Marketing Facts on Russian ICT Industry

Alexander Egorov, Reksoft CEO and recently-elected Chairman of Russian outsourcing servicers providers association Russoft, spoke about the future of the Russian IT market in an interview with the Dutch agency Marketing Facts during its Media and Innovation business trip to Russia. 

Marketing Facts: - You're very much involved in the IT industry. Can you tell us what role the Russians will play and what kind of services they will provide for Europe?

Alexander Egorov: - We deliver a lot of intellectual property to European and American customers....

MF: - I understand Java was developed in St. Petersburg...

AE: - [laughs] Well, you know, that's confidential information... But yes, a lot of software products and systems that are well known in Western markets were developed here in Russia, Ukraine, and other countries of the former Soviet Union where the educational system, language and other aspects have been retained by the universities. Now, we are trying to find our own niche on the world IT market, which is growing fast and dominated by companies from India. China also is growing very fast. But we are closer to our customer base, and we believe that is a huge advantage. We speak the same languages, we're from the same cultural area - we've just been separated for a couple of decades [laughs]. First of all, research and development is quite broad and there are different subservices within that. We believe our strength is in intensive research and development. We help many international companies develop winning products and I think this is a good way to get rid of Russia's dependency on oil and gas and natural resources.

MF: - So you're close to Europe, you say you have the brains, you have the structure - how is the IT industry developing inside Russia?

AE: - Actually that's one of the drivers for growth. We believe one of the areas we have to work on is international exports. Another is the domestic model. IT is a service business. We have to serve our growing companies in other sectors and this is a challenging task because the rates are tremendous and companies are confronted with many, many problems in European customer relationships and so on. So there's a lot of interesting work for professionals to cope with these challenges.

MF: - Last question. The market was $25bn last year but the crisis came and everybody stopped investing and predictions are for $15bn this year, 40% down. How do Russian IT companies deal with a demand reduction like that?

AE: - I think that depends on the type of company. First of all, this forecast is the worst case scenario, and we don't believe it will be realized, but certainly there will be a drop and my estimation is that it will be about 20% or 25% this year. How to cope with that? Well, there were layoffs, of course, in many companies, but not too severe. Most of the volumes are generated come from sales of hardware and network equipment, so I believe that the remaining volumes and margins will be enough to hold the core structure of these companies. They will need to contract and wait until the bad times are gone, then continue growing from around 2011.