In 2022, the Russian software market witnessed a 7.9% increase, reaching a value of $10.4 billion, despite the global challenges posed by geopolitical tensions. This growth momentum is expected to continue, with the market forecasted to expand by 49% to achieve a valuation of $15.5 billion by 2027. Business process applications (BPA) emerged as the dominant segment, contributing 20.2% to the total market value, reflecting Russia’s 3.9% share in the European software market.
Rostelecom, on March 7, 2024, unveiled plans to spin off and list its data center division later this year, according to CEO Mikhail Oseevsky. This move is part of Rostelecom’s broader strategy to capitalize on its infrastructure assets, enhancing shareholder value and positioning itself competitively in the global data center market.
Rosneft has developed a software, RN-AKZT, to automate pipeline design in oil and gas fields, announced on February 28, 2024. This innovation is set to enhance efficiency and accuracy in pipeline construction and design.
EkoNiva Group has announced significant advancements in its proprietary software, EkoCrop 2.0, aimed at optimizing agricultural operations. On February 28, 2024, the group revealed that it has improved the integration between EkoCrop and the 1C: Agricultural Enterprise Management (AEM) database. This enhancement is part of EkoNiva’s ongoing commitment to digital transformation in agriculture, ensuring seamless data transfer and quality control of the information exchanged between systems.
Rostelecom has enhanced its secure cloud video-conferencing service Web-VKS, improving its functionality and security features for users.
The European Union has decided to enhance the prohibition on the export of goods that have dual purposes to Russia, including electronic components and machine-building parts that can be utilized in Russian armaments, such as drones, missiles, and helicopters.
Moreover, it is not allowed to transport dual-purpose goods through Russia. Also, Russians are prohibited from having managerial positions in EU organizations that are related to critical infrastructure.
The list of people and entities under EU sanctions has been expanded. For such individuals, their assets in the EU will be frozen, they will be banned from working with them, and visa restrictions will be implemented.
Deputy heads of Roskomnadzor, including Oleg Terlyakov, Vadim Subbotin, Milos Wagner, and Vladimir Logunov, were imposed sanctions. Before this, the EU had already imposed sanctions on Roskomnadzor itself and its head, Andrey Lipov.
The Russian market for internet access saw a return to moderate growth in 2021, following a decline in 2020, but is expected to grow slowly throughout the forecast period of 2021-2026.
Revenues have been suppressed by fierce price competition among providers, leading to revenue losses for providers due to business interruptions and closures during the economic downturn.
The Russian internet access market had total revenues of $2,543.5 million in 2021, with a CAGR of 4.1% between 2016 and 2021.
Although the cost per Mbps has decreased due to technological advancements, the average price of fixed broadband services paid by consumers has slightly increased as available internet speeds have grown sharply.
Market volume increased to 121.8 million internet users in 2021, with an expected increase to 130.9 million internet users by the end of 2026, representing a CAGR of 1.5% over 2021-26.
The Russian market for wireless telecommunications has been volatile in the last five-year period, with growth rates ranging from negative 10.5 percent to 19.8 percent.
The market experienced feeble growth over the period, which is expected to accelerate slightly over the next four-to-five years.
The wireless telecommunications market in Russia recorded total revenues of USD15.0 billion in 2019, representing an average annual growth rate (CAGR) of 0.6 percent between 2015 and 2019.
The Russian IT services industry experienced robust growth during the last five-year period and is expected to continue growing over the next five years, with slight variations due to the outbreak of COVID-19.
The IT services sector correlates strongly with a country’s gross domestic product (GDP). This means the IT services industry will be in line with GDP growth, given its positive correlation. As technological advantages increase year-on-year, many companies are using IT services, in particular IT infrastructure services, to be fully functional and competitive. As a result, the IT services industry follows the same curve as technology, which means the IT services industry will grow with the growth of technology, with slight variations from country to country, but the growth rates of the industry will still be significant.
Computer vision startup NtechLab has raised USD15 million from two international funds to develop its facial recognition product line and expand into new markets, the company announced on September 23, 2020.
Founded in 2015, the Russian company develops facial recognition software that uses artificial intelligence and neural networks to identify faces, silhouettes, and actions captured on video.
NtechLab’s FindFace algorithm was originally introduced as a consumer app that enabled users to take a photo of someone and match it with a person’s social media profile on Russian website Vkontakte.
The company closed its consumer business after fears that it might end public anonymity. Today, facial recognition software is used by governments and businesses for surveillance. It was used to monitor crowds during the 2018 World Cup in Russia and also helped arrest more than 100 people on the federal wanted list.
Rostelecom PJSC, the largest integrated provider of digital services in Russia, announced the opening of a new data center in the South Sakhalin city of Yuzhno-Sakhalinsk on September 18, 2020.
The new data center will ensure stable and seamless operation of the data processing and storage facilities, as well as protected communication channels for data exchange. The initial total capacity is expected to be 1.5 MW and 25 racks (with the potential to be extended to 180 racks). The data center has proven to be reliable with uninterruptible power supply and conditioning and is equipped with all necessary fire alarm and protection systems.
IT is a leading sector for U.S. exports & investments in Russia.
With Russia’s population at 142 million, the country’s IT market is one of the world’s largest, and it continues growing. By 2025, there are expected to be 124 million internet users in Russia. According to Rosstat, the information and telecommunications industry grew by 3.7 percent in 2017 and was among the most successful sectors of the Russian economy. Market participants’ aggregate revenue as detailed in the annual CNews100 rating (based on 2017 data) decreased by 1.9 percent in rubles to 1,157 billion rubles, but grew in dollar terms by almost 12.6 percent. TAdviser provided similar estimates of 12-14 percent growth from 2016 to 2017.
In any foreign market, companies should consider several general principles for effective management of their intellectual property.
In 2018, Russia remained on the Special 301 Priority Watch List, a report on countries that engage in substantial intellectual property rights (IPR) violations. Several general principles are important for U.S. companies to effectively manage IPR in Russia. First, it is important to have an overall strategy to protect IPR. Second, IPR is protected differently in Russia than in the United States. Third, IPR must be registered in order to be enforced under Russian law.
On September 18, 2017, the U.S. Senate enacted legislation prohibiting the use of Kaspersky products in all executive branch agencies. Yevgeny Kaspersky, the founder of Kaspersky Lab said on September 28, 2017 that the U.S. government knows well that his company doesn’t engage in espionage. The cybersecurity executive believes that the reason his company was targeted is that it is based in Russia.
Mr. Kaspersky stated, “I am more than certain that they, i.e., the U.S. officials, know that we aren’t capable of doing what is alleged. Because there are thousands of technical people that work in our company. These are not some lone programmers sitting in a basement in dirty sweaters and writing separate pieces of the code.”
According to Mr. Kaspersky, his business is a victim of the geopolitical situation and the antagonism between the U.S. and Russia.
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