Third Annual Survey on Russian Export Software Market

Software Export Dynamics (a part)

In 2005, software exports continued to grow at a relatively fast rate. Total export earnings for software companies grew by 28% to just shy of $1 billion - although given the margin of error the figure of $972 million could be rounded up to this significant landmark, especially as current methodology for calculating exports likely produces a lower figure than the actual one.

In this case, ±10-15% (the margin of error is unlikely to be more) does not play a large role. What is important is that methodology remains unchanged, which means growth indicators can be determined fairly accurately. The 28% increase in exports on 2004 is clear evidence that growth rates have slowed down. Closer inspection of the data from last year's survey shows that this slowing down is happening for the second year in a row. Given that Russia's share in the rapidly expanding software export market - and especially the market for ready-made solutions - is not particularly significant, a slowdown in growth can only give cause for concern, especially given that the sector has substantial growth potential.

Export growth is slowing down because of two major factors: 1) internal IT market is continuously growing with a similar growth-rate (24%-25% a year) thus attracting more and more attention of Russian software exportes, 2) a number of issues important for the export growth have not been solved or have even become exacerbated. For example, the situation with personnel in Moscow and St. Petersburg - which combine for over 60% of total exports - has become noticeably worse over the last two years. Higher educational institutions are currently unable to provide the necessary increase in supply for the booming demand for qualified programmers, despite developing collaboration with private companies.

During the last year, recommendations were drafted for state support of the sector, including the introduction of a simplified tax regime for exporters, the creation of a network of IT parks, and the setting up of an investment fund for the IT industry. All of these measures would show support for the sector from the state, and would help create the necessary preconditions for export growth in subsequent years. However, the results will be seen only in some time.

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