Russia without its IT industry

20.08.2012 — Analysis

The INNOPROM 2012 International Innovation Forum demonstrated that Russia is capable of creating competitive information technologies, but the country is desperately short of trained professionals and has yet to succeed in creating world-class IT brands. Experts avow that this is a recipe for defeat in the global marketplace. As this columnist for RusBusinessNews has found out, the usual reasons are to blame - talented people in Russia are unable and unwilling to realize their potential.

Nikolai Komlev, the executive director of the Russian Information and Computer Technologies Industry Association, claims that his industry is responsible for only 1.3% of the nation's GDP. In other countries, the figure is at least twice as high. Russia is ranked 56th in an evaluation conducted by the World Economic Forum/INSEAD to assess the development of information technology.

Viktor Koresh, the president of Akado Group, maintains that his company uses only a handful of domestically produced software programs - most have to be imported. Russia at one time had the ambitious goal of wresting control of the offshore programming market from Great Britain, but failed to do so because of the lack of a high-caliber workforce.

Promoting the domestic IT industry is like running an obstacle course. The country is in a demographic black hole, the methods for financing scientific research are antiquated, and there is neither a strategy for developing technology for the future nor incentives for software producers. The dearth of trained professionals forces employers to pay programmers unreasonably high salaries. According to Mr. Koresh, wages in the Russian IT market are out of sync with what the industry is producing.

It would seem that the Internet economy should be growing at a rapid pace, but its momentum is being slowed by monopoly control of the networks. The experience of other countries (Japan, for example) has long demonstrated that a competitive environment will speed up the exchange of information by 800%. But Russian officials have been indifferent to this fact, which has greatly hindered the development of services and the flow of consumer cash into the industry.

But Russian IT has bigger problems - the country's socio-economic model is simply not conducive to the creation of intellectual products. Dmitry Kalaev, a managing partner at RedButton Venture Capital, claims that his fund could raise ten times as much money, but there is nowhere to invest it. The developers of a new product are not interested in commercializing their ideas because they already receive government grants – subsidies which distort their focus, making the developers less business oriented and more intent on how to best defend their projects before government bureaucrats. Mr. Kalaev contends that institutions of higher education are particularly good at this. They have created their own ecosystem that lives on grants and has no conception of how to commercialize products or form a start-up business.

So, talented researchers are finding an outlet for their energies abroad. Alibek Issaev, the CEO of DUDU, has registered his company in Dubai. The government of the UAE has not only presented the firm with a worksite and tax-free status, but is also providing the company with work - good contracts that DUDU could never have imagined receiving back home.

In addition to this backdrop of wasted intellect, Russia lacks even the basic, critical mass of technical knowledge it needs in order to compete in the technology market. The world's leading IT companies have already arrived and are actively cultivating the domestic market. In their own way Russians are trying to resist. Some IT professionals are asking the federal government to require natural monopolies to publicly disclose information on any software products purchased abroad. Clearly this step will be followed by a demand to introduce quotas on the purchase of domestic products, no matter their quality. Experts are confident that these measures will keep Russia from creating companies with global brands, without which it is not possible to survive in the competitive global marketplace.

Vladimir Terletsky