IT in the Russian Federation

Russia: Domestic Production: Software Development, Hardware Manufacturing, R&D

Overview

The Russian Software Development market is poised to be a key play in international software outsourcing competing with the largest players in the market such as India, China, and Ireland.  In Russia, its main advantage is the generally high level of education of its workers especially in the science and engineering fields.

Key Stats

  • Software Exports for 2001 were close to $150M (57)
  • Some estimate Russian IT Outsourcing to be close to $350M by 2005 (57)

Software Development

Russia’s IT exports are mainly focused in the software industry.  This market is significantly underleveraged.  There are several niche packaged software players that specialize in optical character recognition (OCR), anti-virus, and gaming. They are: (57)

  • ABBYY Software House
    • 2nd largest global OCR software producer, with 10-20% share in some European markets
  • Kaspersky Lab
    • Top 10 global seller of anti-virus software
  • 1C
    • Number 1 accounting software company as well as dominant gaming developer and producer
  • Parallel Graphics
    • Leading developer of web and wireless low bandwidth integrated rich media 3D simulation products for large industrial applications
  • Spirit Corp DSP Software Source
    • Supplies algorithmic technology to Texas Instruments for its DSP 5000 series

The majority of exports are customized software development or offshore programming due to Russia’s strong traditions in scientific education.  Russia is working to reach the stature of other outsourcing leaders in the IT industry.  “Many of the programmers at the higher levels have a great deal of respect for the Russian technologies,” said Paul Swengler, and American hired by Enterra, a Russian software development outsourcing company. (52) 

Russian firms generally market the quality of their work instead of lower fees, according to research firm Aberdeen Group. (52)   Typical Russian programmer fees run between $20 and $35 per hour in comparison to $35 to $60 an hour an American might charge.  Still rates are significantly higher than most Indian programmers earn for simple computer coding.  Russian IT companies tend to prefer intensive projects where they can diagnose a problem and find a solution.  In contrast, Indian companies are better known for nut-and-bolts programming Stephan Lane, a research VP for Aberdeen said. (52)

 Leading Outsourcing Players: (57)

  • Luxoft
  • Aukiga
  • VDI
  • Spirit Corp
  • Star

 Barriers to growth for all Russian Software Product Companies are: (57)

  • Piracy
  • Lack of early stage funding
  • Lack of qualified management
  • Lack of sales and marketing orientation
  • Lack of global network

Hardware Production

Russia does not produce many basic technology products although local computer assemblers control about 80% of the PC market. (51) Interestingly enough, Russia is manufacturing communication satellites for both domestic use and export of parts.  As of Dec 1998, most satellite manufacturers in Russia are former defense enterprises that have become more open to international business.

 As for distribution, in the past, PC makers had to go to a major city to buy computer components, get them on a plane, and guard them against thieves before they could be used in assembly. By the end of 2002, distributors began setting up regional warehouses and arranging secure transportation. (51)

 

Contact Me | ©2004 Sarah C. Waylett