Auriga presents the most complete report on the state of the Russian software export industry.
The Russian Software Developers Association (RUSSOFT) published the results of the 8th Annual Survey of the Russian Software Development Export Industry, conducted in 2011. This research remains the most comprehensive and detailed review of the software development industry in Russia. Auriga is a RUSSOFT board member and an active supporter of this and previous annual industry research efforts.
The report presents a clear picture of the state of the industry and highlights the main trends of its development. The amount of collected data has increased by almost double in comparison to 2010. The field research (with questionnaires completed by respondents from export-oriented software development companies) is accompanied by thorough analyses of analytical agency reports, expert interviews, and mass media publications, providing a realistic view of the Russian industry.
- For the last year, the Russian software industry has almost completely recovered after the world financial crisis, reaching the same export growth rates seen in 2008. In 2009, Russian software and software development export services increased by only 5%, but this growth occurred in spite of an overall IT world market depression observed during that period. In 2010, the export growth rates reached 20%, hitting the pre-crisis level of 2008. The export volume of software and software development services in 2010 reached about $3.3 billion.
- The industry demonstrates much faster growth than software and IT markets worldwide (20% vs. 4% and 2%, respectively). RUSSOFT analytics attribute this growth to Russia’s increasing market share rather than to global economy trends. The total share of Russian software companies, including custom development services, on the global software market is less than 2.5%, though this rating increases by approximately 0.1% every year. Taking into account various sources of information, analytics bent to consider this 0.1% to be contracts lost by Indian companies over the last two years, which switched to Russian vendors.
- The products and solutions share of export revenue constantly grows, and it has reached 41% this year. The products segment, led by Kaspersky Labs, grew 40% compared to the previous year, and soon, it will reach the services segment, which provides 48.5% of entire software export revenue and grew 14% over the year. It is expected that the rapid growth of software product export will continue.
- The income of structure service outsourcing companies changed dramatically: A considerable reduction in custom software development services (previously called “offshore programming”) was noted (from 72% to 49%). Meanwhile, the share of other IT services increased.
- Russian export-oriented companies are doing better than their domestic market-oriented colleagues are. For companies with an export share of less than 10% of revenue, the average growth was 10%, while companies with an export share exceeding 75% on average grew by 30%. In prior crisis years, export-oriented companies also did better, demonstrating, on average, a 2% growth compared to the 10-20% decline of Russian-oriented companies.
- The Russian software industry has a pyramid-like shape, with less than 10% of the companies delivering 70% of the export revenues. It is headed by several global corporations of Russian origin with the main office in Moscow and branches worldwide.
- Significant events of the last period included successful IPOs at foreign exchanges performed by Russian Internet colossuses—Mail.ru Group and Yandex. Experts expect IPOs of other Russian IT companies, including EPAM Systems, Kaspersky Lab, Parallels, etc.
- In 2010, the industry was finally granted the privilege to preserve the existing low social tax rate of 14% for software exporters and to extend this regime to all software developers (working both in Russia and in the global market). Small companies still do not enjoy the benefits of this special tax regime, however.
- The importance of the US market for Russian software product and service exporters (measured as the percentage of companies that indicated the US as a “key market”) has dropped from 50% in 2006/07 to 15% this year. At the same time, 73% of the companies (collectively making 76% of export revenue) are still actively present on the US market.
- At the same time, 99% of the respondents noted their presence in Russia (compared to last year’s figure of 89%). The Russian market is growing quickly, primarily due to the deferred demand, with prices matching those of the most attractive markets in the world.
- At the beginning of 2010, the number of programmers in Russia reached 350,000. On average, about 20,000 new professionals become available in the country every year. According to the Microsoft research results published in the spring of 2010, about 850,000 Russians possess programming skills.
- The salary level and the number of vacancies in the IT sphere reached the pre-crisis level by the middle of 2010. Although the majority of the respondents (70%) are satisfied with their ability to find new engineers, the demand is growing much faster than the supply. According to the recruiting company HeadHunter, the number of vacancies in the “Information Technology and Telecommunications” sector increased by 33% (in the “Internet and eTrade” sector, by 69%). Experts in Internet technologies—such as PHP, Java, and Python—are in high demand.
- Nevertheless, the mobile sector is quickly catching up—the demand for mobile applications developers grew three times faster than the demand for other programmers. Concerning mobile experts, Java knowledge is highly valuable (47% of the total number of vacancies for mobile platform programmers). The demand for C/C++ programmers falls in second place with 34%.
- The research also contains the data on such issues as staff turnover, average salary, technology demand, and English-proficiency dynamics. The conclusions and forecasts provided in the report will help software developers and their customers to better understand the state of the industry.