Expert RA

RA Expert Studies Russia’s IT and Communication Market in 2007

April 21th, 2008

The rating agency RA Expert has studied the Russian IT and Communication market (ITC) in 2007. The study showed that the IT market had made a definite leap in 2007: the revenues of the IT companies that participated in the rating totaled nearly 350 billion rubles or 43 % up against 2006.

RA Expert analysts believe that this great upturn of the total revenues does not fully reflect the market growth rates. If stripped of their distribution and resale figures these revenue gains may appear to be more representational. In 2007, they were 26.2 % against 29.6 % a year earlier.
The year before the last, our study found a growing demand for large scale IT projects. The last year showed which of the players could both feel the market situation and make the most of it. In the first place, they were major diversified holdings, which could not only sell software products and equipment but also provide better intellectual services.

The State continues to be the main driving force on the market as orders from state organizations generate about 25% of all the revenues the participants of the rating have received for the past few years. The relative calm in 2006 was followed by an upsurge in orders in 2007. It was not until 2007 that the previously unveiled national projects entered their active stage due to the fact the last year was eclipsed by the coming parliamentary and presidential elections. Major integration projects now under way to fulfill government orders helped boost the supply of software products and equipment with the revenues of the rating participants going up by over 90 % in this segment.

There was a major gain in revenues in 2007 for software developers as their sales in this market segment soared 46 %, which RA Expert analysts say is far from being the limit. The positive results in the software section stem largely from last year's antipiracy campaign, which speeded up the transition of Russian business and government organizations to the use of licensed software products and the ambitious task of creating open source software. This year will see another upsurge in the growth of software developers and sellers resulting from the abolition of the VAT on software products effective from January 1, 2008.

The IT services sector, which involves consulting, integration, support services, including outsourcing, training and certification, showed lower growth rates than those of the software developers. The total revenues of providers of IT services increased by 30 %. Analysts predict that outsourcing of business processes may prove in the future to be a point of increase for the IT services market. This has been caused by the fact that that requirements for IT specialists’ qualifications have become too high for companies to find it still profitable to maintain all necessary IT processes on their own. There have been qualitative changes in the demand from business structures. For instance, large companies tend to shift from building an IT infrastructure to supporting and developing information systems, and there is every reason to believe that this trend will determine future market development.