Russia:  Analysis of IT Landscape

    Russia, as stated many times in this paper and elsewhere, is a country in turmoil.  The architects of this transition to a market driven economy used "shock therapy" as the means to facilitate the process.  However, the theoretical model they used for Russia was based totally on economic reform and erroneously left out political, democratic and societal reform to accompany this transition.  It was their belief that the "shock therapy" program would itself force societal and political liberalization to compliment the market reform.  What resulted was a model that left out the very important institutional and cultural factors that made up the other foundations of the country and society.  Economics does not operate in a vacuum.  Without accompanying reforms, the "shock therapy" model as applied to Russia degraded into crony capitalism and extreme stratification of the society into those who have and those who have not.

    What does this mean for the IT landscape in Russia.  As stated in the opening paragraph on the main page, IT cannot develop and operate in a society that does not have the societal and communications infrastructure to support it.  To complicate matters further, Russia has hurt itself financially with poor fiscal decisions domestically and defaulting on loans internationally.  Now that the crisis of 1997 is starting to heal, Russia is struggling to attract more FDI and VC into the country to help rebuild the infrastructure in all sectors of the society, not just communications.  Since Russia has some very important advantages over other emerging economies in the world, such as a highly educated population, strategic geopolitical position and nuclear capabilities, the world community cannot afford to loose this country to abandonment.

    "Governements would be better off to develop plans that are highly focused and targeted toward industry sectors where they have a comparative advantage, and to work with private industry to pool resources toward common goals" (Kraemer and Dedrick, 1999). The strengths Russia should focus on in the short to mid term are its contributions to world software production as an offshore haven and use the abundant numbers of highly educated citizens in technological exchanges with the west to help them develop pockets of IT within the vast borders of Russia.  Also, like the others in the emerging world, the advantages of backwardness allows the country to focus on the advent of wireless technologies and fibre optics directly propelling them into the next century of communications.  There is no need to waste huge amounts of money and time in new fixed line networks.  The return on the investment into the new communications infrastructures will pay dividends far exceeding the costs in the long run.  The international interest in this economy is still evident from a business standpoint, but will take time to heal the wounds of the mid 90's.

    Weaknesses in the society, however, are significant and considerable.  The lack of tax collection and inability to raise FDI in Russia means the process of conversion to new networks internally will be slow and laborious.  Unless private organizations become confident in the society again, the majority of the funding will have to come from the cash strapped state.  Additionally, legal establishments must conform to the rule of law and adopt contemporary measures to ensure privacy, security and enforcement to allow the burgeoning IT field to feel secure in their investment.

    Societal hurdles are also evident.  English is the language of technology, which has not penetrated well among the population.  The inability of many to read or understand the english language will be a hindrance to adoption of technology on a personal level.  Also, following the many Ruble devaluations and lack of work in Russia, a good portion of the populous is quite poor, adding to the difficulties of the common Russian in IT adoption.  Lastly, the 70 or so years of communist rule devastated the entrepreneurial and liberal economic understanding among many in the older generation.  Without this it will be virtually impossible for the dynamic IT field to take root from the inside, at least in the short term. According to Kraemer and Dedrick the key assests to competing in the network era are 1) skilled people 2) a good information infrastructure, and 3) an environment conducive to entrepreneurship and innovation.  Currently, Russia contains the first, but seriously lacks the latter two.
 
    Communications infrastructure should be one of the most important foundations in which Russia must continue to keep as a priority.  The long term possibilities will depend on the ability of the country to adopt laws to ensure privacy, protection and ownership, enforce the laws they do adopt, ensure sound and disciplined fiscal measures at home and continue to push for strong political and civic institutions that will ensure the rule of law and develop democratically based organizations.  IT can and will develop along side of these other changes in society as Russia becomes more stable and integrated with the global economy.  To borrow a much used quote from the recent election fiasco here in the US, I would say the attitude toward Russia in IT development should be in the long term one of "cautious optimism."
 

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