How anti-Russia sanctions, oil prices and ruble influenced Russian IT industry export? What will become of it in 2015?
Based on preliminary results of yearly Russian Software Export Industry Survey and results of RUSSOFT representatives participation in Global Technology Symposium in California
Apr 19, 2015
RUSSOFT representatives, including top managers of Competentum, SoftJoys, FirstLineSoftware, Ascon, SmartStaffing, and Association’s president, have just returned from California where they participated in Global Technology Symposium (GTS, April 1-3 2015, San Mateo, CA). Right before going to the US we had finished analysis of preliminary results from our annual software export industry survey, so it seemed to be interesting to compare our data and impressions from meeting US venture investors and startup leaders (and also Russian and Ukrainian IT-diaspora, who made up the most of the GTS participants). It’s worth to mention that this year GTS had over 400 participants, making it one of the largest hi-tech events with active Russian participation in the US.
The important result of our survey is that Russian developers regard influence from oil prices dropping, ruble devalvation, and anti-Russia sanctions as negative, but not crucial to the industry.
These factors led to lowering export grow rate from 16% in 2013 to about 10% in 2014 (gross volume of export sales is estimated at $5.7bln). In 2015 respondents expect growth rate to leap back to 20% (and reaching $6.7-7.0bln in volume).
The expectations are based on the February 2015 truce in Ukrainian conflict; the fact that the process of relocating of Russian IT companies human resources from Ukraine to neighbor countries (Poland and Belarus) was mostly over before the end of 2014, and keeping ruble-based salary at the same level while the Russian currency lost its’ price.
Active negotiations with existing customers and partners allowed to keep most of the existing contracts running. Another peculiar result of the Russian economy crisis: active cuts of IT departments and moving to outsourcing solutions (from 7% in 2013 to 15% in 2014) of Russian business led to lowering the deficit on the labor market of the IT industry. It’s demonstrated with decrease of employment turnover from 10% in 2013 to 5.5% in 2014.
As a result of all the above, for example, first quarter of the 2015 in Saint-Petersburg experienced simultaneous raise of quantity of IT industry vacancies (21%) and Cvs (39%), according to HeadHunter agency.
We also found out that real foreign business, unless directly connected with the US State Department or EU governing agencies, wants to and will work with Russian companies, ignoring negative information campaign and sanctions.
In this regard the optimism of Russian survey participants (in 2015-2016 26% and 24% of respondents respectively plan to attract investors as opposed to 9% who did it in during 2010-2014) comes in clash with US investors at GTS who unanimously claimed that they do not plan to invest in Russian IT in the near future.
It seems that the reason of this contradiction is the lack of information regarding Russian IT industry in the US. Judging by the audience reaction to the information presented by Russian participants on the RUSSOFT panel on the first day of GTS their impressions are based on at least 3-5 months old data.
The RUSSOFT panel (with RUSSOFT as a main sponsor) became a revelation to the GTS participants: the facts presented demonstrated positive dynamics in the first quarter of 2015 and Russian IT industry optimism regarding upcoming years. The optimism was further reinforced with Kelly Services data, made public in Saint-Petersburg HR Forum a week before GTS.
According to Kelly Services the number of requests for hiring Russian developers or establishing development centers in Russia is growing weekly due to devaluation of rubble vis-à-vis UDS. RUSSOFT practices confirm it as well, with Association receiving more requests for outsourcing and software development partner search since the moment of rubble fall beginning.
The important secondary effect of the Russian IT export growth rapid recovery was careful yet obvious restoration of mutual interest between Russian and Ukrainian developers. Cooperative initiative of Russian version of software engineering glossary by Russian and Ukrainian scientists and teachers being the perfect example.
The important result of our survey is that Russian developers regard influence from oil prices dropping, ruble devalvation, and anti-Russia sanctions as negative, but not crucial to the industry.
These factors led to lowering export grow rate from 16% in 2013 to about 10% in 2014 (gross volume of export sales is estimated at $5.7bln). In 2015 respondents expect growth rate to leap back to 20% (and reaching $6.7-7.0bln in volume).
The expectations are based on the February 2015 truce in Ukrainian conflict; the fact that the process of relocating of Russian IT companies human resources from Ukraine to neighbor countries (Poland and Belarus) was mostly over before the end of 2014, and keeping ruble-based salary at the same level while the Russian currency lost its’ price.
Active negotiations with existing customers and partners allowed to keep most of the existing contracts running. Another peculiar result of the Russian economy crisis: active cuts of IT departments and moving to outsourcing solutions (from 7% in 2013 to 15% in 2014) of Russian business led to lowering the deficit on the labor market of the IT industry. It’s demonstrated with decrease of employment turnover from 10% in 2013 to 5.5% in 2014.
As a result of all the above, for example, first quarter of the 2015 in Saint-Petersburg experienced simultaneous raise of quantity of IT industry vacancies (21%) and Cvs (39%), according to HeadHunter agency.
We also found out that real foreign business, unless directly connected with the US State Department or EU governing agencies, wants to and will work with Russian companies, ignoring negative information campaign and sanctions.
In this regard the optimism of Russian survey participants (in 2015-2016 26% and 24% of respondents respectively plan to attract investors as opposed to 9% who did it in during 2010-2014) comes in clash with US investors at GTS who unanimously claimed that they do not plan to invest in Russian IT in the near future.
It seems that the reason of this contradiction is the lack of information regarding Russian IT industry in the US. Judging by the audience reaction to the information presented by Russian participants on the RUSSOFT panel on the first day of GTS their impressions are based on at least 3-5 months old data.
The RUSSOFT panel (with RUSSOFT as a main sponsor) became a revelation to the GTS participants: the facts presented demonstrated positive dynamics in the first quarter of 2015 and Russian IT industry optimism regarding upcoming years. The optimism was further reinforced with Kelly Services data, made public in Saint-Petersburg HR Forum a week before GTS.
According to Kelly Services the number of requests for hiring Russian developers or establishing development centers in Russia is growing weekly due to devaluation of rubble vis-à-vis UDS. RUSSOFT practices confirm it as well, with Association receiving more requests for outsourcing and software development partner search since the moment of rubble fall beginning.
The important secondary effect of the Russian IT export growth rapid recovery was careful yet obvious restoration of mutual interest between Russian and Ukrainian developers. Cooperative initiative of Russian version of software engineering glossary by Russian and Ukrainian scientists and teachers being the perfect example.