Report wary on future of Russia's IT sector
Russia's chance of emerging as a major IT nation will primarily depend on its ability to attract venture capital and develop sufficient business culture, according to a report on Russian technology prepared by Brunswick UBS Warburg.
Dec 04, 2001
Russia's chance of emerging as a major IT nation will primarily depend on its ability to attract venture capital and develop sufficient business culture, as well as on the government's support for the sector, according to a report on Russian technology prepared by Brunswick UBS Warburg.
"Russia presents a win-or-lose case - either it manages to tap into the global tech market (through offshore programming or selling - end products and technologies), even in the currently tough global environment, or it remains stuck within its national - borders," said the report published earlier this month.
According to Brunswick UBS Warburg, Russia has a remarkable intellectual resource pool for the IT industry and, despite the brain drain of the early 1990s, it remains a world leader when it comes to its large number of engineering and science personnel. With 55 engineers per 10,000 people, Russia ranks behind Israel, the United States and Japan, but is considerably ahead of India, said the report.
But despite its academic and professional resources, Russia's IT sector faces considerable difficulties adopting reasonable business strategies aimed at increasing profitability and market capitalization, said the report. "The main reason Russia's vast intellectual capital is underutilized is the generally underdeveloped level of business culture in the Russian technology sector."
The report's authors point out that many traditional businesses in Russia have gone several steps further in adopting new business processes to help them improve efficiency than companies in Russia's IT sector. "While brick-and-mortar companies - through fair or unfair competition - have generally evolved over the past five years to the point where the focus is on maximizing profits, many IT entrepreneurs still concentrate more on personal recognition, whether monetarized or not."
According to the report, Russia's IT sector is also suffering from a lack of venture capital, with just over $100 million invested in the industry so far, compared with about $300 million in India last year alone.
The report's authors note that the lack of foreign venture capital in the Russian IT sector results from poor business culture in the sector, which provides for mismanagement and extensive coaching of investment projects.
Meanwhile, the government has not yet provided initial support for the IT industry either, according to the report. "Justifiably or not, development of the IT sector has so far not been on the government's list of priorities."
The report mentions several projects sponsored by the Russian government in the IT sector, including the $2.5 billion "Electronic Russia" scheme, aimed at the promotion of IT for business processes. Also mentioned were a $1.9 billion program of providing educational institutions with computers and Internet access and a program to support the domestic software industry.
"We consider [these projects] plausible, but are taking a cautious approach as plans laid out by the government may not materialize in their initially planned form, or may benefit individual companies and state bodies, rather than create an equally favorable environment for the industry as a whole," the report said.
"Russia presents a win-or-lose case - either it manages to tap into the global tech market (through offshore programming or selling - end products and technologies), even in the currently tough global environment, or it remains stuck within its national - borders," said the report published earlier this month.
According to Brunswick UBS Warburg, Russia has a remarkable intellectual resource pool for the IT industry and, despite the brain drain of the early 1990s, it remains a world leader when it comes to its large number of engineering and science personnel. With 55 engineers per 10,000 people, Russia ranks behind Israel, the United States and Japan, but is considerably ahead of India, said the report.
But despite its academic and professional resources, Russia's IT sector faces considerable difficulties adopting reasonable business strategies aimed at increasing profitability and market capitalization, said the report. "The main reason Russia's vast intellectual capital is underutilized is the generally underdeveloped level of business culture in the Russian technology sector."
The report's authors point out that many traditional businesses in Russia have gone several steps further in adopting new business processes to help them improve efficiency than companies in Russia's IT sector. "While brick-and-mortar companies - through fair or unfair competition - have generally evolved over the past five years to the point where the focus is on maximizing profits, many IT entrepreneurs still concentrate more on personal recognition, whether monetarized or not."
According to the report, Russia's IT sector is also suffering from a lack of venture capital, with just over $100 million invested in the industry so far, compared with about $300 million in India last year alone.
The report's authors note that the lack of foreign venture capital in the Russian IT sector results from poor business culture in the sector, which provides for mismanagement and extensive coaching of investment projects.
Meanwhile, the government has not yet provided initial support for the IT industry either, according to the report. "Justifiably or not, development of the IT sector has so far not been on the government's list of priorities."
The report mentions several projects sponsored by the Russian government in the IT sector, including the $2.5 billion "Electronic Russia" scheme, aimed at the promotion of IT for business processes. Also mentioned were a $1.9 billion program of providing educational institutions with computers and Internet access and a program to support the domestic software industry.
"We consider [these projects] plausible, but are taking a cautious approach as plans laid out by the government may not materialize in their initially planned form, or may benefit individual companies and state bodies, rather than create an equally favorable environment for the industry as a whole," the report said.