Russia Information Technology Report Q3 2008
The positive trends driving the IT market are likely to remain constant and give Russia the potential of being one of the fastest growing IT markets in the world.
Oct 17, 2008
The positive trends driving the IT market are likely to remain constant and give Russia the potential of being one of the fastest growing IT markets in the world. Against a backdrop of ambitious government ICT development plans, and an oil- fuelled spending boom, BMI projects a Russian IT market CAGR to 21% for the period until 2012. The total size of the IT market is now predicted to increase from US$13.1bn in 2007 to around US$31.3bn in 2012. Accelerating growth in computer sales in 2007 and immense potential for IT investments by Russia’s traditional industries, all make Russia a key market. It is estimated that the government has as much as US$350bn in reserves for investment to apply IT to improving areas such as education, healthcare, defence and the power sector. Increased funding has also been announced for the ambitious series of IT parks, and laws are being passed to provide tax and other incentives for companies specialising in IT. The government is keen to encourage local production, and has recently been mounting a stronger campaign against illegal imports of IT components and taking a stronger stance on intellectual property issues. Much will depend on the government’s ability to maintain an environment conducive to further development, including an effective customs regime, low import duties and generally transparent business environment.
Industry Developments
Two government measures with important implications for the software market were introduced in January 2008. A new legal code came into operation, which strengthens protection of IT intellectual property following signs of progress in the fight against software piracy. Meanwhile, VAT on software licensing agreements was abolished in the same month. A stronger government drive against illegal software may counteract any downward trend in market prices as a result of the VAT cut. The Russian government’s spending on IT projects is expected by BMI to accelerate over the next two to three years. The government has recently announced plans to introduce an e-invoice system to cover all interactions between the state and business. The system is expected to be introduced by the end of 2008. This initiative was announced following a recent IT ministry meeting to review progress in 2007 and identify challenges in 2008.
Competitive Landscape
Keen to encourage local production, the IT ministry has announced a target of developing a US$400 computer for the domestic market by the end of 2008. This has led to a tougher campaign against illegal imports of IT components. As a complement to its anti-smuggling campaign, the government is increasing, or at least not reducing, tariffs on ready made computer goods, while duties on components are being reduced. Most foreign vendors enjoyed rapid revenues growth in 2007, driven particularly by laptops. Toshiba reported 50.8% growth in laptop sales in 2007, but believes that it could have performed even better. Acer achieved 2007 revenues of more than US$1bn in the Commonwealth of Independent States (CIS) markets. Meanwhile, local companies are showing an increasing aggression to build market share. Leading local PC vendor National Computer Corporation (NCC) reported nearly 35% year-on-year growth to nearly US$1.69bn of sales in 2007. NCC subsidiary Aquarius performed even better with a 49% rise in profits last year, and sales up 85% since 2006.
Hardware
Around 20% of PCs sold in Russia are self-assembled, but BMI estimates that the Russian IT hardware market grew to a value of around US$6.9bn in 2007. The main driver of growth was falling prices, but higher internet penetration is also becoming a factor in some areas. The government is keen to increase computer penetration to speed internet adoption, and to this end is encouraging local production. In 2008 the government has announced a target of developing a US$400 domestic computer for market this year. This follows from the new ‘computer for every home’ subsidised computer programme launched by the Ministry for IT and Communications (MITC
Industry Developments
Two government measures with important implications for the software market were introduced in January 2008. A new legal code came into operation, which strengthens protection of IT intellectual property following signs of progress in the fight against software piracy. Meanwhile, VAT on software licensing agreements was abolished in the same month. A stronger government drive against illegal software may counteract any downward trend in market prices as a result of the VAT cut. The Russian government’s spending on IT projects is expected by BMI to accelerate over the next two to three years. The government has recently announced plans to introduce an e-invoice system to cover all interactions between the state and business. The system is expected to be introduced by the end of 2008. This initiative was announced following a recent IT ministry meeting to review progress in 2007 and identify challenges in 2008.
Competitive Landscape
Keen to encourage local production, the IT ministry has announced a target of developing a US$400 computer for the domestic market by the end of 2008. This has led to a tougher campaign against illegal imports of IT components. As a complement to its anti-smuggling campaign, the government is increasing, or at least not reducing, tariffs on ready made computer goods, while duties on components are being reduced. Most foreign vendors enjoyed rapid revenues growth in 2007, driven particularly by laptops. Toshiba reported 50.8% growth in laptop sales in 2007, but believes that it could have performed even better. Acer achieved 2007 revenues of more than US$1bn in the Commonwealth of Independent States (CIS) markets. Meanwhile, local companies are showing an increasing aggression to build market share. Leading local PC vendor National Computer Corporation (NCC) reported nearly 35% year-on-year growth to nearly US$1.69bn of sales in 2007. NCC subsidiary Aquarius performed even better with a 49% rise in profits last year, and sales up 85% since 2006.
Hardware
Around 20% of PCs sold in Russia are self-assembled, but BMI estimates that the Russian IT hardware market grew to a value of around US$6.9bn in 2007. The main driver of growth was falling prices, but higher internet penetration is also becoming a factor in some areas. The government is keen to increase computer penetration to speed internet adoption, and to this end is encouraging local production. In 2008 the government has announced a target of developing a US$400 domestic computer for market this year. This follows from the new ‘computer for every home’ subsidised computer programme launched by the Ministry for IT and Communications (MITC