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Russian IT Market Updates: Further Growth is Expected [12.01.07]

Based on IDC report, the total Russian IT market was worth $12 billion in 2005.  Yet, hardware exceeds the sales of software with its 24% growth.  According to IDC, despite some slower growth in 2006 and 2007, by 2009 total expenditures for IT products should more than double.   The Russian IT services market averages an annual growth of 25% in revenue. 

The enterprise IT market demonstrated some stable growth and will maintain an average of 20-25% during the course of the next 3-5 years.  While IT services are steadily gaining a foothold in the industry, there are still barriers in recognition of its value among Russian businesses.

Russia is gradually developing its product programming potential as well. In the big picture, frequent problems, in this sector, as well as others, include tax burden, lack of financing and experience in international marketing and funding of overseas representative offices.  Here too, grey schemes of business and administrative resources influence the way the business is done in Russia.

According to RUSSOFT, the following IT services are increasingly provided by Russian IT companies:

♦  Custom application development across the full range of application

♦  custom R&D

♦  custom design

♦  embedded systems development

♦  specialized testing

♦  software package integration

♦  translation services

In the industry at the moment there is a group of mid- and large-sized companies (from 300 to 1200 people), which is steadily growing with a pace of 40-50% annually and probably become large international players in the Russian outsourcing market. Their further growth will be limited by the existing system of professional education.  The lack of skilled personnel will increase their cost, which together with high taxes can lead to stagnation of growth in offshore programming.

Among the most advanced Russian IT companies are LUXOFT, Reksoft, Auriga, StarSoft Development Labs and VDI.  A clear example of growing importance of Russian IT is the mushrooming numbers of Fortune 500 companies that are opening their development centers in Russia.  Moscow and St. Petersburg, as well as Nizhny Novgorod and Novosibirsk, have become home to world IT leaders such as Intel, Motorola, Sun Microsystems, IBM, Boeing and Dell.

Source: GidaByte