Russia needs ‘niche monopoly’ on IT market

28 november 2019

Foreign IT companies have a software and hardware monopoly on the domestic market, Analytical Center expert Alexander Malakhov said, noting that systemic software monopoly “is the most dangerous.”

The expert does not see any significant change in the current situation. The United States and China, where all of the key players and volumes are concentrated, remain the world’s principal IT markets. “The logic is simple: wherever there is more money there are also more competences and conditions for developing new technologies, especially as the development of hardware requires much bigger investments that the development of software. We could speak about dynamic growth of the data center services market in Russia to 26.8 billion rubles in 2018, but this is just 0.2% of the world’s total,” Malakhov said.

This situation not just complicates the substitution of imports but also creates a monopoly, besides the monopoly is created in a particular jurisdiction, rather than a particular company. It is much more pronounced in the field of hardware, Malakhov said. Even domestic hardware manufacturers do not have their own elemental base and often assemble their products at factories in China and other countries. “Such equipment actually means a mere re-labeling,” he said.

The monopoly is being mitigated in the field of software, the expert said. This results from a large number of open source code solutions, freely distributed solutions, and their increasing technological maturity. But even these products need support of domestic companies and the government.

The attempt to isolate oneself from the global IT market and to create a family of domestic “full-cycle” solutions has no future due to the huge imbalance of market volumes and necessary efforts, especially of those who are catching up, Malakhov said. “We need to integrate into the world market with our own specialization, occupy a certain niche and become an irreplaceable actor by creating sort of a ‘niche monopoly’ of domestic companies,” he said.

In the opinion of the expert, Russia has significant competences in the field of information security, computer vision, and other IT divisions based on strong mathematical knowledge. “There are leading companies in regions, and they can enter new markets with proper support (regulatory rather than financial),” he said.