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Russia Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 69
Russian IT spending is forecast to record double-digit growth in 2011, building on a recovery that started in 2010. PC sales grew robustly, while IT services vendors also reported stronger demand from Russian organisations. The IT market is projected to grow to nearly US$34.6bn by 2015, with all major segments offering growth opportunities.
In 2011 IT vendors will look to the public sector, which in 2010 launched a number of e-government service pilots in areas ranging from universal identity cards to online fee payments. The broader use of ICT in government and other sectors will ensure an upward market trajectory in the medium term, along with major projects in key sectors such as banking and oil and gas, and a restructuring of the utilities sector.
Russia is showing signs of becoming a market that through its scale can influence global industry developments. 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$138 in 2011 to US$250 by 2015.
Industry Developments
In July 2011 Russia's Economic Development Ministry was reported to be considering introducing customs duties on imports of personal computers. The reason for the potential new tax is apparently to provide a boost to domestic computer hardware production. In line with the situation in other countries where similar tariffs have been introduced, the possible tax increase would be expected to lead to more foreign investment in manufacturing and assembly facilities in Russia.
In 2010 the government earmarked RUB2bn (US$64mn) for e-government infrastructure projects through to the end of the year. The government launched test projects in 2010 for a number of e-government initiatives, with the aim of meeting targets for the introduction of information technology to deliver government services.
In December 2010 Prime Minister Vladimir Putin signed a decree that approved a plan for the federal government and subordinate agencies' transition to open source software The plan is due to be implemented between 2011 and 2015. In the first stage, a solution covering routine government work is expected to be implemented in 2011 and the implementation of other solutions is expected to be completed by 2014.
Competitive Landscape
Russian PC market leader Acer led in the Russian PC market in the first three quarters of 2010, ahead of its fellow Taiwanese rival Asus. Acer's overall Russian market lead is based on its strength in the consumer notebooks, while HP is a strong challenger in the desktop segment. Chinese PC leader Lenovo has also made steady advances, working with partners such as IT and consumer electronics distributor MICS.
In H111 a number of new service providers have entered the emerging market for cloud computing services in Russia. In June 2011, Inoventica, a new infrastructure service provider in Russia, announced that it was ready to offer cloud computing services for the public and private sectors. Meanwhile, in January 2011, I.T Co announced that it had deployed the first private cloud based for one of the largest universal banks of Russia.
In 2010 local IT services giant IBS's revenues made a healthy recovery to US$656mn, with net incomes soaring 86% y-o-y. Local IT leader IBS is recognised to be the leader across most segments of the Russian IT services market, with total 2010 revenues from consulting services more than twice as much as its nearest competitor. In Q111 Sberbank, the biggest bank in Russia and the CIS, awarded IBS a tender to implement a SAP HR Management system for its 250,000 employees.
Hardware
BMI forecasts double-digit growth for the Russian computer hardware market in 2011, consolidating a strong recovery in 2010. According to BMI projections, the computer hardware market is forecast to recover to US$10.9bn in 2011, up from US$9.1bn in 2010, driven by notebooks. In 2010 shipments bounced back robustly, with growth driven mainly by notebook sales, which accounted for about 60% of PC shipments.
Computer hardware sales will find support from a number of fundamental drivers, including low PC penetration, rising incomes, government IT initiatives and industrial reform in many sectors. The PC market compound annual growth rate (CAGR) for the next five years is projected to be in the region of 15%, with PC spending reaching US$15.2bn by 2015.
Software
The addressable domestic software market is forecast to be close to US$3.5bn in 2011. Spending in this sector is forecast to return to positive growth territory after demand was hit in 2009 by the much sharper decline in PC sales. The market is projected to grow at a CAGR of 18% to US$6.6bn by 2015, making Russia potentially one of the most significant global software market opportunities.
Although Russia has the fifth-highest software piracy rate in the world (87%), BMI expects government efforts to strengthen intellectual property protection will mean this falls closer to the Eastern European average, boosting the market. Unsurprisingly, there are regional disparities, with Moscow some way ahead of its closest rival St Petersburg in terms of enterprise resource planning (ERP) deployments.
Services
BMI projects an IT services market value of US$4.9bn in 2011, with a continued strong recovery from the 2009 contraction across all main IT spending verticals. The IT services opportunity is forecast to grow steadily to US$9.5bn by 2015, with opportunities in sectors such as telecoms and banking, retail, transport and logistics, and discrete manufacturing.
Systems integration is the largest IT services component, accounting for as much as obe-third of revenues and, together with the implementation of hardware and software, it probablyn accounts for about half of all IT services. However, value-added services such as consulting and applications development are growing fast. Outsourcing is also on the rise, although it is below the levels in some other Central and Eastern European (CEE) countries.
E-Readiness
The government's ambitious policy is that every locality in Russia should be provided with fixed-line telephony infrastructure, mobile phone coverage and internet access by 2015. According to the Ministry of IT and Communications' target, every populated area in the country should be provided with all three elements irrespective of its economic weight and population. The former IT and communications minister, Leonid Reiman, described the digital divide as a challenging issue for all countries in the Commonwealth of Independent States (CIS) and one that the Russian government was aiming to overcome.
Internet use is forecast to experience robust growth over our forecast period. However, tight credit markets are limiting the ease with which broadband operators are able to source much needed funds to invest in network proliferation. Coupled with economic uncertainty, this is creating a troublesome environment for operators to plan their investment decisions. However, growth will still be strong, but will 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. Expansion of fixed and wireless networks should result in increased penetration rates across 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.
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.
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