Russian IT Quarterly. Issue #19, April, 2009
With the economic slowdown an international talking-point, what is going on in the Russian ICT market? This is the number one question for analysts, outsourcers and providers.
Apr 13, 2009
The fact is, with IT budgets being reduced the world over, the Russian market has experienced a definite decrease in domestic demand for the first time in five years.
Echoing the global market, Russian financial, oil and gas, and metal-working industries, previously key customers for local IT providers, have slowed their pace. Niche IT companies and local system integrators have been affected by the sudden drop in orders and the cancellation of some short-term contracts.
Some of these factors actually play into outsourcing providers' hands, however. Possessing a diversified customer portfolio, both in terms of industries and geographical location, they remain stable. At the same time, the labour pool of highly qualified specialists that had virtually dried up is being filled again by lay-offs in other sectors. Scarce ERP and document management resources are being pushed to offshore development companies. The IT salary bubble that had been growing over recent years due to high competition for IT resources has burst, while the mild fall in the ruble strengthens a competitive advantage for Russian software developers.
But what's next? We foresee two trends that might counteract each other in the coming months. Striving to retain their own personnel for the sake of social responsibility, European and Northern American companies might try to reduce the number of external consultants. Conversely, with companies looking for ways to lower expenditures, demand for offshore services might well be stimulated still further. Industries producing products and services in which IT plays an integral part (such as the automobile sector) will probab! ly have to take a closer look at Russia.
Talking about the domestic demand, Government support may become another driver for the Russian ICT market. Analysts predict a rise in the public sector of up to 30% of market capacity as a whole. Government initiatives like the 'computer for every home' programme and an increasing emphasis on IT as an instrument of reform in various economic sectors should support this trend.
With Gartner predicting annual growth of between 2.7% and 5% for the Russian market, and spring fast approaching, the current climate may not be as frosty as many have feared.
Download RIQ issue #19 here (PDF, 166Kb).
Echoing the global market, Russian financial, oil and gas, and metal-working industries, previously key customers for local IT providers, have slowed their pace. Niche IT companies and local system integrators have been affected by the sudden drop in orders and the cancellation of some short-term contracts.
Some of these factors actually play into outsourcing providers' hands, however. Possessing a diversified customer portfolio, both in terms of industries and geographical location, they remain stable. At the same time, the labour pool of highly qualified specialists that had virtually dried up is being filled again by lay-offs in other sectors. Scarce ERP and document management resources are being pushed to offshore development companies. The IT salary bubble that had been growing over recent years due to high competition for IT resources has burst, while the mild fall in the ruble strengthens a competitive advantage for Russian software developers.
But what's next? We foresee two trends that might counteract each other in the coming months. Striving to retain their own personnel for the sake of social responsibility, European and Northern American companies might try to reduce the number of external consultants. Conversely, with companies looking for ways to lower expenditures, demand for offshore services might well be stimulated still further. Industries producing products and services in which IT plays an integral part (such as the automobile sector) will probab! ly have to take a closer look at Russia.
Talking about the domestic demand, Government support may become another driver for the Russian ICT market. Analysts predict a rise in the public sector of up to 30% of market capacity as a whole. Government initiatives like the 'computer for every home' programme and an increasing emphasis on IT as an instrument of reform in various economic sectors should support this trend.
With Gartner predicting annual growth of between 2.7% and 5% for the Russian market, and spring fast approaching, the current climate may not be as frosty as many have feared.
Download RIQ issue #19 here (PDF, 166Kb).