Era change in the Russian IT industry Ambiguous results of 2022

The largest foreign vendors have left. At the same time, the market was not empty, but did not become sovereign either

The most high-profile information reasons of the outgoing year concerned the closure or suspension of the activities of Russian representative offices of the world's leading IT companies: Microsoft, Oracle, SAP, Dell, SAS, Huawei, NVidia, IBM, etc. These vendors annually sold billions of their products in Russia, and someone for tens of billions of rubles.

Is the market empty due to their departure? It looks like not. But there is no need to say that he became sovereign overnight either.

The Russian IT industry is undergoing an era change

The balance of vendors strongly depends on the segment. For example, in software now the overwhelming number of solutions are Russian, their number will grow. But in servers and DSS there are Western (thanks to parallel imports), and Asian, and even noticeable Russian manufacturers, - said TAdviser Alexei Melnikov, managing partner of the F + tech group, the head of Marvell Distribution, one of the three largest IT distributors in Russia. - The empty market cannot be called for sure. On the one hand, import substitution, which had previously slipped, ceased to be a speculative concept, and began to develop significantly. On the other hand, thanks to manufacturers from friendly countries and parallel imports, it is quite possible to find the necessary solutions in one way or another (especially if in some cases the issues of price and delivery time are left behind).

Moreover, the market is not just not empty in terms of assortment, it has not decreased in terms of sales volumes either. If we count in the number of brands, then from the F + tech portfolio, according to Melnikov, 25-30 percent went, but if we talk about turnover, then at the end of 2022 it grew.

"The demand for domestic or unauthorized solutions and goods during the year became not just very high, but sometimes critical, so we do not have a single direction where we would not sign new vendors and did not fill the gaps," he adds.

The choice of Russian, software indeed, is great. For example, only domestic system developers virtualizations claiming to become an alternative for customers VMware and at Citrix least 15 (see the TAdviser study on this topic). In many other segments - from ON and to and - BI EDMS CRM the situation HRM is similar.

Domestic software, according to Alexei Melnikov, occupies 95% of the assortment presented in the portfolios of distributors, the remaining share includes products of vendors from different countries, including those who have not yet left Russia.

The unprecedented rise in demand for Russian products is also confirmed by the manufacturers themselves. Speaking at the November TAdviser summit, the general director of Astra Group Ilya Sivtsev announced an increase in revenue to 5 billion rubles in 2022, i.e. 2 times compared to the previous year, as well as the goal to once again double revenue - up to 10 billion rubles - in 2023.

But do not assume that domestic software developers have unconditionally won and can safely rest on their laurels. According to Alexei Melnikov, Chinese vendors are trying to enter the Russian software market.

"They don't have any significant share yet, but private sector companies are really eyeing them. There are still a number of niches in which Russian software is either not presented, or is presented extremely poorly, while Chinese developers have competitive solutions in these areas. "

One of the striking examples illustrating Chinese expansion is the developer of the ZStack virtualization platform, which is a serious competition for VMware in its homeland. TAdviser wrote in detail about his plans for the Russian market in September 2022.

White spots and customer requests with a 5-year implementation horizon

Despite the wide range of domestic products and the availability of some foreign ones, not all niches and needs are fully closed by them. Moreover, if you take the position of the customer, the problem is not always the availability of certain products.

Renata Abdulina, Chairman of the Association of the Largest Software and Equipment Consumers (unites Rosatom, Rostelecom, Russian Railways, Roscosmos, Gazprom-Neft, Transneft and Дом.РФ), answering TAdviser questions, highlights, for example, the dependence of Russian software on foreign operating systems and database management systems.

Also, according to her, big business has difficulties with software development tools and embedded software, where, in addition to the limited offers, the problem is that foreign software is closely related to equipment. Difficulties arise with engineering software, means of joint development, which have no analogues, with specialized industry solutions, etc.

In addition, the development of server equipment of various classes is required (from miniPC to large computing systems), adds Abdulina.

It is important to come to the conclusion that domestic developers take into account the request of consumer companies from key sectors of the economy in the process of refinement and development of their solutions and on its basis provide a full-fledged stack of technologies to achieve technological independence. We, as the Association of the Largest Software and Hardware Consumers, are working to consolidate such requirements and broadcast them to developers and manufacturers, she notes.

Renata Abdulina expects that "the involvement of domestic software and equipment developers in this process will make it possible to reach a high level of quality and competitiveness of the supplied products," but even under an optimistic scenario, taking into account the unification of efforts of large customers and developers, it will take 4-5 years to create fully functional domestic analogues of foreign software, according to her assessment.

Customers and suppliers talk about import substitution in different languages

According to Renata Abdulina, work on achieving technological independence is very active, and the acceleration of this process will largely depend on the quality of the software and equipment supplied by domestic developers and their closure of those niches where there are no domestic analogues today.

The general director of IBSGrigory Kocharov looks at this question a little differently. Speaking at TAdviser SummIT, he told how the ecosystem of vendors, integrators and customers in the field of ERP and CRM solutions is being created. Kocharov leads the relevant working group at the competence center for the development of system-wide and applied software (CDC), launched at the initiative of the government.

According to him, customers and integrators have a completely different understanding of how to conduct import substitution projects, when it is necessary to integrate products from different vendors, and usually these projects turn into large programs, within which individual projects are carried out according to different methodologies.

The position of customers, says Kocharov, is quite simple: "I want to be on SAP, but faster and better." And the position of integrators, he adds, most often sounds like the opposite: "I only have this, and we need to take it, because it will end soon." Therefore, it is necessary to gradually approach an agreed understanding of what to offer to the market in the end, the head of IBS concludes.

There are risks that, trying to integrate sets of domestic solutions, in a few years a huge number of different designers will be created, which will be difficult to support and almost impossible to develop, says Kocharov. In addition, there is a problem of staff shortages: in the ERP-CRM segment alone, the deficit is estimated at about 10-20 thousand trained specialists.

More information about the theses and slides of Grigory Kocharov can be found in another article.

Consolidation of IT-Business and risk of reducing innovation potential

Competence centers that unite customers and suppliers either on an industrial basis (ICC) or by the class of software being created (CDC), this is a new form of interaction launched at the initiative of the government in the second half of 2022. The idea is for customers to formulate a request to IT companies to create scarce solutions and pay for this work with the involvement of state co-financing. You can read more about the development of centers in a separate TAdviser article.

On the one hand, this format of work should synchronize the activities of IT companies with the needs of customers in order to successfully replace foreign solutions with domestic ones.

On the other hand, to fulfill such ambitious plans, the players included in the ICC/CDC will need strong specialists, who, according to Vladimir Zakharov, the general director of Datana, are a little, therefore, they will have to be taken from small and medium-sized businesses not involved in tasks of national importance.

From the third party, to which Zakharov also draws attention, the declared topics in the centers of competence are the replacement of the existing one, and not the creation of a fundamentally new one. While with fundamentally new directions - innovations - difficulties are expected.

The mobilization of the country's IT industry to solve the import substitution problems facing the largest customers, according to Datana's CEO, could lead to the closure of small and medium-sized enterprises and the consolidation of backbone companies engaged in technological sovereignty.

We all need to think about the next question, - adds Zakharov, - If we are only engaged in preserving the current present, and not in development, what we will offer the market in a few years, when our economy opens for import and export. Will our production, heavy and light industry cope in the new, future reality of a competitive market of a global scale?

Have IT workers left - is it a problem or not?

In 2022, there were two main waves of emigration of IT specialists from Russia. After the start of a special military operation in Ukraine - in February-March, and after the announcement of partial mobilization - in September-October. Estimates of the number of people who left varied greatly, and this suggests that no one has reliable quantitative data. Another significant point is that in the category of IT specialists, with such assessments, a very wide range of specialists is often included, for example, those who are engaged in digital marketing or work in e-commerce (no matter what position).

Let's look at the problem from a qualitative point of view.

If we estimate how many left and do not plan to return developers, since it is this category that is in short supply and difficult to replace, then I have not heard from any client that such a problem exists, "says Alexander Abramkin, founder of Heads Partners, a company specializing in finding managers and forming teams for high-tech companies. - Yes, there are those who left. Yes, someone has no plans to return. But this is 1-3% of the total number of employees. Of course, except when the whole company is relocated or the office in Russia stops working, but in these cases not all 100% move, even if there is support in the relocation. Someone has a family, someone is not ready for other reasons, and the government has created, in my opinion, many positive conditions to keep people in the country. If so many measures were not taken, and the Minister of Digital Development himself was not involved in the problem, then we could talk about a catastrophe.

For organizations involved in the digitalization of the public sector, according to Abramkin, the most favorable time has come to attract talents or mature leaders, while a year ago only a special specific part of professionals wanted to find a job there. Now the situation has changed a lot, the public sector is stability and, in a way, security.

A more significant problem, Abramkin believes, is the relocation of IT entrepreneurs, heads of digital (product) companies and areas, i.e. those "who created values ​ ​ through new businesses or changed some meanings, who created potential in the market." Their "leak," according to the head of Heads Partners, is practically irreparable, since they cannot be simply taken and trained: "as a rule, they are the carriers of unique expertise, new thinking or non-standard vision."

What's next?

Let's try to thesically formulate expectations from the foreseeable future.

Import substitution of IT solutions is difficult and not fast, but in most areas it is likely to be successful in the future for 4-5 years. In 2022, many of the largest customers took this seriously, which was not before. The process seems to be becoming irreversible.

But the development of the IT industry is far from just import substitution. By launching the process of replacing foreign IT systems with domestic ones, the state should pay attention to the innovative potential of the industry, stimulate small business, private investment and export activities.

The consolidation of the IT-Business against the background of import substitution is probably inevitable. It is important that corporations raised on government support retain the ability to operate on the open market, which will one day return.

There was and still is a personnel problem. Experienced experts in the development and implementation of IT products have always been lacking. There will only be more work for them, as well as opportunities for development. Obviously, the solution to this problem should be dealt with not only by the state, but the scale of replenishment of the industry by new specialists should become much wider.

Alexander Levashov