Among others, CRN/RE article quotes Mikhail Stepanyuk, MERLION’S Software Department Director.
According to IDC, the software market in Russia grew by 19.7 % in dollar terms and by 4.6 % in ruble terms. According to Elena Semenovskaya, Director for Research, “IDC Russia and CIS”, this considerable difference in the growth rates is caused by a higher ruble-to-dollar exchange rate last year. We should remind that The Central Bank annual exchange rate was 58.3 RUB/USD for 2017 and 66.83 RUB/USD for 2016. To a large extent, the market growth was secured by public funds."
According to Infosec data, in 2017 the Unified Procurement Information System registered IT-oriented contracts for the total amount over 670 bln rubles. This figure exceeds the previous year’s figure by 29 %.
Among all IT contracts registered by the system in 2017, 17 % of contracts received funding from the regional budget; 14 % from the federal budget; 69 % of contract were concluded with companies partially owned by the government.
Software distributors polled by CNR/RE give different estimates of the previous year, with regard to the market in whole and to related individual segments.
According to Mikhail Stepanyuk, MERLION’S Software Department Director, the Enterprise segment shows downfall on average while the SMB segment demonstrates a stable growth every year. Depending on the calculation methods, we may conclude that the market is maintaining sales volumes and even growing, but not very fast – not more than by 5 % in ruble terms. Mr. Stepanyuk explained: it is difficult to estimate the software market because it is considerably affected by certain bog deals under long-term projects.
According to Mr. Stepanyuk, in 2017 MERLION on average maintained its sales volumes at the level similar to the previous calendar year’s figures; a number of successful big deals in the Enterprise segment allowed to grow by 10 % in ruble terms.
According to Elena Semenoskaya's estimates, three segments of the software market showed the most rapid growth:
Basically, according to our respondents, the trends shaped in the Russian software market for two years were maintained last year. The main development trends are the same such as import substitution, information security, complicated project solutions and clouds.
Mikhail Stepanyuk singles out trends influencing the sales structure such as activities in the Russian-made software market; an evident growing interest in high-level virtualization (network virtualization, DSS, etc.); “unbinding” servers from hardware (both physical and cloud hardware); higher demand for software for processing large data volumes.
The bias to import substitution is being increased and involves a specific content, either new domestic software products equivalent to foreign-made software or regular plans, schedules and other administrative measures taken by state authorities.
According to Elena Semenovskaya, the import substitution factor becomes evident in certain segments of the software market, in particular:
Contrary to many expectations and despite multiple restrictions for foreign software suppliers introduced by Russian authorities in recent years, some of them managed to improve their business in 2017. <…> According to Elena Semenovskaya, this growth is associated with another trend appeared last year – the trend to business digitalization and transformation. Many large companies are developing and extending digital initiatives which require the integration with the existing systems.
The global software market becomes more cloud-oriented. Customers interested in cuts in expenditures, including expenditures for maintaining their own IT infrastructure, more often get rid of their on-premise IT systems and related software licensing models and choose cloud solutions and subscription for the desired software.
In Russia, this process is still delayed, but the trend for using software by subscription becomes more evident and, according to Elena Semenovskaya, the SaaS marking is growing and will grow three times faster than the usual software market. So far, the key customers of this service are SMB companies, but in 2017 there were some projects run by big companies related to the use of cloud technologies as quick access to innovations.
Mikhail Stepanyuk points out a rapid transition of software developers to the cloud service sales model, as well as the growth of the trend in the SMB channel. Moreover, the expansion of the SaaS segment results in a growing interest in technologies related to analytics and management of IOT operations in the cloud infrastructure.
Of course, particular attention is paid to IS in all its manifestations. The following factors have hampered a rapid growth of IS tools in recent years: wider ingress of IT into various fields, geopolitical situation import substitution policy, better understanding of the importance of IS implementation from executives.
<…>According to our respondents, no specific events that affected the distribution business were registered in the software market. But in other segments…
“Sanctions have the strongest effect. In the course of time these measures allow to understand that there are risks, even in those fields where they are insignificant and that there are no other option to substitute the software products being used and in the nearest future no alternatives can be found”, stated Mikhail Stepanyuk.
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Recently, the World Bank has issued an unpromising forecast for Russia's economy for 2018: in January, the growth by 1.7 % was reported; in June the World Bank's experts expect the growth by 1.5 % only. The World Bank has left the prognosis for 2019?2020 unchanged – 1.8% annually.
In the early 2018, Russia’s Minister of Economic Development had more optimistic assessments, foreseeing the growth by 2.1 %, 2.2 % and 2.3 % in 2018?2020, respectively. However, at the beginning of the summer season, Minister of Economy Maksim Oreshkin admitted that they need to review the macroeconomic forecast as new US sanctions affect Russia’s economy. However, the minister specified a wide range of growth rates – 1.6-2.1 %.
According to IDC’s forecast, they expect a moderate growth in the Russian software market in 2018, about 4 % in ruble terms. In dollar terms, the growth rates will depend on exchange fluctuations.
The geopolitical tension, potential imposing of new anti-Russian sanctions and expected Russia’s countersanctions along with a considerable uncertainty maintained in the Russian market offer a little room for optimism of market players.
Only Russian software developers feel more certain and positive.
We should remind that in July 2016 Russia's Government issued the order to approve a plan for transition of state authorities to domestic software in 2016?2018. For now, the Ministry of Communications and Mass Media, Ministry of Healthcare, Ministry of Culture, Ministry of Energy, Ministry of Industry and Trade, Federal Service for Surveillance on Consumer rights protection and Human Wellbeing (Rospotrebnadzor), Federal Agency for State Property Management (Rosimushchestvo), Federal State Reserve Agency (Rosrezerv), Federal Tax Service (FNS) and other departments have their own schedules to switch to home-grown software.
For instance, according to the schedule for transition of MIA agencies published online (as recommended by the Ministry of Communications and Mass Media), they should use 100 % of anti-virus programs and information and legal consulting systems developed in Russia by 2018; as for office software suites and OS, they should use 80 % of home-grown software in 2020.
<…>Mikhail Stepanyuk gives his own forecast ? “flat in all key segments”. We should expect a rapid growth in sales of cloud services, but, taking into account that the sales volume in this segments is now not more than 15 % of the total volume of the software market, this growth expressed in absolute values will not be significant
In his opinion, MERLION expects a growth in usual software sales at about 10 % in ruble terms, and as they say, the double digit growth in sales of cloud products and services. With regard to the growth trend in the segment of locally developed software, MERLION will continue to fill its portfolio with the most promising software solutions.
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