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Russia Information Technology Report Q1 2009(M2 PressWIRE Via Acquire Media NewsEdge) -www.companiesandmarkets.com adds new report: Russia Information Technology Report Q1 2009 Market Overview Despite the recent fall in oil prices, Russia remains on course to become one of the largest IT markets in Europe. GDP growth is expected to decelerate over the forecast period, but the total size of the IT market is now predicted to increase from an estimated US$18.2bn in 2008 to around US$44.9bn in 2013. Low computer penetration, rising incomes, and immense potential for IT spending by Russia's traditional industries, all provide a strong foundation for optimism. Over the next five years, economic activity in Russia is expected to shift much more towards domestic consumption, as Russian GDP per capita in US dollar terms rises from US$9,053 in 2007 to US$18,826 by 2013. IT spending per capita should increase from around US$100 to US$300 over the same period. Such government programmes as the 'computer for every home' programme, and an increasing emphasis on IT as an instrument of reform in various economic sectors, will support this trend. The fall in oil prices, from the US$150/barrel (bbl) levels that had underwritten ambitious government IT spending plans, does present a downside risk to BMI's core forecast scenario. However, at least in H108, IT spending continued to be robust, in contrast to signs of reduced corporate expenditure in other parts of Europe. Government spending was below target in H108, but grew again, after a strong year in 2007. The Electronic Russia informatisation programme should generate around US$2.4bn in spending by 2010. Industry Developments The government has created a new regulatory body to ensure more competition in the IT market. The head of the Federal Antimonopoly Service (FAS Russia) recently signed an order to form the FAS Russia Export Council for Development of Competition in IT. The goal of the new administrative body is to ensure more compliance with existing antimonopoly legislation related to the IT industry, and develop new proposals to improve government control of IT. Government IT spending in H108 fell short of implied targets, leaving nearly the entire annual budget to be spent in the remaining three quarters. The shortfall raised questions about the ability of the government to see through its ambitious e-agenda over the next few years, particularly now that the price of oil has slumped from its mid-2008 high of around US$150/bbl In July 2008, President Dmitry Medvedev chaired a session of the Presidium of the State Council of the Russia Federation devoted to government strategy for 'information society' development. Medvedev set a deadline for the Russian government to complete the creation of new administrative rules to facilitate electronic circulation of documents. This was in support of its target of mainly electronic document circulation by 2010. Competitive Landscape PC vendors invested in 2008 to capitalise on rapid revenues growth. Acer hoped to achieve total revenues for Russia and Kazakhstan of US$1.5bn in 2008, representing growth of 68%. To help achieve its target, Acer planned to invest US$20mn, up from just US$1mn in 2007. Much of the money was to go on developing its services network. Meanwhile, HP broke ground on a new US$50mn computer plant in St. Petersburg, which it was building in collaboration with Taiwanese manufacturer Foxconn, Acer's parent group. Microsoft reported that Russia was its highest-growth market among Central and Eastern European (CEE) countries in FY08, with Ukraine in second place, with both markets recording growth of above 45%. Microsoft has continued to build alliances with key partners in Russia, and in September 2008 signed a co-operation with Russia Post aimed at joint development of IT infrastructure. Microsoft also recently launched a co-operation agreement with MTS, the largest mobile operator in Russia In Q308, Russian IT giant Sitronics announced that it had completed a nearly three-year enterprise resource planning (ERP) implementation project for telecom company Comstaf, a leading provider of integrated telecom solutions in Russia and the Commonwealth of Independent States (CIS). Meanwhile, IBM has enjoyed more success in the banking vertical, signing a three-year co-operation agreement with Savings Bank of Russia (SBRF) for purchase of hardware and software solutions. Hardware According to BMI projections, hardware spending CAGR in the next five years will be in the region of 18%, and will pass US$23bn by 2013. Going forward, despite some negative economic factors, hardware spending will be driven by a number of strong fundamentals including low PC penetration, rising incomes, government IT initiatives, and industrial reform in many sectors. Russia is a hardwaredominated market, with hardware including peripherals accounting for about two-thirds of total IT spending. According to a recent survey, only 14% of Russians use a PC daily or several days a week from home, office or other places. About 3% use a PC once a week, and 78% not at all. Rapid income growth and availability of household credit will sustain an upward trajectory of PC demand. PC producers are therefore focused on retail chains, which account for 86% of total PC sales in Russia. Software Russia's software market was worth an estimated US$492mn by the end of 2008. Although Russia has the fifth-highest software piracy rate in the world (87%), BMI expects that government efforts to strengthen intellectual property (IP) protection as part of the conditions for World Trade Organization (WTO) entry will see this fall closer to average Eastern European levels, boosting the market to US$2.7bn by 2013, at a CAGR of 22%. The rapid growth of internet penetration is stimulating demand for security solutions, while there is growing demand from the corporate sector for ERP and customer relationship management (CRM) applications. The corporate market is moving beyond demand for single-function applications such as accounting, towards broader solution packages. Meanwhile, the small business market is a primary battleground for enterprise application vendors in the Russian market, with domestic companies emerging to challenge the multinational vendors. Services Russia's IT services sector is booming, as it grows from a low base, with BMI calculating a value of an estimated US$5.7bn for 2009, up from US$4.5bn in 2008. The services sector is expected to grow at a CAGR of 22% to around US$12.1bn by 2013. The overall market outlook is very positive, with growing sales stimulating demand for consulting and implementation work. Systems integration is the largest IT services component, with as much as one-third of segment revenues, and, together with implementation of hardware and software, probably accounts for about half of all IT services. However, more value-added services such as consulting and applications development are growing fast. Outsourcing is also on the rise, although below the levels in some other CEE countries. Special Focus: IT Parks The 'technopark' programme is the government's flagship policy for development of the IT sector (see Industry Developments). The main construction phase began in 2007, with a federal budget of around US$74.68mn initially assigned for the project, which is being co-ordinated by the Federal Agency for IT (see below). A new phase of funding for 2008-2010 worth some US$850mn was announced in 2007. The 'technoparks' were initially intended to be exclusively 'IT Parks', but are now actually open to enterprises in other sectors such as nano- and bio-technology, as well as IT. A plan was approved in March 2006 to construct the parks in seven regions, and the parks were expected to employ 19,000 people by 2008 and some 75,000 by 2011. Investment will be US$985mn, and the Russian IT and communications minister, Leonid Reiman, predicted that the output of the technoparks would be US$749mn by 2008, reaching US$4.4bn by 2011. So far, the St Petersburg project is the most advanced. Intra-departmental wrangling over budgets has caused some delays to many projects. State financing is expected to make up only around 20% of the funds required by the programme, which overall are likely to exceed RUB100bn. One proposal floated - for tax breaks - was not included in the current programme. E-Readiness Internet penetration was estimated by BMI to have reached around 30.1% by end-2008, representing more than 42mn internet users, up from 35mn users in 2007. By the end of 2008, BMI estimates that there were around 7.2mn broadband users, mostly DSL, and this is expected to increase to 47.5mn by 2013. The government's ambitious policy is that every locality in Russia should be provided with fixed-line telephony infrastructure, cell phone coverage and internet by 2015. According to the Ministry of IT and Communications (MITC)'s target, every populated area in the country should be provided 'irrespective of its economic 'weight' and population'. IT and communications minister Reiman has described the 'digital divide' as a very challenging issue for all CIS countries, and one that the Russian government was seeking to overcome. http://www.companiesandmarkets.com/link.asp?id=F1XQPTRM065862 ((Comments on this story may be sent to [email protected])) (c) 2009 M2 COMMUNICATIONS LTD |