PC in Russia: there is room for growth

Among the experts in the IT Channel News review article is Oleg Fomenko, CEO of the Merlion Group of Companies.

IT Channel News interviewed IT industry experts about the prospects for the PC market and published the article "PC in Russia: there is room for growth" in three parts. Among the interviewed speakers is Oleg Fomenko, CEO of the Merlion Group of Companies.

Analysts predict strong growth for the global PC market starting in 2024, and there was a certain revival in this segment in Russia at the end of 2023. Experts say that the main motivating motives for the PC fleet upgrading on a global scale should be the imminent end of support for Windows 10 and the trend towards local AI computing. But what are the drivers of growth in demand for personal computers in Russia? And if we look in general, is this market segment still attractive for the Russian IT channel?

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If you believe GfK analysts, as Oleg Fomenko, CEO of the Merlion Group of Companies points out, the Russian computer market in general looks good: "Sales of PCs and laptops in 2023 exceeded the 2022 sales in terms of money (220 and 200 billion rubles, respectively) and in pieces (3.6 and 3.2 million). These are the figures for the open market (without tenders), while the growth in tender-based sales should be just as impressive, I believe. The majority of the market was accounted for by laptops as their sales increased from 2.1 to 2.2 million units (161 and 142 billion, respectively)."

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Oleg Fomenko examines in detail the individual probable growth engines of the Russian PC market:

• "Park overhaul is always going on willy-nilly. But it is unlikely that it will be carried out en masse now simply because "the time has come". I think they'll wait a little longer. The factor has its significance, but not the one that Gartner and IDC give it, trying to at least somehow encourage the world's leading vendors.
• The end of Windows support is unlikely to happen. Security patches will continue to arrive for a long time, but they won’t – it’s easier to protect yourself from threats with an antivirus than to change a working PC if it otherwise meets business requirements.
• The world's leading analytical companies unanimously promise the triumph of AI in individual PCs, but we still don't know how much a "smart PC" will cost and whether this "mind" can be used in solving standard business problems. And, of course, the price is a major point: I saw a forecast that "Windows + AI from Gates" will require 16 GB of RAM. And this AI will also require new processors with a built-in AI chip and, as it will probably become clear closer to the point, some other bells and whistles. But it still can have an impact, for example, by the fact that it will still be possible to buy "regular" Windows and PCs with "regular" processors in 2024. We'd better gain traction.
• The market as a whole is not ready to switch to domestic software packages. Some companies have standards according to which they must use domestic products, while others are unwilling (or find it impossible) to pay the current price asked for "non-domestic" hardware and software. So there is a market driver here, but it is a little different.
• Finally, the general revival of the economic situation is, in my opinion, a fairly modest but reliable driver of growth in the PC market."

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In domestic realities, self-assembly and/or home-made assembly has been a major competitor for branded consumer-class PCs for decades. However, as the user base expanded, the segment of ready-made B2C systems became increasingly important - at least until 2022. Is this area of the domestic PC market showing clear positive dynamics today and can it generally be considered significant for the IT channel?

"The consumer segment of the Russian PC market is in good shape," says Oleg Fomenko, "if we include laptops in the PC category as well, which corresponds to the usual classification of analysts. Just look at the range of offers for gaming laptops in a large online store, for example, in our Citilink. No one will buy such an expensive product just for future use to keep it stored. And, by the way, "laptops with AI" can enter the user segment. 16 Gigabytes of RAM is offered everywhere, and a larger number of chips will not affect the price that much. Russian positions are perhaps a little weaker here than in the commercial segment; after all, foreign manufacturers have a certain head start, but that’s the current situation."

Oleg Fomenko also points to some important reasons for the lengthening of the actual service life of PCs in recent years, such as the lack of breakthrough processors and breakthrough areas of application: "They are trying their best to offer AI for this role, and we should wait and see whether it will succeed or not. And, of course, difficulties may arise with transferring the licensed Windows system to a new PC, and many people are not yet mentally ready to switch to Linux. Though we should be getting used to it already."

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Sales of "heavy" PCs, such as workstations and powerful gaming systems, make up a modest share of the total number of computers sold in Russia for obvious reasons, but they are much more attractive for the channel in monetary terms than modest "workhorses". Do high-performance personal systems still remain a narrow (albeit high-margin) niche or is the growing interest in the notorious local AI generation stimulating its expansion?

The niche of high-performance PCs, as Oleg Fomenko says, is still narrow and high-margin since "AI in every PC" is still only a project: "But will it really expand at the expense of AI? I think that AI versions of serious applications will set such system requirements that the niche will remain narrow - albeit at a different technological and, perhaps, price level."

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Are domestic PC vendors able to fully respond to market demands? It depends on the subsegment.

Domestic PC vendors satisfy the main business and consumer demands, and Oleg Fomenko is also convinced of this: "We find it hard to beat foreign competitors in the corporate segment, namely, the previously-mentioned niches of specialized solutions ("no one has yet been fired for buying an IBM", as they say). And we also struggle in the consumer segment – namely, in the segment of top-end laptops, especially gaming ones, as the brand also plays its role, among other things. As for the exact time, that’s not a question for me; I will only be glad if this happens in the near future."

The full version of the article with the opinions of other participants is available on the IT Channel News website: part 1, part 2, part 3.