segment by 2012, from just 1.5% currently. The notebook market share target for 2010 is 5%. Packard Bell is expected to invest heavily in brand promotion in Russia in order to achieve its goal. Acer's total notebook market share is estimated at around 30%.
In November 2009, Microsoft said that it was considering launching its own retail presence in Russian in 2010. The outlets would be opened in Russia's largest cities and would be used more for brand development rather than as a new sales channel. Microsoft hoped that sales of its Windows 7 operating system, launched in October 2009, would boost local sales. Fellow US IT giant HP admitted that it had been hit hard by the Russian market contraction in 2009. The firm said that it expected 2009 annual output decline to be about 40% in Russia. However, HP said that it had outperformed the Russian IT market in the second quarter and that it expected to restore revenues to pre-crisis levels by 2011.
Hardware BMI forecasts a return to growth for the Russian computer hardware market in 2010, following a sharp contraction in PC sales in 2009. The PC market was forecast to contract 20% in dollar terms in 2009. According to BMI projections, the computer hardware market is forecast to recover to US$8.7bn in 2010, up from US$7.5bn the previous year but still short of 2008 levels.
Despite the adverse economic situation, future hardware spending will have support from a number of fundamental drivers including low PC penetration, rising incomes, government IT initiatives and industrial reform in many sectors. PC market compound annual growth rate (CAGR) for the next five years is projected to be in the region of 11%, with spending reaching about US$10.8bn by 2014.
The domestic software market is projected at around US$3.2bn in 2010. Spending on software is therefore forecast to return to positive growth territory, after demand was hit in 2009 by the much sharper decline in PC sales. Going forward, the market is projected to grow at a CAGR of 14% to US$5.4bn by 2014, making Russia potentially one of the most significant global software market opportunities. The domestic software market is forecast at around US$3.1bn in 2009. Although Russia has the fifth highest software piracy rate in the world (87%), BMI expects that government efforts to strengthen IP protection will see this fall closer to average Eastern European levels, boosting the market. There are, unsurprisingly, regional disparities, with Moscow some way ahead of its closest rival St Petersburg in terms of enterprise resource planning (ERP) deployments.
The report projects an IT services market value of US$4.1bn in 2010, which will see some recovery from 2009 when the market experienced a sharp contraction. The IT services opportunity is forecast to grow to around US$7.0bn by 2014, as the IT market gradually recovers from recent external shocks. The broader use of ICT in government and other sectors will ensure an upward market trajectory in the medium term. Systems integration is the largest IT services component, with as much as one-third of segment revenues and, together with implementation of hardware and software, probably account for about half of all IT services. However, more value-added services such as consulting and applications development are growing fast. Outsourcing is also on the rise, although below the levels in some other Central and Eastern European (CEE) countries.
The government's ambitious policy is that every locality in Russia should be provided with fixed-line telephony infrastructure, mobile phone coverage and internet by 2015. According to the Ministry of IT and Communications (MITC)'s target, every populated area in the country should be provided irrespective of its economic 'weight' and 'population'. IT and Communications Minister Reiman has described the 'digital divide' as a very challenging issue for all CIS countries and one that the Russian government was seeking to overcome.
Internet usage is forecast to see robust growth over the remainder of our forecast period. However, the current tight credit markets are limiting the ease with which broadband operators are able to source much needed funds to invest in broadband network proliferation. Coupled with the economic uncertainty, this is creating a troublesome environment for operators to plan their investment decisions. That said, growth will still be strong, it will just not meet its full potential.
Competition between the incumbent's holdings and alternative operators such as Comstar-UTS, Golden Telecom and Net By Net will continue to drive the sector forward. Continued expansion of networks, both fixed and wireless, should see penetration increasing in the regions, while uptake remains strong in the more urbanised areas. Alternative technologies such as WiMAX and fibre will also play their part in expanding the market, by introducing competition as well as offering services over a wider area. SHOW LESS READ MORE >
- Market Overview
- Industry Developments
- Competitive Landscape
- Russia IT Sector SWOT
- Russia Telecommunications Industry SWOT
- Russia Political SWOT
- Russia Economic Swot
- Russia Business Environment SWOT
IT Business Environment Ratings
- Regional IT Business Environment Ratings
Central And Eastern Europe IT Markets Overview
- IT Penetration
- Market Growth And Drivers
- Sectors And Verticals
- Government Authority
- Table: Russia's IT Market Structure (US$bn)
- End-User Analysis
- Government IT Market Policy
- Open Source Software
- New Measures Affecting Software
- IT Plan
- IT Parks
- Table: Russia's Technology Park Expenditure, 2006-2010 (US$mn)
Industry Forecast Scenario
- Table: Russian IT Sector - Historical Data & Forecasts
- Table: Telecoms Sector - Internet - Historical Data & Forecasts
- Country Context
- Table: Rural/Urban Breakdown, 2005-2030
- Table: Consumer Expenditure, 2000-2012f (US$)
- Table: Svyazinvest Regional Companies, Broadband Subscribers
- Macroeconomic Forecast
- Russia – Economic Activity
- IBS Group
- IBM Russia
Country Snapshot: Russia Demographic Data
- Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
- Section 2: Education And Healthcare
- Table: Education, 2002-2005
- Table: Vital Statistics, 2005-2030
- Section 3: Labour Market And Spending Power
- Table: Employment Indicators, 2001-2006
- Table: Consumer Expenditure, 2000-2012 (US$)
- Table: Average Annual Wages, 2000-2006
- IT Ratings – Methodology
- Ratings Overview
- Table: IT Business Environment Indicators
- Table: Weighting Of Components
- How We Generate Our Industry Forecasts
- IT Industry