October 19, 2017

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Russian market rebound possible in 2017

by Stuart Wilson, Tuesday 9 August 2016

Source: PMR

The latest research by PMR has laid bare the IT market downturn that occurred in Russia. The IT market in Russia slumped by almost a third in Euro terms in 2015 to fall below €10 billion (US$11.09 billion). Short term forecasts assume the market will continue to drop in 2016, while a bounce-back is possible in 2017, according to PMR.

Sales of IT products and services in Russia declined by 8.8% year-on-year to RUB652.1 billion (€9.7 billion) in 2015. In Euro terms, the market contracted by 31.7% year-on-year in 2015. PMR claims that the decline in Euro terms better characterises the overall market performance.

Hardware and a significant proportion of software solutions are imported to Russia and their prices depend heavily on exchange rate fluctuations. As a result, the sharp devaluation of the Rouble in the second half of 2014 and throughout 2015 inflated the value of hardware and software segments of the IT market in the country last year distorting its real development trend.

Stagnation in 2013 and further market decline in 2014 and 2015 created challenges for IT companies in Russia which had been accustomed to rapid market growth. Problems mentioned by Russian IT companies included restructuring of demand, growing competition, pressure on prices and profitability, and increasing volume of bad debts in the distribution channel.

In 2014 the Russian government announced a plan to reduce technological dependence from foreign IT vendors. In 2015 Russia approved the law which gives priority for local software in public procurements and allows government authorities purchasing the software of global vendors only if there are no local options. This law came in force in January 2016 and is expected to further influence the market structure.

In 2015, global hardware and software vendors started to re-build their strategies in Russia being towards direct contacts with large retailers and businesses. Interestingly the corporate sector was more interested in B-brands and even white label hardware, according to PMR.

Another major trend observed over the last two years by PMR shows that Russian companies and the public sector have started to re-orient their hardware purchases towards Chinese vendors. Chinese companies, including Huawei and Lenovo, have been recently investing in the development of sales and support in Russia. This may lead to a growing importance of Far East suppliers on the Russian market in 2016-2017.

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