Due to European sanctions, Russian programmers are preparing their software for export to Africa, Asia and the Middle East

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Russian software developers are gradually reorienting deliveries to Asian countries and the Middle East. But in order to sell their products in Europe and the US, some companies register legal entities in neutral countries in order to bypass sanctions and stay in familiar markets.

Change of geography

Russian software companies, against the backdrop of American and European sanctions, rely on working with “friendly” countries. This is evidenced by the results of a survey of the Russoft Association, which it conducted from February to May 2022 among 171 Russian software companies with a total turnover of about 100 billion rubles. Representatives of the company shared the results with CNews.

Thus, Russian companies are seriously interested in South and East Asia, South and Central America and the Middle East. The share of those wishing to enter new markets in South and East Asia in 2022 increased from 5.3% in 2021 to 9.6%. Interest in India increased from 2.4% to 7.2%, even among service companies whose main business is custom software development.

“Five years ago, such an interest on the part of Russian developers of custom software to the Indian market, where local powerful outsourcing companies are present, was hard to imagine,” Russoft analysts comment. “Nevertheless, he is. Although it is clear that companies are entering or have already entered this market that develop specific solutions that require special competencies in some narrow technological area.”


In 2021, the Middle East accounted for 3-5% of sales of Russian software companies

Russian software developers are not averse to making their debut in South and Central America – 7.8% of companies expressed such a desire instead of 4.9% in 2021. 8.4% of survey participants want to work in the Middle East – the figure has also doubled. Oddly enough, interest in the markets of the post-Soviet countries, on the contrary, has fallen – companies want to work actively only with Uzbekistan (9.6% of developers said this).

Also, judging by the survey, 26% of companies that have not yet exported in 2021 plan to enter foreign markets.

Workarounds for Europe and the US

At the same time, only 3% of the developers surveyed planned to enter the European market in 2022, up from almost 8% a year ago. For the US and Canadian market, the figure fell from 6.8% to 1.8%. Russoft analysts specify that sales of domestic software developers in Western markets will continue, but they will be conducted through representative offices in neutral countries and not on behalf of Russian companies. Russian developers began to actively open offices in third countries in the spring of 2022 – in Armenia, Turkey, Kazakhstan, Montenegro, Uzbekistan, Georgia and the United Arab Emirates.

“Everyone who works with Europe is actively disguised as local companies,” a representative of the Russian software market confirmed to CNews.

Russoft analysts attribute the change in priorities of Russian developers to the influence of sanctions, which have seriously affected the work of Russian IT companies with clients from “unfriendly” countries.

“In fact, the ability to purchase software products or services from Russia, both from enterprises and from citizens of these countries, is severely limited either by direct bans (or secondary sanctions) or bans on banking transactions with Russian enterprises,” the report notes. .

What the developers say

Russoft provides an approximate distribution of sales of Russian software companies in 2021 by macro regions. Russia accounted for 50% of sales, the Near Abroad – 8-10%, the USA and Canada – 13-15%, Europe – 12-13%. The share of South and East Asia reached 5-7%, the Middle East – 3-5%. South and Central America – 2.5-3%, Africa and Australia – 1% each.

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“Today, the MENA region and India can be called the most promising markets,” CNews said. Dmitry Makhlin, director of development of the electronic personnel document management system HRlink. But they are not suitable for every product. It is important to conduct CustDev at the start so as not to waste time and resources.”

So, with the HRlink product, the company wanted to enter the UAE market, which attracted favorable conditions for start-ups and free trade zones with other countries, such as Saudi Arabia. According to Makhlin, this market has recently been of great interest to IT manufacturers. However, during the CustDev process, it turned out that the chosen direction for the product was not suitable. There were several reasons: the low level of digitalization and an excess of cheap labor. As a result, local businesses did not see the value of certain solutions.

“Another country that we considered for expansion is Armenia,” Makhlin shared. – You can enter with a Russian passport and stay there for up to six months, there is no language barrier and minimal bureaucracy for non-residents. Registration of a company takes only a few days, you can open an account quickly, unlike Dubai, where it can take a couple of months. But the domestic market of Armenia is too small, and it is unprofitable to grow on it. Another thing is to use the office in Armenia as a hub for reaching the international level, especially in English-speaking countries. We plan to develop in this direction.”

Shared their plans and representatives of other software companies that took part in the survey. So, President of the IW Group Alexey Sinitsa notes that the company plans to continue to interact with Uzbekistan and Abkhazia and is eyeing the BRICS countries, South and East Asia. Sergey OzhegovDirector General of Searchinform, noted that the company has been working in Asia and Latin America for a long time, but recently active cooperation has been established with Turkey.

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“Certainly, there are enough difficulties for international expansion,” says Ozhegov. — In Asian countries, there is a language barrier that can serve as an obstacle to entering the markets. In South America, the sales cycle is longer than in Russia due to the specifics of the mentality. We expect that the discussed state support measures will start working in the near future and will help level these difficulties. The Institute of Digital Attachés, platform promotion of products will facilitate promotion both for those companies that are already active abroad, and for new companies that are just looking at this opportunity.”

In June 2022, CNews wrote that the Russian Ministry of Finance, for no apparent reason, was refusing to approve the project for the transfer of 1.3 billion rubles. from the liquidated Rosinfocominvest fund to the RFRIT fund. The money should go to support the export of Russian software.

Angela Patrakova

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