Russia fails to capitalize on IT excellence

Moscow. (Ian Pryde for RIA Novosti) – Russia’s IT sector, like much else in the country, is characterized by screaming contradictions. Russia has an advanced IT solutions industry, and it is no accident that Russian computer engineers and software developers find ready employment in international IT companies at home and are snapped up when they move abroad.

While global media and business have been riveted by India’s burgeoning IT and outsourcing industry in recent years, Russian IT experts consider Indian programmers to be vastly inferior to Russians, who spend the first two years of their university training continuing an already rigorous school education in maths and physics.

They are therefore much more capable than their Indian counterparts, who cannot proceed far beyond the constraints of their narrow programming training. With even business programs becoming increasingly sophisticated and mathematically based, Russia will come to the fore to become a world leader and leave India behind.

A sign of things to come could be Australia, which has been turning to Russians more and more over the last 4-5 years to make up for its shortage of software programmers, a process which has picked up in the last 18-24 months, pushing out the Indians.

On the other hand, Russia is famously bad at implementation, and the IT sector is no exception. According to 2005 data from the World Economic Forum, Russia occupies 62nd place out of 104 in implementing new information and communications technology.

Lack of financing in IT is due to lack of confidence on the part of potential investors and the crowding out of investment as the private sector piles into natural resources and processing industries to make large profits, while the Russian government largely neglected the sector until its relatively recent decision to make information and communications technology one of its priorities.

As a result, Russia has still to develop working and practical legislation for IT, and this in turn hinders the development of electronic trade, although online banking services, for instance, are now readily available and widely used.

With the Russian economy dangerously tilted towards natural resources and processing, real help for IT will have to come from the state, but progress is painfully slow considering the central role of the sector in the modern global economy.

Even Electronic Russia, the official program which the government initiated in 2002 to computerize the country and encourage the development of the IT and communications sectors, admits that government departments themselves are unwilling to introduce modern computer-based management methods or to use IT to interact with either the public or the business community.

On August 15, 2006, the government therefore approved a new version of Electronic Russia prepared by the Ministry of IT and Communications. The updated version aims to create an “electronic government” and improve administration in the country, as well as to tighten up the coordination and communication between different governmental departments and make government services more accessible to the public and business. The government also hopes to raise the level of computer literacy among state employees at federal, regional and local levels.

The government plans to spend over 13 billion rubles from the federal budget on the program between 2007 and 2010, a vast increase on the previous funding allocated to Electronic Russia, which the government admits never received more than 25% of the funds necessary to implement the program fully in four years of operation between 2002 and 2006. In 2007, 2.8 billion rubles will be spent implementing Electronic Russia.

After an initiative by President Putin, the government has been trying to develop science and technology parks since 2005, but again, Russia has an awful lot of catching up to do. While Russia will begin building the first parks only towards the end of 2007, China has nearly 100 already. And with IT a low priority until recently, the sector will not even be represented at all of the parks.

However, Leonid Reiman, the minister of IT and Communications, said in October that the number of science and technology parks would be expanded and that the government is considering setting up a Federal Agency to Promote IT Exports. According to Reiman, the government also intends to discuss tax breaks for software exporters with the State Duma, the lower chamber of parliament.

Paradoxically, Russia’s slow and poor implementation is compounded by over-optimism in the IT sector itself. In a poll held at the International Computer Forum in Sochi last June and conducted by the analytical center REAL IT League of Independent Experts in IT LINEX, most Russian IT experts believe that areas such as Enterprise Resource Planning (ERP) and systems integration had already reached the stage of “productive use” in Russia.

Using what they describe as a relatively objective methodology, however, the pollsters concluded that it would take another three years for ERP and its cousin Customer Relationship Management (CRM), and another six years for systems integration to reach the productive stage in Russia.

In other words, many in Russia’s IT establishment overestimate the current state and also the future prospects for the IT industry in Russia.

Sergei Karalov, chairman of the council of the REAL IT League of Independent Experts, says that such unjustified optimism among businessmen, IT experts and government officials responsible for the IT sector is very worrying. “In addition to underestimating the significance of IT for Russia’s post-industrial modernization, we have an overestimation of the current state and future prospects for the development of the domestic IT industry – and this could lead to mistaken strategies, not only with regard to the different IT sectors themselves, but for Russia’s economy as a whole.”

The result of all this is a paradoxical situation where many Russian IT developments and innovations can often be applied more easily in the West than at home. Russian companies such as Galaktika have found less technical ERP solutions compared to the complicated algorithms used by western firms such as Oracle, making them much easier to operate for the end users in large enterprises. As a result, these newer solutions are now also being picked up and applied by western software companies involved in ERP.

The world-class technical education enjoyed by Russian computer specialists combined with Russia’s insufficient computer and technical infrastructure frequently proves vastly superior to the classical approach and has produced large numbers of professionals with a thorough theoretical knowledge and extensive experience in applied information and computer technology.

Russia’s real challenge now is to capitalize on this advantage and modernize its IT for the benefit of the country and its business – not least to reduce the massive brain drain of many of its brightest and best.

The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.

The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.

This article was originally written for The Washington Post’s special advertising site International Spotlight: Trendline Russia at, which was published on 6 December 2006.

It was reproduced in Ian Pryde’s weekly column for the Opinion & Analysis section of RIA-Novosti’s English-language website on 18 December 2006.

It can be viewed at, the site of the Sputnik news agency, the successor to Russian state-owned RIA Novosti’s international branch, which became defunct in 2013.


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