Geographic Reach and Main Vertical Markets of the Russian Software Development Industry
A chapter from 10th Annual Survey of the Russian Software Export Industry
Sep 25, 2013
Main Geographical Markets
In comparison with the last year’s survey results, the average number of mentioned key markets per one company considerably reduced (from 1.87 to 1.56). The same applies to the markets in which respondents are present with just single projects (from 3.9 to 3.3). The decrease appears to be even more significant considering that this year one more region – the Middle East – was added in the appropriate questionnaire. It turned out that 10% of the respondent companies already operate in this market that adds 0.1 per one company when considering all mentions together.
Now, the respondents less often mention almost all markets as the key ones. The exceptions are Russia, Ukraine, Belarus, and the "Australia, Africa, South America" region.
The vast majority of respondent companies (89%) still operate in the Russian market. However, the share of the companies considering it as the key market sharply decreased – from 79% to 24%. The Russian market has never had such low figure for the entire research period. Possibly, this figure was affected by the reduction of the market growth rates in 2012, as well as by extending opportunities of access to foreign markets.
The interest in the "USA and Canada" market, which increased after the crisis, was replaced with a sharp de-emphasis for the respondents in 2011. Last year, 31% of respondent companies were present at this market (a year before, there were 45%), and only 14% of respondents consider it as the key one (in 2011, there were 30%). The index of American market importance for Russian software exporters turned out to be the lowest for the last 10 years.
The next year’s survey results may allow stating a decrease in Russian developers’ interest in the Russian and US markets more definitely as such sharp change of attitude towards these markets in 2012 can be partly explained by the considerable change of the respondent structure in comparison with the previous survey.
Ukraine and Belarus, "Other countries of the former USSR", and Germany are mentioned as the key market more often than a year ago. Software exporters not only focused on a smaller number of markets, but reoriented towards the near-shore countries and to Germany.
A few years ago, Russia and the USA were way ahead by the frequency of mentions as the key markets. However, for the last years, the USA backslided from the second place to the 6th-7th spot, and Russia shared the first place with the countries of the former USSR. According to respondents, the near-abroad countries are considered to be the most prospective market for the next two years, although a small growth of interest is expected in regard to the Western Europe (except Germany and the Nordic Countries), the USA, the South East Asia, the "Australia, Africa, South America" region, and the Middle East.
The change of attitude towards the "USA and Canada" market concerns both small and large companies. In 2012, 36% of respondents with the turnover more than $4 million operated at this market (a year ago there were 70%). In the previous years the situation here was different. A reduction of mentioning American market was generally taking place at the expense of small companies that had an insignificant total export.
As in the previous years, St. Petersburg leads with the highest number of companies that operate in the foreign markets (except Asia and the Middle East). Moscow is in the lead by the share of exporters that are mainly oriented towards the markets of the former USSR republics.
In the last three years, opening of sales and of local customer technical support offices was declared by several Russian companies: Group-IB in the USA, Softline in Peru, ABBYY in Kazakhstan, Yandex in Switzerland and Belarus, Kaspersky Lab in the Republic of South Africa.
At the end of 2012, the InfoWatch reported that they were thinking of opening its office in the United Arab Emirates or Saudi Arabia. The share of this region in the company’s revenue is quickly growing. InfoWatch already runs projects in Bahrain, Kuwait, Saudi Arabia, and other Middle Eastern countries.
The news related to expansion of the Russian companies in the foreign markets for the last 2-3 years:
ABBYY acquired 100% of the Connective Language Services in order to extend its share of localization and support in the US market.
In June 2010, Playnatic Entertainment announced the agreement with Sina Data Coin, the first Russian-Iranian agreement in the IT sphere.
In May 2011, Entensys, a Russian information security software developer, signed a Cooperation Agreement with ITXON, a Polish software distributor.
In January 2011, Vitim has officially opened its office in Finland; this company will become the main European partner of the Speech Technology Center in St. Petersburg and will be engaged in development of software in sphere of speech record, processing and analysis.
NIS GLONASS has registered the NIS GLONASS Pvt Ltd subsidiary in India, which will be engaged in the large projects requiring system integration and in creating the distribution network for its solutions in the consumer market. It is supposed that the subsidiary will help to promote the GLONASS navigation technologies in the Indian market.
In April 2013, the i-Free and China Telecom, a Chinese mobile network operator represented by the Dazzle Interactive Network Technologies subsidiary, signed an agreement on strategic cooperation in the field of mobile games.
In April 2013, the integrated automated security management system developed by the RTEC was presented at LAAD-2013, the leading armament exhibition in Latin America.
At the beginning of 2013 Mail.Ru Group launched the Spanish version of its mail service interface. According to the Internet World Stats, Spanish is one of the top-3 languages spoken by Internet users globally.
In March 2013, Naumen from Yekaterinburg reported that Magellan Solutions, a Philippine outsourcing call center, began operations based on the company’s software. Naumen expects to start expansion in the region with automation of 100 workplaces of this center. According to developers, the size of the Philippine call-center service market is considerably larger than the similar Indian market and is measured in billions of dollars.
* – the markets which are key ones or the marketplaces where separate projects are implemented
Vertical Markets
For the previous 10 years, no regular change in the importance of separate vertical markets was revealed. The majority of the figure fluctuations are random or temporary. In the results of 2012 survey we can only note the upward trend of mentioning the "Information Technologies" segment that reflects the increasing concentration of Russian developers in the B2B segment for technological companies all over the world. We can also note some decrease in importance of the financial and e-government sectors against a small growth of interest towards industrial production automation.
As a whole, it can be concluded that Russian export companies’ industry priorities have not changed essentially for the decade.
The only clearly revealed regularity connected with vertical markets is a sharp reduction of their total frequency of mentions during the period of crisis. In 2009-2010, software developers were forced to focus their efforts on the areas in which they were most competitive or which were least affected by the world crisis.
Only 3% of respondents mentioned "Other" (not listed) vertical markets. "International Organizations", "Advertising", "Housing and Utilities" (twice), "Agriculture", "Security companies" were mentioned.
* before 2010 – Banking & Financial Services
Software Development Center Geographic Distribution
31% of respondents (a year ago, there were 35%) reported existence of one own remote software development center. The share of these companies varied within 25–40% during the recent years. 16% of respondents (there were 17% last year) reported two and more remote development centers while 7% of companies (last year, there were 10%) have at least three such centers.
Most of Russian companies’ foreign development centers are located in Ukraine. It can be surely assumed that this country is significantly ahead of other countries and regions by the total number of the employees working for Russian companies outside Russia. In Ukraine there have been created favorable conditions for software companies (many experts consider that these conditions are better than in Russia) and the labor cost is much lower there than in Russian capitals.
Luxoft has more staff in its production divisions in Ukraine than in Russia (about 2600 employees of nearly 6000 worldwide). In addition to Luxoft, EPAM Systems and DataArt also have their large development center networks in Ukraine.
Many Russian companies’ remote development centers also operate in Belarus and in other CIS countries. However, Ukraine has a special place as it is the second largest post-Soviet state (after Russia) by its population. According to Luxoft, there are about 38 thousand qualified programmers in Ukraine. Every year, the Ukrainian higher education institutions produce 18 thousand IT graduates who know English generally better than Russians.
The majority of the Ukrainian software development centers of Russian companies are located in Kiev (this year, there are offices of 5% of respondent companies). There are 2-3 times less development centers in Kharkov, Dnepropetrovsk and Odessa. The following Ukrainian cities are also mentioned there: Sevastopol, Kherson, Lvov, Vinnytsa, Cherkassy and Anthracite (Lugansk region).
In Belarus, the majority of software development centers are also located in the capital city of Minsk. There are also development centers in Gomel, Vitebsk, Mogilev, Alekseyevka and Brest.
Among other CIS countries, Kazakhstan is an attractive place for creation of remote development centers. The Baltic states (with cities of Riga, Vilnius, Liepaja) are also mentioned. It is quite possible that in the next 2 years several new production sites of Russian software developers will appear in Kazakhstan.
As a whole, the share of respondents who plan to expand its network of remote development centers or to create its first center, was considerably reduced in comparison with the previous year. Probably, some companies concentrated their efforts not on opening new production sites but on expansion of already existing ones. Besides in Ukraine, Belarus, and other countries, a limitation of available human resources is beginning to emerge. In any case, only 12% of respondents plan to create new development centers in 2013-2014.
Respondents have their remote production sites in 45 cities of Russia (last year, there were 46). The leading five cities, where the majority of head-quarters and of remote development centers are located, remained the same in comparison with the previous year. Kazan has gained a foothold on the 5th place and – keeping up current pace – it pretends to catch up with Nizhny Novgorod within two-three years ahead.
Rating of Russian cities (by number of companies’ head offices and remote development centers)
1. Moscow – 46
2. St. Petersburg – 45
3. Novosibirsk – 10
4. Nizhny Novgorod – 8
5. Kazan – 6
6-7. Omsk – 5
6-7. Izhevsk – 5
8-10. Voronezh – 4
8-10. Yekaterinburg – 4
8-10. Taganrog – 4
11-15. Krasnoyarsk – 3
11-15. Rostov-on-Don – 3
11-15. Ulyanovsk – 3
11-15. Perm – 3
11-15. Kolomna – 3
16-25. Kaliningrad – 2
16-25. Barnaul – 2
16-25. Belgorod – 2
16-25. Zelenograd – 2
16-25. Oryol – 2
16-25. Penza – 2
16-25. Puschino – 2
16-25. Samara – 2
16-25. Cherepovets – 2
16-25. Tver – 2
Remote development centers operate in 25 Russian cities. Most of them are located in St. Petersburg (8), Nizhny Novgorod (5), Moscow (4), Voronezh (3), Kazan (3), and Krasnoyarsk (3).
Russian export companies are present (have their head offices, remote development centers or sales agencies) in 60 Russian cities.
Rating of Russian cities (by the number of the company head offices, trade offices and remote development centers)
1. Moscow – 64
2. St. Petersburg – 52
3. Nizhny Novgorod – 12
4. Novosibirsk – 10
5. Kazan – 7
6-8. Voronezh – 6
6-8. Yekaterinburg – 6
6-8. Omsk – 6
9-12. Izhevsk – 5
9-12. Krasnoyarsk – 5
9-12. Rostov-on-Don – 5
9-12. Ulyanovsk – 5
13-15. Kaliningrad – 4
13-15. Perm – 4
13-15. Taganrog – 4
16-19. Barnaul – 3
16-19. Belgorod – 3
16-19. Kolomna – 3
16-19. Chelyabinsk – 3
20-33. Arkhangelsk – 2
20-33. Dubna – 2
20-33. Zelenograd – 2
20-33. Irkutsk – 2
20-33. Krasnodar – 2
20-33. Obninsk – 2
20-33. Oryol – 2
20-33. Penza – 2
20-33. Puschino – 2
20-33. Samara – 2
20-33. Saratov – 2
20-33. Stavropol – 2
20-33. Tyumen – 2
20-33. Cherepovets – 2
Development centers in Moscow and in economically developed countries with a high programmers’ salary level are opened purposely either to access high competences or to support customers’ project by local engineers. Western companies are often being acquired for this purpose.
For example, in April 2013 Luxoft declared the acquisition of Freedom OSS, a US developer of corporate open source software using RedHat products. The acquisition was made in order to obtain new customers from the US financial sector.
Earlier, in the spring of 2012 EPAM Systems expanded its presence in the market of North America, having acquired for $17.4 million Thoughtcorp, a Canadian software developer with customers in retail, telecommunications, and finance. At the beginning of 2013, one more bargain with EPAM Systems participation was concluded: they purchased Empathy Lab, an American consulting company specializing in development of digital strategies and UX design.
Geographic Distribution of Marketing and Sales Offices of Russian Companies
One third of respondents have their sales offices abroad or in other cities of Russia. 12.5% of companies have only one sales office, 21% – at least two, and 12.5% of respondents have at least three sales offices.
According to the last year’s research forecasts, about 20% of respondents planned to open new sales offices. However, the total quantity of companies that have sales offices almost did not change. The situation has remained stable for 5 years. It is generally explained by the fact that major service companies take part in the survey in a regular way. The leaders among them established long ago, they create almost all new sales and support centers while small- and medium-sized service companies are developing far less rapidly. New software vendors who are promptly developing in the last 3-5 years thanks to the efforts of the State development institutes (first of all Russian Venture Company - RVC), are unwilling to participate in the research; they create their offices abroad but try not to display their Russian origin.
We should note a very small percentage of companies that have sales offices in Belarus and Ukraine, although these markets are mentioned as the most significant for respondents. Apparently, they are specified as important, first of all, from the viewpoint of developer resource availability.
There is a considerable increase in interest in the African market which was exotic for the Russian companies for a long time. 6% of respondents plan to open their sales offices in the African countries in the next two years. Last year, the corresponding figure was equal to 2%. Some companies really demonstrated their interest in the African market in recent years, but such big growth (three times) may be caused by random factors (for example, by change of the respondent structure).
Previous
In comparison with the last year’s survey results, the average number of mentioned key markets per one company considerably reduced (from 1.87 to 1.56). The same applies to the markets in which respondents are present with just single projects (from 3.9 to 3.3). The decrease appears to be even more significant considering that this year one more region – the Middle East – was added in the appropriate questionnaire. It turned out that 10% of the respondent companies already operate in this market that adds 0.1 per one company when considering all mentions together.
Now, the respondents less often mention almost all markets as the key ones. The exceptions are Russia, Ukraine, Belarus, and the "Australia, Africa, South America" region.
The vast majority of respondent companies (89%) still operate in the Russian market. However, the share of the companies considering it as the key market sharply decreased – from 79% to 24%. The Russian market has never had such low figure for the entire research period. Possibly, this figure was affected by the reduction of the market growth rates in 2012, as well as by extending opportunities of access to foreign markets.
The interest in the "USA and Canada" market, which increased after the crisis, was replaced with a sharp de-emphasis for the respondents in 2011. Last year, 31% of respondent companies were present at this market (a year before, there were 45%), and only 14% of respondents consider it as the key one (in 2011, there were 30%). The index of American market importance for Russian software exporters turned out to be the lowest for the last 10 years.
The next year’s survey results may allow stating a decrease in Russian developers’ interest in the Russian and US markets more definitely as such sharp change of attitude towards these markets in 2012 can be partly explained by the considerable change of the respondent structure in comparison with the previous survey.
Ukraine and Belarus, "Other countries of the former USSR", and Germany are mentioned as the key market more often than a year ago. Software exporters not only focused on a smaller number of markets, but reoriented towards the near-shore countries and to Germany.
A few years ago, Russia and the USA were way ahead by the frequency of mentions as the key markets. However, for the last years, the USA backslided from the second place to the 6th-7th spot, and Russia shared the first place with the countries of the former USSR. According to respondents, the near-abroad countries are considered to be the most prospective market for the next two years, although a small growth of interest is expected in regard to the Western Europe (except Germany and the Nordic Countries), the USA, the South East Asia, the "Australia, Africa, South America" region, and the Middle East.
The change of attitude towards the "USA and Canada" market concerns both small and large companies. In 2012, 36% of respondents with the turnover more than $4 million operated at this market (a year ago there were 70%). In the previous years the situation here was different. A reduction of mentioning American market was generally taking place at the expense of small companies that had an insignificant total export.
As in the previous years, St. Petersburg leads with the highest number of companies that operate in the foreign markets (except Asia and the Middle East). Moscow is in the lead by the share of exporters that are mainly oriented towards the markets of the former USSR republics.
In the last three years, opening of sales and of local customer technical support offices was declared by several Russian companies: Group-IB in the USA, Softline in Peru, ABBYY in Kazakhstan, Yandex in Switzerland and Belarus, Kaspersky Lab in the Republic of South Africa.
At the end of 2012, the InfoWatch reported that they were thinking of opening its office in the United Arab Emirates or Saudi Arabia. The share of this region in the company’s revenue is quickly growing. InfoWatch already runs projects in Bahrain, Kuwait, Saudi Arabia, and other Middle Eastern countries.
The news related to expansion of the Russian companies in the foreign markets for the last 2-3 years:
ABBYY acquired 100% of the Connective Language Services in order to extend its share of localization and support in the US market.
In June 2010, Playnatic Entertainment announced the agreement with Sina Data Coin, the first Russian-Iranian agreement in the IT sphere.
In May 2011, Entensys, a Russian information security software developer, signed a Cooperation Agreement with ITXON, a Polish software distributor.
In January 2011, Vitim has officially opened its office in Finland; this company will become the main European partner of the Speech Technology Center in St. Petersburg and will be engaged in development of software in sphere of speech record, processing and analysis.
NIS GLONASS has registered the NIS GLONASS Pvt Ltd subsidiary in India, which will be engaged in the large projects requiring system integration and in creating the distribution network for its solutions in the consumer market. It is supposed that the subsidiary will help to promote the GLONASS navigation technologies in the Indian market.
In April 2013, the i-Free and China Telecom, a Chinese mobile network operator represented by the Dazzle Interactive Network Technologies subsidiary, signed an agreement on strategic cooperation in the field of mobile games.
In April 2013, the integrated automated security management system developed by the RTEC was presented at LAAD-2013, the leading armament exhibition in Latin America.
At the beginning of 2013 Mail.Ru Group launched the Spanish version of its mail service interface. According to the Internet World Stats, Spanish is one of the top-3 languages spoken by Internet users globally.
In March 2013, Naumen from Yekaterinburg reported that Magellan Solutions, a Philippine outsourcing call center, began operations based on the company’s software. Naumen expects to start expansion in the region with automation of 100 workplaces of this center. According to developers, the size of the Philippine call-center service market is considerably larger than the similar Indian market and is measured in billions of dollars.
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Russia | 55% | 87% | 89% | 99% | 93% | 89% |
| USA and Canada | 55% | 52% | 38% | 40% | 45% | 31% |
| Ukraine | 17% | 35% | 41% | 57% | 35% | 34% |
| Other countries of Western Europe | 35% | 30% | 33% | 35% | 40% | 25% |
| Other countries of the former USSR | 39% | 26% | 34% | 51% | 50% | 36% |
| Belarus | 32% | 23% | 31% | 45% | 29% | 31% |
| Germany | 25% | 24% | 28% | 33% | 34% | 26% |
| Scandinavia (with Finland) | 28% | 18% | 18% | 20% | 27% | 19% |
| South East Asia | 19% | 14% | 19% | 19% | 23% | 15% |
| Australia, Africa, South America | 25% | 7% | 12% | 19% | 15% | 15% |
| Middle East | - | - | - | - | - | 10% |
* – the markets which are key ones or the marketplaces where separate projects are implemented
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Russia | 42% | 71% | 72% | 86% | 79% | 24% |
| USA and Canada | 43% | 28% | 26% | 15% | 30% | 14% |
| Other countries of Western Europe | 12% | 15% | 10% | 12% | 17% | 13% |
| Ukraine | 6% | 13% | 11% | 10% | 9% | 22% |
| Other countries of the former USSR | 12% | 7% | 11% | 6% | 11% | 24% |
| Belarus | 24% | 9% | 8% | 12% | 8% | 20% |
| Germany | 11% | 10% | 12% | 12% | 14% | 18% |
| Scandinavia | 13% | 8% | 6% | 6% | 8% | 8% |
| South East Asia | 6% | 6% | 3% | 3% | 7% | 6% |
| Australia, Africa, South America | 9% | 3% | 2% | 1% | 4% | 3% |
| Middle East | - | - | - | - | - | 3% |
Vertical Markets
For the previous 10 years, no regular change in the importance of separate vertical markets was revealed. The majority of the figure fluctuations are random or temporary. In the results of 2012 survey we can only note the upward trend of mentioning the "Information Technologies" segment that reflects the increasing concentration of Russian developers in the B2B segment for technological companies all over the world. We can also note some decrease in importance of the financial and e-government sectors against a small growth of interest towards industrial production automation.
As a whole, it can be concluded that Russian export companies’ industry priorities have not changed essentially for the decade.
The only clearly revealed regularity connected with vertical markets is a sharp reduction of their total frequency of mentions during the period of crisis. In 2009-2010, software developers were forced to focus their efforts on the areas in which they were most competitive or which were least affected by the world crisis.
Only 3% of respondents mentioned "Other" (not listed) vertical markets. "International Organizations", "Advertising", "Housing and Utilities" (twice), "Agriculture", "Security companies" were mentioned.
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Information Technology | 89% | 88% | 69% | 71% | 74% | 70% | 74% |
| Banking* | 35% | 36% | 36% | 28% | 23% | 36% | 26% |
| Telecom | 34% | 44% | 33% | 29% | 26% | 38% | 31% |
| Industries | 31% | 40% | 31% | 34% | 27% | 36% | 38% |
| Hospitality, Travel & Transportation | 24% | 29% | 31% | 26% | 28% | 37% | 29% |
| Government | 28% | 38% | 25% | 28% | 21% | 31% | 24% |
| Power supply, Gas & Oil | 18% | 27% | 24% | 19% | 17% | 22% | 22% |
| Healthcare & Pharmaceuticals | 23% | 29% | 24% | 18% | 23% | 29% | 28% |
| Retail & Distribution | 35% | 38% | 24% | 21% | 26% | 41% | 29% |
| Education | 36% | 32% | 23% | 24% | 21% | 28% | 28% |
| Science & Research | - | - | - | - | 18% | 28% | 26% |
| Gambling & Entertainment | 20% | 19% | 11% | 12% | 9% | 17% | 15% |
| Media | - | - | - | - | 13% | 20% | 18% |
| Sport & Travel | - | - | - | - | 10% | 20% | 17% |
| Insurance | - | - | - | - | 13% | 28% | 15% |
| Building & Real estate | - | - | - | - | 12% | 23% | 17% |
| Services | - | - | - | - | 27% | 40% | 35% |
| Finances | - | - | - | - | 25% | 30% | 26% |
| Energy | - | - | - | - | 17% | 22% | 21% |
* before 2010 – Banking & Financial Services
Software Development Center Geographic Distribution
31% of respondents (a year ago, there were 35%) reported existence of one own remote software development center. The share of these companies varied within 25–40% during the recent years. 16% of respondents (there were 17% last year) reported two and more remote development centers while 7% of companies (last year, there were 10%) have at least three such centers.
Most of Russian companies’ foreign development centers are located in Ukraine. It can be surely assumed that this country is significantly ahead of other countries and regions by the total number of the employees working for Russian companies outside Russia. In Ukraine there have been created favorable conditions for software companies (many experts consider that these conditions are better than in Russia) and the labor cost is much lower there than in Russian capitals.
Luxoft has more staff in its production divisions in Ukraine than in Russia (about 2600 employees of nearly 6000 worldwide). In addition to Luxoft, EPAM Systems and DataArt also have their large development center networks in Ukraine.
Many Russian companies’ remote development centers also operate in Belarus and in other CIS countries. However, Ukraine has a special place as it is the second largest post-Soviet state (after Russia) by its population. According to Luxoft, there are about 38 thousand qualified programmers in Ukraine. Every year, the Ukrainian higher education institutions produce 18 thousand IT graduates who know English generally better than Russians.
The majority of the Ukrainian software development centers of Russian companies are located in Kiev (this year, there are offices of 5% of respondent companies). There are 2-3 times less development centers in Kharkov, Dnepropetrovsk and Odessa. The following Ukrainian cities are also mentioned there: Sevastopol, Kherson, Lvov, Vinnytsa, Cherkassy and Anthracite (Lugansk region).
In Belarus, the majority of software development centers are also located in the capital city of Minsk. There are also development centers in Gomel, Vitebsk, Mogilev, Alekseyevka and Brest.
Among other CIS countries, Kazakhstan is an attractive place for creation of remote development centers. The Baltic states (with cities of Riga, Vilnius, Liepaja) are also mentioned. It is quite possible that in the next 2 years several new production sites of Russian software developers will appear in Kazakhstan.
As a whole, the share of respondents who plan to expand its network of remote development centers or to create its first center, was considerably reduced in comparison with the previous year. Probably, some companies concentrated their efforts not on opening new production sites but on expansion of already existing ones. Besides in Ukraine, Belarus, and other countries, a limitation of available human resources is beginning to emerge. In any case, only 12% of respondents plan to create new development centers in 2013-2014.
Respondents have their remote production sites in 45 cities of Russia (last year, there were 46). The leading five cities, where the majority of head-quarters and of remote development centers are located, remained the same in comparison with the previous year. Kazan has gained a foothold on the 5th place and – keeping up current pace – it pretends to catch up with Nizhny Novgorod within two-three years ahead.
Rating of Russian cities (by number of companies’ head offices and remote development centers)
1. Moscow – 46
2. St. Petersburg – 45
3. Novosibirsk – 10
4. Nizhny Novgorod – 8
5. Kazan – 6
6-7. Omsk – 5
6-7. Izhevsk – 5
8-10. Voronezh – 4
8-10. Yekaterinburg – 4
8-10. Taganrog – 4
11-15. Krasnoyarsk – 3
11-15. Rostov-on-Don – 3
11-15. Ulyanovsk – 3
11-15. Perm – 3
11-15. Kolomna – 3
16-25. Kaliningrad – 2
16-25. Barnaul – 2
16-25. Belgorod – 2
16-25. Zelenograd – 2
16-25. Oryol – 2
16-25. Penza – 2
16-25. Puschino – 2
16-25. Samara – 2
16-25. Cherepovets – 2
16-25. Tver – 2
Remote development centers operate in 25 Russian cities. Most of them are located in St. Petersburg (8), Nizhny Novgorod (5), Moscow (4), Voronezh (3), Kazan (3), and Krasnoyarsk (3).
Russian export companies are present (have their head offices, remote development centers or sales agencies) in 60 Russian cities.
Rating of Russian cities (by the number of the company head offices, trade offices and remote development centers)
1. Moscow – 64
2. St. Petersburg – 52
3. Nizhny Novgorod – 12
4. Novosibirsk – 10
5. Kazan – 7
6-8. Voronezh – 6
6-8. Yekaterinburg – 6
6-8. Omsk – 6
9-12. Izhevsk – 5
9-12. Krasnoyarsk – 5
9-12. Rostov-on-Don – 5
9-12. Ulyanovsk – 5
13-15. Kaliningrad – 4
13-15. Perm – 4
13-15. Taganrog – 4
16-19. Barnaul – 3
16-19. Belgorod – 3
16-19. Kolomna – 3
16-19. Chelyabinsk – 3
20-33. Arkhangelsk – 2
20-33. Dubna – 2
20-33. Zelenograd – 2
20-33. Irkutsk – 2
20-33. Krasnodar – 2
20-33. Obninsk – 2
20-33. Oryol – 2
20-33. Penza – 2
20-33. Puschino – 2
20-33. Samara – 2
20-33. Saratov – 2
20-33. Stavropol – 2
20-33. Tyumen – 2
20-33. Cherepovets – 2
| 2008 | 2009 | 2010 | 2011 | 2012 | Planned to open a development center in 2012-2013 | Plan to open a development center in 2013-2014 | |
| In Russia | 19% | 23% | 18% | 28% | 24% | 12% | 4% |
| In Belarus | 4% | 6% | 6% | 7% | 8% | 6% | 3% |
| In Ukraine | 4% | 6% | 7% | 7% | 10% | 2% | 1% |
| In other CIS countries | 4% | 1% | 2% | 3% | 6% | 2% | 0% |
| In Western European countries | 4% | 4% | 4% | 5% | 5% | 2% | 1% |
| In Central and Eastern European countries | 3.5% | 1% | 4% | 3% | 1% | 3% | 1% |
| In USA and Canada | 3% | 5% | 4% | 3% | 3.5% | 2% | 1% |
| In South East Asia | 0.5% | 3% | 2% | 5% | 1% | 2% | 1% |
| In Africa | - | - | - | 0% | 0% | 2% | 0% |
| In South America | - | - | - | 0% | 0% | 2% | 1% |
| In the Middle East | - | - | - | 0% | 1% | 1% | 0% |
| Somewhere | In Russia | Plan to open a development center in 2013-2014 | |
| Turnover less than $0.5 million | 14% | 5% | 0% |
| Turnover from $0.5 million to $4 million | 23% | 15% | 12% |
| Turnover from $4 million to $20 million | 56% | 50% | 28% |
| Turnover from $20 million to $100 million | 64% | 64% | 9% |
| Turnover higher than $100 million | 100% | 80% | 20% |
Development centers in Moscow and in economically developed countries with a high programmers’ salary level are opened purposely either to access high competences or to support customers’ project by local engineers. Western companies are often being acquired for this purpose.
For example, in April 2013 Luxoft declared the acquisition of Freedom OSS, a US developer of corporate open source software using RedHat products. The acquisition was made in order to obtain new customers from the US financial sector.
Earlier, in the spring of 2012 EPAM Systems expanded its presence in the market of North America, having acquired for $17.4 million Thoughtcorp, a Canadian software developer with customers in retail, telecommunications, and finance. At the beginning of 2013, one more bargain with EPAM Systems participation was concluded: they purchased Empathy Lab, an American consulting company specializing in development of digital strategies and UX design.
Geographic Distribution of Marketing and Sales Offices of Russian Companies
One third of respondents have their sales offices abroad or in other cities of Russia. 12.5% of companies have only one sales office, 21% – at least two, and 12.5% of respondents have at least three sales offices.
According to the last year’s research forecasts, about 20% of respondents planned to open new sales offices. However, the total quantity of companies that have sales offices almost did not change. The situation has remained stable for 5 years. It is generally explained by the fact that major service companies take part in the survey in a regular way. The leaders among them established long ago, they create almost all new sales and support centers while small- and medium-sized service companies are developing far less rapidly. New software vendors who are promptly developing in the last 3-5 years thanks to the efforts of the State development institutes (first of all Russian Venture Company - RVC), are unwilling to participate in the research; they create their offices abroad but try not to display their Russian origin.
We should note a very small percentage of companies that have sales offices in Belarus and Ukraine, although these markets are mentioned as the most significant for respondents. Apparently, they are specified as important, first of all, from the viewpoint of developer resource availability.
There is a considerable increase in interest in the African market which was exotic for the Russian companies for a long time. 6% of respondents plan to open their sales offices in the African countries in the next two years. Last year, the corresponding figure was equal to 2%. Some companies really demonstrated their interest in the African market in recent years, but such big growth (three times) may be caused by random factors (for example, by change of the respondent structure).
| 2008 | 2009 | 2010 | 2011 | 2012 | Plan to open at least one new commercial agency in 2012-2013 | Plan to open at least one new agency in 2013-2014 | |
| In Russia | 15% | 27% | 26% | 19% | 21% | 8% | 8% |
| Abroad (in foreign countries) | 17% | 29% | 26% | 27% | 26% (17%) | - | 20% (17%) |
| In Belarus | 0% | 6% | 10% | 2% | 6% | 1% | 1% |
| In Ukraine | 1% | 11% | 14% | 3% | 6% | 2% | 1% |
| In other CIS countries | 1% | 8% | 9% | 6% | 6% | 3% | 6% |
| In Western European countries | 11.5% | 11% | 11% | 16% | 5% | 8% | 6% |
| In Central and Eastern European countries | 2.5% | 3% | 2% | 3% | 2% | 4% | 6% |
| In USA and Canada | 12% | 11% | 9% | 19% | 15% | 4% | 5% |
| In South East Asia | 2% | 3% | 1% | 6% | 3% | 3% | 3% |
| In Africa | - | - | - | 2% | 0% | 2% | 6% |
| In South America | - | - | - | 3% | 2% | 3% | 1% |
| In the Middle East | - | - | - | 3% | 1% | 4% | 1% |
| All countries and regions | 28% | 41% | 39% | 34% | 33% | 20% | 25% |
| 2008 | 2009 | 2010 | 2011 | 2012 | Plan to open at least one new commercial agency in 2012-2013 | Plan to open at least one new agency in 2013-2014 | |
| Turnover less than $0.5 million | 5% | 18% | 22% | 5% | 14% | 15% | 14% |
| Turnover from $0.5 million to $4 million | 30% | 45% | 27% | 32% | 28% | 19% | 24% |
| Turnover from $4 million to $20 million | 47% | 48% | 70% | 57% | 39% | 24% | 33% |
| Turnover from $20 million to $100 million | - | - | - | - | 73% | - | 36% |
| Turnover higher than $100 million | - | - | - | - | 80% | - | 20% |
| Turnover higher than $20 million | 56% | 75% | 22% | 31% |
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