The RUSSOFT press conference considers the outcomes and future prospects for IT market in a new geopolitical reality

The discussion opened with an address by press conference moderator Valentin Makarov, President of RUSSOFT:

"After the special military operation began and the world's geopolitical structure was rebuilt, import substitution turned into an urgent need for the Russian economy. And now, 2 years later, we are finally able to draw certain conclusions and identify trends. Throughout this period, the state, particularly the Russian Government, has been working on an exceptionally extensive set of measures to ensure efficient, swift, and appropriate import substitution. For instance, the Russian IT Fund supported 22 projects crucial to the development, refinement, and adoption of import-substituting Russian IT solutions at leading industry enterprises in 2022-23. The total project value was 23.84 billion rubles. The total grant funding was 17.01 billion rubles. This year, 7 billion rubles have been allocated to continue all the processes that have already been initiated. At the same time, industry competitors were introduced to what the industry really needed, what their most important import substitution tasks were going to be, and how they were meant to solve them. Import substitution is, in fact, underway in several sectors, including IT: the Russian IT market is expected to grow by approximately 30% in 2024.

However, negative outcomes have also become noticeable. For instance, there has been a rise of insourcing at corporations, but in-house products are not designed for global market competition, and thus will only keep losing competitiveness year after year. Meaning that industrial competence centers might achieve import substitution, but not necessarily technological sovereignty. Russia's domestic market is relatively small compared to the global market, so for local products to remain competitive and for us to become leaders of the New Technological Order, their development must be entrusted to IT companies with experience creating and selling products in the global market. State support is necessary to address this issue. Firstly, this concerns extending the profit tax exemption, since for most companies, this is the only way of financing their development. Secondly, the export of IT services (i.e., software) should get budget funding and be prioritized within the Data Economics national project, while the IT companies themselves should be supported just as much as the exporters of physical goods".

Artem Semenikhin, partner at the Technologies of Trust (TeDo) technology practice, outlined the outcomes achieved by the IT industry in 2023, as well as the forecasts for 2024, with special focus on artificial intelligence:

"AI was 2023's main buzzword, and we will continue seeing interest and increased investment in AI development in 2024. Currently, ensuring technological sovereignty in the field of generative artificial intelligence and large language models is a priority for Russia. Furthermore, the 'rules of the game' in terms of legislation are likely to be determined this year."

Igor Kirichenko, CEO of Naumen, dedicated his presentation to the main digital transformation vectors among Russian companies and the new challenges faced by software vendors. He also shared the results of his own company's work on import substitution:

"As of the end of 2023, Naumen's revenue growth was 40%. The growth was driven by high demand for contact center and IT service management (ITSM) solutions. Over the past year, Naumen introduced five new products and technologies into market, including the Speech AI speech synthesis and recognition platform, the Conversation Intelligence speech analytics system, the Erudite VoiceOut robot service for automating calls with per-second billing, the low-code NaumenPlatform for rapid application development, and more. Naumen's revenue growth over ten years of import substitution reached 930%."

In his speech, Dmitry Odintsov, Development Director at TrueConf, reported on import substitution progress and current trends in the field of communication software:

"In terms of communications software, import substitution is going well: according to our data, about 95% of solutions in the public sector have already been substituted, and starting from 2022, we have also been noticing an increased migration to domestic software among members of the business and industry community.

In the wake of foreign companies' departure and a decrease in demand for their services, not only has the share of domestic players increased, but many alternative solutions have emerged as well, specifically in sectors that already have mature IT products. Given the pace of migration to domestic software, only those solutions that are capable of competing with foreign products both in Russia and abroad will survive in the market over the next five years".

Rustam Rustamov, Deputy General Director of RED SOFT, spoke about the "smooth" migration of complex IT infrastructures:

"RED SOFT system software sales grew by 105% in 2023 relative to 2022, which equals more than one and a half billion rubles in monetary terms. We have managed to achieve the flywheel effect in our business. RED SOFT has earned a good reputation as both a developer and an issuer. We have gained the trust of financial market players by successfully raising capital for several years through bond offerings on the Moscow Exchange. We use the funds raised primarily for the development of our product line. Customers see our work, are satisfied with our products, and purchase them for import substitution purposes. This allows us to improve our financial results, which, in turn, meet the expectations of our investors, who then decide to remain a part of our joint success by providing even more financial resources for our development."

Elena Bocherova, Executive Director of Cyberprotect, emphasized the way Russian product companies' breakthrough growth is changing the industry:

"Over the course of two years, a record number of software developers have grown from small and medium-sized businesses into large companies. This situation is unprecedented for the market, which both the business community and the government will need to address. Businesses are grappling with scaling challenges, and competition for talent is intensifying. One of our tasks is to restore and strengthen trust among all market participants following the events of the past few years. The government needs to keep up import substitution pace in the public sector and CII, and support the IT industry in light of the current situation. Our shared goal is to supply both software developers and customers with IT personnel in the long term. This is why the involvement of domestic business in education is becoming a necessity".

Ruslan Vagizov, Director of ICL Services, noted the role played by an integrated approach to import substitution, which allows for a more effective transition to domestic software:

"Companies cannot switch from Western software to domestic products overnight. Therefore, we have developed a balanced approach to import substitution: we are simultaneously ensuring continued maintenance and secure operation for Western solutions that are no longer officially supported by their manufacturers, and planning the transition to domestic solutions. This approach makes certain that productivity is not compromised and provides a return on past IT investments. We have taken the same systematic approach to the project for the government agencies of the Republic of Tatarstan, as we are helping them move to a domestic operating system. We are creating and implementing standard workplaces based on Astra Linux OS and other Russian IT products. We will replicate this experience in other regions of the Russian Federation".

Mikhail Bocharov, Executive Director and Deputy General Director for Science at CSoft Development, discussed plans for import substitution of engineering software:

"Over the last year or two, Russian information modeling technologies have proven to be in great demand, as well as compliant with the needs of domestic civil and industrial construction. Although Western BIM technologies continue to have a presence in our market in various forms, local developers have risen up to the challenge and successfully substituted engineering software at the design stage. The next steps will involve developing solutions for the construction and operation stages, as well as establishing a digital vertical hierarchy".

The RUSSOFT press conference was wrapped up by Igor Bashkov, the CEO of Netrika Healthcare, who highlighted the main aspects of the digital transformation in healthcare across various Russian regions:

"We are implementing healthcare digitalization projects in 18 regions throughout the country, with a combined population of more than 36 million people. The introduction of new helpful services for patients, doctors, and healthcare administrators is helping these regions take the lead in digital transformation. The crux of our success is the integrated approach, where the customer can select the best solutions for each unique task, which we then turn into a unified regional digital healthcare framework. Importantly, this approach opens up access to government contracts in our field for IT companies of all sizes."