IT Market to Free Russia From Raw Material Dependence
Experts believe that Russia has a real chance of becoming a leader on the world IT market with an annual exports of goods and services worth at least $3 billion.
Dec 16, 2004
Moscow. RIA Novosti
It is common knowledge that Russia's current economic growth is largely down to the high demand for oil and gas. The Kremlin knows full well that the country will remain the West's raw material appendage unless it develops advanced information technologies. The computerization of the economy and everyday life is becoming a critical factor in the country's competitiveness, as without IT, Russia's limited integration with the world economy is impossible, to say nothing about its G8 membership.
In point of fact, it is an area where Russia has vast potential, quite comparable with the scale of its territory.
According to Russian sources, the IT market is growing by least 25% every year. Two international marketing agencies, IDC and Gartner, are more conservative in their estimates and believe the Russian IT market will expand by 10-15% in the next few years. Nevertheless, this is still significant growth. In IDC's estimates, the Russian IT market almost doubled in 2000-2003, reaching $7.1 billion in 2003. Even oil prices have not posted such strong dynamics. However, despite these growth rates, the IT sector accounts for merely 1.4% of GDP, whereas the figure in the US is 5%. Only 14% of Russian IT products are exported in comparison with Israel's 70% and India's 80%.
Until recently, the state invested virtually nothing in IT. A nine-year government program, Electronic Russia, was only adopted in 2002. Some representatives of the IT industry have criticized it, whereas others have praised it. The former communications ministry has been renamed the Ministry of Information Technologies and Communications. A Concept for the Development of the Russian Information Technologies Industry is expected to be adopted in January 2005. The government has also set such priorities providing schools and libraries with Internet access, developing e-trade, adopting laws on e-commerce and e-documents, and providing access to state information resources.
The state will also support the IT exports by taking measures to promote Russian companies' products in the world and establishing an image for Russia as specialized intellectual property producer.
Owing to the influx of petrodollars, the government now has the funds to develop IT. "Even now, the program is being formed on the basis of the real needs of the state and the population," says Olga Uskova, president of Cognitive Technologies, a major Russian software holding. "An optimal situation has emerged in Russia: the money has appeared and the president is energetically promoting IT."
However, Russia faces some serious problems. There is still little demand for advanced technologies, there are no definite mechanisms for encouraging enterprises to adopt IT and the population has few computer skills. IT market players believe that their business is becoming increasingly dependent on bureaucrats. Officials still cannot understand that effective computer programs can be created at the touch of a button and this can earn real profits. This is why advanced information systems are being introduced slower in Russia than in the West. There are also other problems primarily related currency regulations, taxation and hi-tech exports.
Without a coherent strategy for developing IT, Russia's chances of ensuring tangible growth in this industry are slim, Viktor Nikitin, dean of the business IT department at the Higher School of Economics, stated during a RIA Novosti round table. One of Electronic Russia's innovations is to train a new generation in both management and IT skills.
President Vladimir Putin's visit to India on December 3-5 was crucial from the viewpoint of developing IT. He visited India's "Silicone Valley" - the city of Bangalore. The president spoke about the good prospects for Russian-Indian co-operation in IT and about respective state support. "We can pool our efforts to be more efficient," Mr. Putin said during a meeting with programmers at the company Infosys. "We will offer strong competition to each other without fail, so, get ready for it."
Although many Russian software producers have gained a firm foothold on the world IT market, Western software still dominates the Russian market. "What is most deplorable is that a great deal of the software Russia imports from the US and other countries was developed in Russia on orders from major US software companies," Mikhail Donskoy, general director of the Russian IT company DISCo, noted. Regrettably, the state does not place large orders with Russian software firms.
However, the government is well aware that the IT industry must be stimulated. Current growth rates cannot be maintained until 2010 without the state playing a role. There are plans to reinforce intellectual property rights in legislation, create techno-parks and establish tax and customs privileges. India's experience should be very valuable. Experts believe that Russia has a real chance of becoming a leader on the world IT market with an annual exports of goods and services worth at least $3 billion.
"We can justifiably calculate that the total IT market will grow to $40 billion by 2010," Dmitry Milovantsev, Russia's deputy minister of information technologies and communications, recently said.
It is common knowledge that Russia's current economic growth is largely down to the high demand for oil and gas. The Kremlin knows full well that the country will remain the West's raw material appendage unless it develops advanced information technologies. The computerization of the economy and everyday life is becoming a critical factor in the country's competitiveness, as without IT, Russia's limited integration with the world economy is impossible, to say nothing about its G8 membership.
In point of fact, it is an area where Russia has vast potential, quite comparable with the scale of its territory.
According to Russian sources, the IT market is growing by least 25% every year. Two international marketing agencies, IDC and Gartner, are more conservative in their estimates and believe the Russian IT market will expand by 10-15% in the next few years. Nevertheless, this is still significant growth. In IDC's estimates, the Russian IT market almost doubled in 2000-2003, reaching $7.1 billion in 2003. Even oil prices have not posted such strong dynamics. However, despite these growth rates, the IT sector accounts for merely 1.4% of GDP, whereas the figure in the US is 5%. Only 14% of Russian IT products are exported in comparison with Israel's 70% and India's 80%.
Until recently, the state invested virtually nothing in IT. A nine-year government program, Electronic Russia, was only adopted in 2002. Some representatives of the IT industry have criticized it, whereas others have praised it. The former communications ministry has been renamed the Ministry of Information Technologies and Communications. A Concept for the Development of the Russian Information Technologies Industry is expected to be adopted in January 2005. The government has also set such priorities providing schools and libraries with Internet access, developing e-trade, adopting laws on e-commerce and e-documents, and providing access to state information resources.
The state will also support the IT exports by taking measures to promote Russian companies' products in the world and establishing an image for Russia as specialized intellectual property producer.
Owing to the influx of petrodollars, the government now has the funds to develop IT. "Even now, the program is being formed on the basis of the real needs of the state and the population," says Olga Uskova, president of Cognitive Technologies, a major Russian software holding. "An optimal situation has emerged in Russia: the money has appeared and the president is energetically promoting IT."
However, Russia faces some serious problems. There is still little demand for advanced technologies, there are no definite mechanisms for encouraging enterprises to adopt IT and the population has few computer skills. IT market players believe that their business is becoming increasingly dependent on bureaucrats. Officials still cannot understand that effective computer programs can be created at the touch of a button and this can earn real profits. This is why advanced information systems are being introduced slower in Russia than in the West. There are also other problems primarily related currency regulations, taxation and hi-tech exports.
Without a coherent strategy for developing IT, Russia's chances of ensuring tangible growth in this industry are slim, Viktor Nikitin, dean of the business IT department at the Higher School of Economics, stated during a RIA Novosti round table. One of Electronic Russia's innovations is to train a new generation in both management and IT skills.
President Vladimir Putin's visit to India on December 3-5 was crucial from the viewpoint of developing IT. He visited India's "Silicone Valley" - the city of Bangalore. The president spoke about the good prospects for Russian-Indian co-operation in IT and about respective state support. "We can pool our efforts to be more efficient," Mr. Putin said during a meeting with programmers at the company Infosys. "We will offer strong competition to each other without fail, so, get ready for it."
Although many Russian software producers have gained a firm foothold on the world IT market, Western software still dominates the Russian market. "What is most deplorable is that a great deal of the software Russia imports from the US and other countries was developed in Russia on orders from major US software companies," Mikhail Donskoy, general director of the Russian IT company DISCo, noted. Regrettably, the state does not place large orders with Russian software firms.
However, the government is well aware that the IT industry must be stimulated. Current growth rates cannot be maintained until 2010 without the state playing a role. There are plans to reinforce intellectual property rights in legislation, create techno-parks and establish tax and customs privileges. India's experience should be very valuable. Experts believe that Russia has a real chance of becoming a leader on the world IT market with an annual exports of goods and services worth at least $3 billion.
"We can justifiably calculate that the total IT market will grow to $40 billion by 2010," Dmitry Milovantsev, Russia's deputy minister of information technologies and communications, recently said.