Russia Information Technology Report Q1 2009
Market Overview Despite the recent fall in oil prices, Russia remains on course to become one of the largest IT markets in Europe.
Feb 16, 2009
Market Overview Despite the recent fall in oil prices, Russia remains on course to become one of the largest IT markets in Europe. GDP growth is expected to decelerate over the forecast period, but the total size of the IT market is now predicted to increase from an estimated US$18.2bn in 2008 to around US$44.9bn in 2013. Low computer penetration, rising incomes, and immense potential for IT spending by Russia’s traditional industries, all provide a strong foundation for optimism.
Over the next five years, economic activity in Russia is expected to shift much more towards domestic consumption, as Russian GDP per capita in US dollar terms rises from US$9,053 in 2007 to US$18,826 by 2013. IT spending per capita should increase from around US$100 to US$300 over the same period.
Such government programmes as the ‘computer for every home’ programme, and an increasing emphasis on IT as an instrument of reform in various economic sectors, will support this trend.
The fall in oil prices, from the US$150/barrel (bbl) levels that had underwritten ambitious government IT spending plans, does present a downside risk to BMI’s core forecast scenario. However, at least in H108, IT spending continued to be robust, in contrast to signs of reduced corporate expenditure in other parts of Europe. Government spending was below target in H108, but grew again, after a strong year in 2007. The Electronic Russia informatisation programme should generate around US$2.4bn in spending by 2010.
Industry Developments The government has created a new regulatory body to ensure more competition in the IT market. The head of the Federal Antimonopoly Service (FAS Russia) recently signed an order to form the FAS Russia Export Council for Development of Competition in IT. The goal of the new administrative body is to ensure more compliance with existing antimonopoly legislation related to the IT industry, and develop new proposals to improve government control of IT.
Government IT spending in H108 fell short of implied targets, leaving nearly the entire annual budget to be spent in the remaining three quarters. The shortfall raised questions about the ability of the government to see through its ambitious e-agenda over the next few years, particularly now that the price of oil has slumped from its mid-2008 high of around US$150/bbl In July 2008, President Dmitry Medvedev chaired a session of the Presidium of the State Council of the Russia Federation devoted to government strategy for ‘information society’ development. Medvedev set a deadline for the Russian government to complete the creation of new administrative rules to facilitate electronic circulation of documents. This was in support of its target of mainly electronic document circulation by 2010.
Competitive Landscape PC vendors invested in 2008 to capitalise on rapid revenues growth. Acer hoped to achieve total revenues for Russia and Kazakhstan of US$1.5bn in 2008, representing growth of 68%. To help achieve its target, Acer planned to invest US$20mn, up from just US$1mn in 2007. Much of the money was to go on developing its services network. Meanwhile, HP broke ground on a new US$50mn computer plant in St.Petersburg, which it was building in collaboration with Taiwanese manufacturer Foxconn, Acer’s parent group.
Microsoft reported that Russia was its highest-growth market among Central and Eastern European (CEE) countries in FY08, with Ukraine in second place, with both markets recording growth of above 45%. Microsoft has continued to build alliances with key partners in Russia, and in September 2008 signed a co-operation with Russia Post aimed at joint development of IT infrastructure. Microsoft also recently launched a co-operation agreement with MTS, the largest mobile operator in Russia In Q308, Russian IT giant Sitronics announced that it had completed a nearly three-year enterprise resource planning (ERP) implementation project for telecom company Comstaf, a leading provider of integrated telecom solutions in Russia and the Commonwealth of Independent States (CIS). Meanw
Over the next five years, economic activity in Russia is expected to shift much more towards domestic consumption, as Russian GDP per capita in US dollar terms rises from US$9,053 in 2007 to US$18,826 by 2013. IT spending per capita should increase from around US$100 to US$300 over the same period.
Such government programmes as the ‘computer for every home’ programme, and an increasing emphasis on IT as an instrument of reform in various economic sectors, will support this trend.
The fall in oil prices, from the US$150/barrel (bbl) levels that had underwritten ambitious government IT spending plans, does present a downside risk to BMI’s core forecast scenario. However, at least in H108, IT spending continued to be robust, in contrast to signs of reduced corporate expenditure in other parts of Europe. Government spending was below target in H108, but grew again, after a strong year in 2007. The Electronic Russia informatisation programme should generate around US$2.4bn in spending by 2010.
Industry Developments The government has created a new regulatory body to ensure more competition in the IT market. The head of the Federal Antimonopoly Service (FAS Russia) recently signed an order to form the FAS Russia Export Council for Development of Competition in IT. The goal of the new administrative body is to ensure more compliance with existing antimonopoly legislation related to the IT industry, and develop new proposals to improve government control of IT.
Government IT spending in H108 fell short of implied targets, leaving nearly the entire annual budget to be spent in the remaining three quarters. The shortfall raised questions about the ability of the government to see through its ambitious e-agenda over the next few years, particularly now that the price of oil has slumped from its mid-2008 high of around US$150/bbl In July 2008, President Dmitry Medvedev chaired a session of the Presidium of the State Council of the Russia Federation devoted to government strategy for ‘information society’ development. Medvedev set a deadline for the Russian government to complete the creation of new administrative rules to facilitate electronic circulation of documents. This was in support of its target of mainly electronic document circulation by 2010.
Competitive Landscape PC vendors invested in 2008 to capitalise on rapid revenues growth. Acer hoped to achieve total revenues for Russia and Kazakhstan of US$1.5bn in 2008, representing growth of 68%. To help achieve its target, Acer planned to invest US$20mn, up from just US$1mn in 2007. Much of the money was to go on developing its services network. Meanwhile, HP broke ground on a new US$50mn computer plant in St.Petersburg, which it was building in collaboration with Taiwanese manufacturer Foxconn, Acer’s parent group.
Microsoft reported that Russia was its highest-growth market among Central and Eastern European (CEE) countries in FY08, with Ukraine in second place, with both markets recording growth of above 45%. Microsoft has continued to build alliances with key partners in Russia, and in September 2008 signed a co-operation with Russia Post aimed at joint development of IT infrastructure. Microsoft also recently launched a co-operation agreement with MTS, the largest mobile operator in Russia In Q308, Russian IT giant Sitronics announced that it had completed a nearly three-year enterprise resource planning (ERP) implementation project for telecom company Comstaf, a leading provider of integrated telecom solutions in Russia and the Commonwealth of Independent States (CIS). Meanw