2009-11-04 08:51:02 - Russia Information Technology Report Q4 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/russia-informa ..

Market Overview

BMI projects that Russian IT spending will contract by 12% in 2009, before recovering to grow at an 11% compound annual growth rate (CAGR) to a value of around US$22.8bn by 2013. A marked contraction occurred in PC sales in H109, with shipments reportedly down by more than 30% year-onyear (y-o-y) and steep falls in imports. Software and IT services sales were relatively less affected, but could not escape the negative effect of the decline in the PC market. Overall the total IT market seems likely to have contracted by a double-digit factor in H109 as economic conditions continued to worsen. Looking forward, Russia is still on course to emerge as one of the largest IT markets

 

 

in Europe, even if this is at a slower rate than previously expected. Growing computer penetration, government information and communication technology (ICT) projects and immense potential for IT spending by Russia´s traditional industries all have potential to drive an increase in IT spending per capita from around US$105 to US$165 over the 2009-2013 period.

Industry Developments

The Russian government has suggested that it will consider new measures if necessary to drive Russian government bodies to achieve key e-government targets. In a strongly worded speech in August 2009, President Medvedev said that progress on e-government projects had been ´a disgrace´ and threatened to introduce financial penalties for government bodies that failed to meet targets. The Russian president pointed to a number of projects where ´no real progress´ had been made. These included: The development of the inter-agency electronic document management system; Setting up a fully fledged online public procurement system; Establishing a unified system of state registration of the results of scientific research and experiment and design work. The president´s address echoed similar remarks made in May 2009 by Prime Minister Putin, who also called for urgent drafting of a new e-government programme for the period up to 2015.

Competitive Landscape

Vendors felt the effects of difficult trading conditions in Russia´s PC market in H109. Most multinational vendors reported steep falls in shipments, but some Asian vendors such as Acer, Asus and Lenovo appeared to fare relatively better. Although PC sales have grown at a double-digit CAGR over the last few years, local brands and assemblers still dominate the market. Software market leader Microsoft said in June 2009 that it planned to double its sales in Russia within three years. Microsoft had previously announced in April 2009 that it was to invest US$300mn dollars in Russia over the same period. Russia was its highest growth market among Central and Eastern European (CEE) countries in FY08, ahead of Ukraine in second place, with both markets recording growth of above 45%. Meanwhile, foreign IT services vendors such as IBM have continued to win contracts based on their reputed expertise. In 2009 IBM won a major contract from Russian Railways. The project, scheduled for completion in 2010, includes migration of freight and passenger management systems, and financial management applications, to three new consolidated, disaster-proof data centres.

Hardware

The Russian PC market is forecast to contact 18% in dollar terms in 2009. However, PC market CAGR for the next five years is projected to be in the region of 12%, reaching about US$9.8bn by 2013. Despite adverse economic trends, hardware spending has support from a number of fundamental drivers including low PC penetration, rising incomes, government IT initiatives and industrial reform in many sectors. In Russia, demand for computer hardware including peripherals accounts for about two-thirds of total IT spending. According to BMI projections, the computer hardware market is forecast to drop to US$7.8bn this year, from US$9.6bn in 2008. The PC market is thought to have fallen by at least 30% y-o-y in H109, and with rising unemployment, economic uncertainty and currency weakness affecting consumer confidence, the downturn is likely to be prolonged.

Software

The domestic software market is forecast at around US$3.1bn in 2009. Although Russia has the fifth highest software piracy rate in the world (87%), BMI expects that government efforts to strengthen IP protection as part of the conditions for WTO entry will see this fall closer to average Eastern European levels, boosting the market to US$4.8bn by 2013. There are, unsurprisingly, regional disparities, with Moscow some way ahead of its closest rival St Petersburg in terms of enterprise resource planning (ERP) deployments. The economic headwinds represent a challenge for software vendors, as enterprises have an increased tendency to focus on the bottom line and defer spending on systems. However, in 2008 companies in key sectors such as telecoms continued to invest in software. In the current economic environment, vendors will want to pitch the potential efficiency savings offered by new applications.

Services

BMI projects an IT services market value of slightly below US$4.0bn in 2009, down from US$4.2bn in 2008. The IT services opportunity is expected to grow to around US$6.2bn by 2013, as the IT market gradually recovers from recent external shocks.&The broader use of ICT in government and other sectors will ensure an upwards market trajectory in the medium term. 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. E-Readiness The government´s ambitious policy is that every locality in Russia should be provided with fixed-line telephony infrastructure, mobile 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. Internet usage is forecast to see robust growth over the remainder of our forecast period, to reach over 52% of the population in 2013. However, the current tight credit markets are limiting the ease with which broadband operators are able to source much-needed funds to invest in broadband network proliferation.

Coupled with the economic uncertainty, this is creating a troublesome environment for operators to plan their investment decisions. That said, growth will still be strong, it just will not meet its full potential. Competition between the incumbent´s holdings and alternative operators such as Comstar-UTS, Golden Telecom and Net By Net will continue to drive the sector forward. Continued expansion of networks, both fixed and wireless, should see penetration increasing in the regions, while uptake remains strong in the more urbanised areas. Alternative technologies such as WiMAX and fibre will also play their part in expanding the market, by introducing competition as well as offering services over a wider area.