ICT Channel in Russia

Russia represents by far the highest market potential in EMEA and continues to maintain very extensive economic and political authority in the region. The most important geographical area has a rather small population density which is in decline. The country still maintains a very strong influence on ex-territories like Ukraine and Byelorussia.

At the same time, its ICT channel is expanding in the context of a necessary state of economic development and in an environment marked by a lack of business transparency and a significant presence of the grey economy.

The Russian ICT market is currently undergoing plenty of changes as the opportunities seem unlimited, the market is vast and there is still a lot to do in many sectors. The Russian IT market seems to be closely related to overall economic evolution, but most of all to the primary resources market.

More than two thirds of IT revenue is generated by the public sector, supporting the necessary development of their technological infrastructure. A great number of products and services are therefore intended for this sector.

Characterized by two digit growth in the past two years, investments in the sector -- both inward, as well as at company level - are expected to slow down until the critical period will pass. However, the lack of technology in certain key sectors such as manufacturing or even food may still benefit the IT industry. The country’s infrastructure also suffers from a delay in development.

The Central region which includes the capital city Moscow represents the most important growth cluster for the ICT sector; it concentrates about 37% of the channel players. The Northern region comes second (with a 19% concentration rate), while the former industrial Ural region has about 13% of the ICT channel players. Retail plays a more important role given the current increase in demand for home electronics products. Regarding the sales methods, the traditional sales techniques (field sales and in-store sales) continue to dominate the channel at an 80% rate, while online and delivery sales are gaining importance, moving beyond single digits.

One of the countries most interested in the Russian channel is the United States, attracted by the great potential for growth and lack of maturity in the Russian ICT market. However, Russia has traditional know-how in the sector and its products and services are finding increasing demand from abroad. Half of the IT revenue comes from hardware sales and Russian hardware retail is strongly dependent on consumers’ behaviour. More than 80% of revenues from hardware sales are generated by B2B clients, and, more precisely, from large corporations.

The Russian IT software industry is developed; numerous Russian companies have built their reputations in both the domestic market and internationally. Additionally, outsourcing of software services to Russian companies for reasons of cost generates 7% of the total IT revenues. The antivirus sector is a Russian specialty, and their distribution network extends to over 60 countries. This market is expected to pursue its expansion, together with other cost effective markets such as server virtualization

The growth in ERP solutions is comparable to overall growth in the sector. The market also shows great interest for BI solutions, as lately consulting has experienced a growth trend. However, the diminution of marketing budgets will strongly impact the software market sector.
One of the main constraints of the Russian software market remains piracy: estimates indicate that more than two thirds of existing products on the market are pirated.
The telecommunications sector is expanding and the telecom infrastructure is continually improving. The best sales prospects are considered to be broadband technologies, as well as the latest mobile services.

Russian products gain more and more weight internationally, as current conditions make national products more competitive, given the devaluation of the national currency.