Russia - Commercial Guide
Information Technologies

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2019-10-13
Overview>

With a population of 142 million, Russia’s IT market is one of the world’s largest, with significant potential. By 2025, there are expected to be 124 million Internet users in Russia.  According to the International Data Corporation (IDC), a global leader in market intelligence for IT, the value of the Russian IT market reached $22.6 billion in 2018.

As of 2017, 1.2 million people were employed in the IT sector (1.7% of the employed population of Russia, 2.7% of GDP). In terms of its share in GDP, the sector is comparable to energy supply (2.9% of GDP), and is lower than agriculture (4.4%), the financial sector (4.2%), the construction (6.4%), and mining industry (10.4%).

In 2017, the country's economy began to recover and about a third of the surveyed executives expected to see a positive trend in demand for IT services in 2018. Its fastest growing segments are hosting, software maintenance and administration, consulting, software customization and information security services. Market leaders believe ongoing digitalization of the Russian economy will lead to an increase in demand for IT services.

The "thawing" of IT budgets in Russia is proceeding slowly and systematically. 2018 saw more optimism among IT market participants. Increases in IT spending have been noticeable in the banking and oil and gas industries as well as the public sector.  Reflecting the structure of the economy, IT expenditures are concentrated among the 100 largest Russian companies, which account for 85% of total IT spending.

Russian IT industry experts singled out five key technological trends in the Russian market during 2017-2018:
1.             Robotic Assistance: Virtual assistants are becoming an essential component as companies seek to deliver cost effective and personalized services;
2.             Internet of Things (IoT): Russian utilities, energy, and transportation systems will become increasingly interconnected and enabled by advanced technology, leading to Smart Cities initiatives throughout the country. This type of technology-focused infrastructure development is a central component of Russia’s Digital Economy program;
3.             The all-over-platform has become an essential component of modern IT vernacular that encompasses IoT platforms, cloud platforms, virtual reality (VR) platforms, block platforms, and platforms for managing drones;
4.             Import substitution: the Russian Unified Software Register displays new solutions developed in Russia that are beginning to displace global vendors. For example, in RusHydro, EMC Documentum was replaced by a domestic electronic document management system from Lanit. Transneft has migrated from SAP to Galaxy. These examples reflect a trend of Russian companies looking for domestic software solutions.
5.             Improving time-to-market: the customer base is not only companies that currently have large installed technology bases and large IT budgets, but also entities who are playing “catch-up” with the digital economy;

Russian internet and telecom regulators have taken several actions during 2017-2018 that have elicited mixed reactions from industry participants and warrant consideration by U.S. exporters:
•              Telemedicine Law: In accordance with a January 2018 law, doctors are now officially allowed to consult patients through the internet by means of video conference calls or by phone;
•              Anonymizers and VPNs: As of November 1, 2017, VPN-services and anonymizers operating in Russia must restrict access to banned information. The list of such banned information is maintained by Roskomnadzor. Roskomnadzor has the power to block such VPN-services and anonymizers if they are found to be non-compliant;
•              Fines for illegal processing of personal data have been increased by a factor of 3-4. Additionally, the list of actionable offences has been expanded. Since July 2017, there have been seven categories of punishable offences and the maximum fine is ₱75,000 (approximately $1,190).
•              Instant Message Provider and User Information:  In accordance with the amendments to Articles 10.1 and 15.4 of the Information Law, instant message (“IM”) providers are obliged to identify users by their phone numbers as of January 1, 2018. Furthermore, such IM providers must ensure confidentiality of transmitted messages and be prepared to submit such messages to the governmental bodies upon request. Messengers are also compelled to store user identification records within Russia (not outside Russia).

Russia’s enforcement of this regulation has resulted in the blocking of millions of IP addresses perceived to be associated with the popular messenger Telegram due to its developers' repeated refusal to give regulators access to users' data. Roskomnadzor has cast a very wide net in its actions, restricting access to some IP addresses that have no apparent relation to Telegram and disrupting an array of web-based services.
•              Critical Infrastructure: The law sets the basic framework for critical informational infrastructure (“CII”) in Russia. It was adopted in July 2017 and came into force on January 1, 2018.
•              VAT: Services provided by foreign IT companies to Russian customers are subject to 15.25% VAT. As of January 1, 2017, foreign companies providing services to Russian customers via the Internet are obliged to pay Russian VAT and register with tax authorities.
•              Online Cash Registers: The online cash register law came into force in July 2017. In accordance with the law, organizations and sole proprietorships must register and use only advanced cash registers that can transmit fiscal data to tax authorities on an automated basis. This law has had a significant impact on the growing e-commerce market of Russia.

In aggregate, changes to Russia’s internet regulatory framework in 2017 exhibit competing priorities. The government is striving to enhance the use of modern technologies in everyday life, while attempting to maintain significant control over the information available on the web.

The United States is one of the leading suppliers of IT products and technologies in Russia’s highly competitive market.  The quality level of most of domestic products is lower than that of foreign manufacturers, but Russian firms are frequently trying to sell products and services at lower price points.  Google, Apple, IBM, Cisco, Oracle, Intel, Dell, and HP are among U.S. market participants that face competition from Russian firms including Kaspersky Lab, Yandex, 1C, Cognitive Technologies, EPAM Systems, CFT, Luxoft, Abbyy, Acronis, Parus, CBOSS, and Mail.Ru.

The largest local IT companies in Russia in 2019, according to TAdviser, a Russian IT-focused media outlet.
1.             Rostech corporation
2.             NCC
3.             Lanit
4.             Softline
5.             1C


According to forecasts of Russian IT industry leaders, in 2019 the domestic information technology market will continue to grow moderately. Among the main drivers of this growth, experts mention the government’s policy of building the digital economy and the rapid development of the IT services sector. The main barriers mentioned by the industry players, are difficult political conditions, sanctioned industry sectors (energy, finance, and defense), immaturity of solutions based on breakthrough technologies, and restrictions on the labor market.

Leading Sub-Sectors>

Government, Banking Industry, Oil and Gas, Transportation, Data Centers, Utilities and eCommerce

Opportunities>

Best Prospects: Cloud Computing, Artificial Intelligence, industrial IoT, Virtual Reality, Telemedicine .

Trade Events>

Integrated Systems Russia (Audio Visual Equipment)
October 23-25, 2019
Moscow


Svyaz Expo (Telecom)
April 21-24, 2020
Moscow

Web Resources>

Ministry of Digital Development, Communications and Mass Media of the Russian Federation
Roskomnadzor
IDC Research Agency (Information Technology Sector in Russia)
TAdviser (Media Portal for IT Industry in Russia)
CNews (IT Media)

U.S. Commercial Service Contact
Darya Kolesnikova, Commercial Specialist
Tel: +7 (495) 728-5579