Distribution of ICT products (Russian market)

2021: Year Results and Projections

About what factors affect the Russian IT distribution market, what is its dynamics and potential, TAdviser spoke with the largest companies operating in the market.

Market Volume and Dynamics

Distribution for the Russian IT market remains one of the key areas. At the same time, the IT distribution segment is growing markedly, all market participants surveyed by TAdviser agree. General Director of Marvel-Distribution Alexei Melnikov estimates the volume of the domestic IT distribution market in 2020 at 1.2 trillion rubles, and in 2021 - at more than 1.3 trillion rubles. That is, the market over the year grew by a little more than 8%.

Other market participants believe that it grew much faster in 2021. According to Grigory Sverdlikov, CEO of Treolan (part of the Lanit group), this year the market increased by 20% compared to the previous year.

Due to the pandemic, which has become the main driver of market growth, demand for IT has increased markedly. And this trend will continue in the near future. Unlike all previous years, there is a real tangible growth in sales, which is significantly ahead of all expectations, "Grigory Sverdlikov shared his assessment with TAdviser.

At the same time, the pandemic put its imprint on the market: the directions of IT distribution grew unevenly. In 2020, many customers were forced to quickly revise their IT budgets, purchase large batches of personal computers and laptops to transfer employees to a remote location. According to the CEO of diHouse (part of the Lanit group) Yury Rodny, in 2020 the demand for laptops increased significantly, which were sold 40% more than in 2019, and already in 2021 sales fell by a third compared to the previous year. At the same time, in the same 2020, demand for infrastructure solutions decreased, companies began to purchase cloud services more often. IaaS

Events and Trends

The Russian IT distribution market is changing markedly due to three key factors:

• worldwide semiconductor deficiency;
• strengthening the role of the state and import substitution policy;
• Development of digital sales channels.

Semiconductor deficiency

As all participants in the TAdviser survey noted, the global shortage of semiconductors also affected the domestic market. Russian companies have to compete for products with world giants. Moreover, the shortage affected the entire range of IT equipment, ranging from smartphones to complex enterprise-solutions.

Softline Ecommerce Director Yulia Kurysheva says that now, due to a shortage in the chip market, many even standard positions are issued only on order and waiting for their delivery can reach four weeks. Previously, such deadlines were allowed only for specialized equipment.

According to Alexander Sysoev, Head of Computing Infrastructures at Krok, due to the semiconductor crisis in the IT equipment market, delivery times and, as a result, the timing of IT projects have significantly increased. Moreover, the range of solutions offered to the customer has been reduced, as a result, companies are forced to adapt to new conditions and when buying equipment take into account not only its technical characteristics, but also the delivery time.

The distribution market faced the strongest challenge in 2020 - the semiconductor crisis. It will affect the business of solution providers and customers in the coming year. The crisis is global, so it is virtually impossible to fight the situation. It is necessary to lay down extended delivery times in the project and strive to optimize the infrastructure as much as possible, or use cloud resources if security policies allow, "said TAdviser Alexander Sysoev from Krok

Due to a shortage of semiconductors in the IT equipment market, delivery times have increased significantly

Import substitution

The import substitution program started several years before the pandemic, but in 2021 the state increased pressure on state-owned companies, so in April the directives of the Government of the Russian Federation "On ensuring the development (updating) of a strategy (program) for digital transformation until 2024" were published. As a result, not only domestic brands began to appear in the portfolio of distributors, but also deeply localized equipment of world vendors and even products produced under their own trademarks.

The general director of Marvel-Distribution, Alexei Melnikov, says that the trend for import substitution appeared about five years ago, even then the distributors were negotiating with Russian manufacturers.

At first there were many problems: few believed in the very idea of ​ ​ import substitution. Many domestic vendors did not understand why they should work with the distributor. Today we see that large distribution companies are launching their own import substitution projects. The state course pushed our market from the traditional model to the search for a new role and meaning, and this leads to the development of new competencies and the emergence of growth points, "said Alexei Melnikov.

According to Alexander Rozhkov, Director of Products and Technologies of the T1 Group (formerly Technoserv), regulatory requirements for mandatory installation of Russian software on smartphones, restrictions on public procurement of foreign IT equipment stimulate distributors to take initiatives in the field of import substitution. Distributors launch their own production of hardware solutions, component them with domestic system software. Then they register such decisions in the register of domestic products of the Ministry of Industry and Trade, hoping to increase the chance of participation in the procurement of state-owned companies.

Consultations of state corporations and authorities on import substitution in IT for many distributors have become an important business area. However, even in the field of software, where there are mature Russian solutions, import substitution does not always go smoothly. So, the director of marketing and regional development of Mont Andrei Sungurov draws attention to the fact that some Russian products are bought more for tick than for real use. In his opinion, Russian companies need to seriously invest in technical support, the development of sales channels and the popularization of iconic cases. At the same time, he assures that Mont successfully implements domestic software.

Digitalization of distribution

The Russian distribution market for IT equipment is rapidly changing, both the mass and the project distribution market. And companies are forced to adapt to it, rebuild logistics, transform models, and develop new competencies. Increasingly, distributors have to work with the end user, for example, the rapid growth of marketplaces forced many companies that had not previously done this to go to direct sales, launching the Direct to Consumer (D2C) direction.

Yulia Kurysheva from Softline believes that an active change in the market dates back to 2017, when companies began to change and began to hire strong specialists. As a result, customers of distributors began to better understand their needs and better set tasks for suppliers. Accordingly, distributors also had to change.

According to Alexander Rozhkov of T1, by 2019, most large distributors have already laid the foundation for the development of the digital business. The companies launched their own online stores, marketplaces, B2B portals for online sales to dealers, introduced express delivery services, and robotized warehouses.

Moreover, digital sales channels were developed by all market participants, regardless of the segment in which they work. As Alexey Melnikov from Marvel-Distribution notes, distribution models of consumer equipment and corporate-class solutions are becoming more and more similar to each other. In his opinion, there are three reasons:

• the distributor today must be competent in both areas;
• In the project business, the role of system integrators is reduced due to the fact that the share of integrators affiliated with end customers is growing;
• The volume of direct sales of the distributor in both directions increases, which also erases the differences and boundaries.

Forecast for future years

According to all representatives of the IT distribution market interviewed by TAdviser, this segment will continue to grow in the coming years. According to Yulia Kurysheva of Softline, the company expects stable growth both in the distribution segment of domestic equipment and foreign production. The situation with delivery dates should normalize as early as 2023. At the same time, the company intends to bet on the development of its own products.

Alexander Rozhkov from T1 is convinced that the IT distribution market will, of course, grow, but the problem of microarray deficiency will not disappear anywhere until 2024, when they will finally give the effect of the state program for the development of local production of semiconductor products. At the same time, vendors are launching digital platforms that encourage partners to move from traditional distribution services to managed value-added services, as well as the subscription model.

The head of Marvel-Distribution, Alexei Melnikov, believes that the IT distribution market will grow, and at the same time the shares of the largest players will increase.

The market appreciated the services for managing various risks of partners and vendors and will strive to further transfer them to distributors. From the point of view of work in the project business, those who have a system program for participating in import substitution will be in favor. In the consumer market, those companies that develop the D2C direction and actively work with marketplaces will receive additional opportunities, "Alexey Melnikov shared with TAdviser.

At the same time, many of the market participants surveyed are confident that customers will increasingly purchase cloud infrastructure, including in order to save on the purchase of equipment.