IT around the world: Russia

In the first of an on-going series examining IT markets around the globe, we look at whether investing in Russia is worth the risk – and how to go about it the right way.

By Nicole Kobie, 20 Aug 2008 at 17:10

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Even with these hurdles, Gartner said Russia is a country worth targeting, as the opportunities outweigh the risks of such an emerging, volatile market.

Advice
Because Russia’s a tough place, it’s worth taking some time, Gartner advised. Investments should be made for the long term, and making local partnerships and relationships are key to being successful.

“For anyone wanting to enter the market, be aware,” said Metz. “People have to be aware what they’re getting into... it’s a long-term investment.”

“The way in is through partners, even with really big vendors,” she noted, adding firms looking to get a slice of the market must really understand their verticals and connect with local systems integrators, which can help funnel products to customers.

The easiest entry point is likely St Petersburg, which is a bit less expensive than Moscow and has a bit more European outlook, Metz said. “It’s a very beautiful old-world, friendly place, with strong business support and a bit more diversified.”

But if your company has no current global reach, don’t start with Russia. “It’s not a good place to start expansion,” Metz warned. “It’s more eastern than western, and they have a different way of viewing the world.”

So – time to invest?
Taking an idea like expanding into Russia to the board right now might not be the wisest move. If they’ve read the news, they’ll be wary, for stability reasons as well as corporate social responsibility and ethics. Trying to convince the higher-ups and shareholders that investing in a country with an aggressive military, and history of corruption, is no easy sell.

But software and hardware firms willing to take the time to build partnerships with local suppliers and services providers could have luck, and anyone with services expertise could stand to benefit in the long-term.

Steady, year-on-year growth rates of 20 per cent is nothing to ignore - but then neither is corruption, a militaristic government and a difficult business culture. The rewards are clear, but so are the risks, when it comes to investing in Russia's IT market.

The details:
IT centres: St Petersburg, Moscow
Top tech markets: software, security
Growth: over four per cent for GDP, as much as 20 per cent in tech alone worth at least $16 billion
Top local firms: Kaspersky, Yandex, OneC
Further reading: Russoft
Broadband: 32.7 million people
Mobile phones: 167.7 million (120 per cent penetration)

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RE:

The problemwith investing in Russia, is that you\'ll end up losing your investment to some unknown tax which you forgot to pay! The only way you can pay it as by the time you get the bill - it will already be the value of your company - is to sell most of it to some russians who you are competing with. My advice - don\'t invest in Russia unless your HQ is based in London and your taxes are accountable only in London - otherwise look at BP-TNK - this might be big - but there are hundred\'s more t

By nicomo on Thursday Sep 11