Russia represents a growing and dynamic market for IT industry suppliers. The Ministry of Information Technology and Telecommunications estimated that the overall Russian IT market was worth $17 billion in 2007 with real growth of 9% over 2006. In 2008, the total lT market was expected to reach $20 billion, rising 18% in real terms over 2007. This growth rate is considered more moderate, however, as market forecasts have been revised downward due to the recent economic crisis. The previous significant increases were due to the favorable economic situation in general, the strong ruble, and high demand for IT services in both the government and corporate sectors. The latter include the oil and gas, metallurgy, financial services, telecommunications and retail industries. Given the current economic situation, growth may slow, but the numbers will remain positive. Many major U.S. companies are already present in the market and their products are available either directly or through representative offices or distributors.
At the end of 2008, the number of computers in Russia exceeded 27 million (with the number of regular internet users totaling 40 million) and total units are forecast to reach 60 million in the next five years, an average annual growth of 17%.
Core IT market segments include hardware (64%), software (11%), and services (25%). As in previous years, the hardware segment is key to the structure of the market. In terms of growth, laptops have the best prospect in the hardware segment (71% share in the first quarter of 2007). The leading manufacturers on the Russian PC market in 2008 included Acer, HP, Asus, and Kraftway. Although the hardware segment dominates, services have become the fastest growing segment of the IT market following a 30% increase in 2007.
Although intellectual property protection concerns remain, the situation for software piracy is improving. In 2008, the Business Software Alliance (BSA) reported in its fifth annual study of 108 countries that the estimated software piracy rate in Russia dropped the most of any country, declining from 80% in 2006 to 73% in 2007. The BSA attributed the decrease to software legalization programs, Russian government engagement, user education and increased law enforcement efforts.
In the IPR Side Letter, part of the U.S. – Russia bilateral agreement on WTO accession, Russia committed to address piracy and counterfeiting, and improve protection and enforcement of intellectual property rights before Russia completes its accession to the WTO. This binding Agreement also requests that Russia establish a more transparent system for the import of electronic goods with encryption, a major U.S. export.
In 2008, the market for services was the fastest growing IT segment, including consulting (60% growth), development and customization (29%), education and training (30%), outsourcing (24%), deployment and support (23%), and integration (34%).
Software in conjunction with services is also showing positive dynamics. According to 2007-2008 sales results, the best prospects in the software segment are specialized productivity products (60% growth), enterprise resource planning (51%), business intelligence (45%), and security (40%).
Continuing growth in the number and purchasing power of small and medium-sized private enterprises is driving demand for legally imported operating systems, software application packages and enterprise management software. The notebook computer market grew by 71% in 2007, and sold a record two million units. According to industry specialists, the notebook computer market accounted for 31% of the IT hardware market in 2008. Although desktops are the market’s driving force, due to increased sales to home and government consumers, they no longer dominate the market and have given way to increasing laptop sales.
The best opportunities for sales of U.S. manufactured hardware are: laptops, data storage systems, data center solutions, servers, networking equipment, communicators/PDAs and internet mobile technology. The growth of operating systems and software applications has been stimulated by growing public awareness of IPR issues and by producers’ efforts to provide product support to legal users only.
Computer hardware, peripherals, software and IT services are growing steadily and play an important role in the Russian-U.S. services trade because most high-tech equipment is imported. While at much lower rates, most experts believe that growth will continue because the current economic crisis will impact IT projects and sales less than other sectors.