According to the Ministry of Communications, until now the share of imported software in the government sector was between 50 and 97 percent, depending on the type.

According to a new law that comes into force on Jan. 1, Russian official bodies will no longer be allowed to use foreign software but will have to use Russian programs, and the new regulations will possibly be later extended to cover state companies. How realistic is the government’s initiative and what opportunities does it provide to the Russian IT sector?

The Russian government has announced its intention to substitute foreign computer programs and services with domestically-produced equivalents. From Jan. 1, 2016 Russian governmental bodies will have to renounce foreign software in favor of Russian programs.

It will still be possible to buy software from abroad but only if the necessary programs do not have domestic equivalents or the client can explain why exactly the domestic software does not suit them.

According to the Ministry of Communications, until now the share of imported software in the government sector was between 50 and 97 percent, depending on the type.

The new regulation threatens the position of IT giants such as Microsoft, SAP, Oracle and IBM, who may lose a share of the Russian market.

Foreign software producers do not declare the share of the government sector in their Russian sales (and often sales in Russia in general). Russia's entire software market in 2013 was worth $4.9 billion, as estimated by the analytical company IDC.

Russian President Vladimir Putin has already given his support to the IT sector's proposal to restrict purchases of foreign software not only for government bodies but also for state companies.

What will the Central Bank and the government be deprived of?

"Among the government structures whose work will be affected by the new law are the Central Bank, the mayor's offices, the government and the state banks," said Alexander Volzhinsky, chief engineer of the Informzaschita company's projects.

Volzhinsky explains that these structures use foreign software in three segments: operational systems, (Windows, Linus/Unix); specialized software (customer relationship management – CRM, enterprise resource planning – ERP, the SQL managing data system, automated banking system –ABS); and protection programs that are necessary as cases of cyber-attacks increase.

According to Volzhinsky, while variations of equivalent Russian programs are contained in the Ministry of Communication's register, "domestic programs cannot substitute foreign software because they cannot guarantee the same level of support, performance and convenience," he said.

Opportunities for the Russian software market

The Association of Russian Software Producer's register contains more than 200 companies and more than 900 Russian products from various categories. Among them at least three large companies have already received recognition not only in Russia but also abroad: 1C, Kaspersky's Lab and ABBY.

"In terms of the number of ERP projects, 1C [a program that is used in accounting and human resources – RBTH] is far better than SAP," said Dmitry Zavalishin, general director of Digital Zone. However, according to Volzhinsky, this program needs foreign databases such as Microsoft or Oracle to function.

As examples of successful Russian software, Zavalishin mentions PostgreSQL and Big Data, which were developed by Yandex. Yet both have two weaknesses: consulting and technical support. Unlike the Russian companies, large foreign software provides strong and prompt support.

Zavalishin notes that for Russian companies it is economically disadvantageous to have such large call-center staff since their activity is oriented towards more local needs.

Moreover, Russian companies do not really have their own software that has been developed from scratch. Domestic players use already developed software with an open code, explained one IT expert.

The main customers for such software are small companies, for whom the accessible price and localization in the Russian language are an advantage, while large companies prefer to work in English, said the expert.

"There is reason to believe that the ratio of foreign to domestic software in the government sector will not change radically in 2016," said Dmitry Komissarov, general director of New Cloud Technologies.

Some state companies have already managed to explain their need for foreign software and have conducted tenders. According to the zakupki.gov portal (a site where state companies place their orders), the state Rosatom corporation held three tenders in November 2015 to buy Microsoft software, while the state company RusHydro also bought Microsoft licenses for the 2016-2018 period.

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