IT explosion helps to fuel boom times

Russia

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The Russian stock market came of age when RosBusinessConsulting (RBC) floated a 16% stake on the Russian Trading System to raise investment capital. The amount of money involved was tiny and the company is small by international standards but the IPO in April was a landmark in Russia's development towards a market-based economy.
RBC is Russia's leading online media and IT company. It provides real-time online stock market quotes for banks and brokerages as well as running the only dedicated Russian-language financial newswire service. Having built up expertise in programming it has more recently moved into IT solutions for companies and is planning to launch Russia's first dedicated business television channel in the style of Bloomberg TV.
The company's success comes on the back of Russia's economic recovery. Its revenues have doubled and profits have risen by a third every year since it was founded in the early 1990s.
"It is still early days for Russia's IT sector," says Yury Rovensky, RBC's general director. "But it has already begun. We have left square one and are now looking to develop businesses that already exist and start new ones that are missing."

Russia has embraced IT as one of the few things that it was good at even in Soviet times. Five years ago a McKinsey report laid out six conditions that needed to be met before Russia's software sector could take off. Most of them have been met.
Despite rampant corruption, Russia's universities continue to churn out highly qualified - but cheap to hire - graduates, who increasingly speak English as the leading language of commerce. International companies are increasing their contact with Russia and Russian companies are adopting the international standards they need to do business with foreigners. And finally rapid progress in restructuring Russia's dilapidated telecoms system means that access to high-quality and relatively cheap communications is becoming more prevalent.
Offshore programming
Russia is making good money from its hi-tech companies but still has a long way to go before it overhauls the world leaders.
Earning roughly $100 million a year from offshore software development - writing programmes for clients in other countries - it will take a decade to catch up with India and Ireland which each earn over $6 billion.
However, income from software development is rising by between 60% and 80% a year and India, which has lower levels of education but similar labour costs, was also earning $100 million a year from software development 10 years ago.
Russia's big shortcoming is the lack of experience - both of project managers and of dealing with international companies' needs. Russia's big advantage is that its education system remains world class.
Russia has more people working in R&D per capita than any other country and ranks third in the world for the number of scientists and technicians per capita. With world demand for programmers outstripping supply (Germany and the US have both relaxed visa restrictions for software engineers) there is a growing niche waiting to be filled.
Meanwhile the country that spent 70 years walled off from the rest of the world is getting used to the idea of being able to surf directly into homes from New York to Tokyo.
Ideally suited to a country that stretches across 11 time zones, internet use has grown exponentially in recent years. Computer imports were at an all-time high at the end of last year, while internet usage in Moscow doubled last year and rose by just under 40% for the country as a whole. Some 4.3 million people, 3% of the population, use the Cyrillic language internet - or RuNet (pronounced roo-net) as it is known in Russia - at least once a week and one in 15 Russians occasionally.
At the same time the number of RuNet sites doubled over a year, jumping to 135,000 by August. RuNet is growing fast but still remains a fraction of the size of western Europe's where most countries can boast more than 1 million sites.
Even the government is getting in on the act. In August, Russian tech giant International Business Systems (IBS) won a tender to create a Kremlin portal - due to be launched next year - which will provide information on the economy and society as well as integrating the existing ministry sites.
A few companies are even making money from RuNet. The leading search engine Yandex, which receives half of all Russian search hits, more than doubled revenues to pass $1 million by the start of this year.
Electronic Russia
The Japanese government singled out electronics as a rapid growth area in the 1960s and pumped in millions in state support to boost production. The Russian government doesn't have the same resources, but has also hit on the idea of encouraging domestic IT business as one product in which Russia already enjoys a competitive advantage.
Officially launched this year, the Electronic Russia programme is aiming to boost Russia's IT exports to $2.5 billion by 2005, according to communications and IT minister Leonid Reiman. The programme is due to run until 2010 when Reiman hopes IT will account for 2% of GDP, compared with the current 0.6%.
The short-term goal of the programme is to provide unlimited information resources to Russians and bring Russia's tattered telecommunications infrastructure closer to western levels.
But for the E-Russia project to really take off, Russia will need to attract some serious foreign investment. While Russia's engineers are world class, the infrastructure and hardware available is stuck in the 20th century.
Russia's leading companies have been spending heavily on IT thanks to the recent balmy economic climate, often going straight to state-of-the-art systems. For instance, the MICEX (Moscow Interbank Currency Exchange) stock exchange can boast one of the most sophisticated electronic trading and settlement systems in the world. And growing demand has also provided fertile ground for the handful of domestic IT companies.
International Business Systems (IBS) leads the way among domestic companies and promises to follow RBC's IPO later this year with its own, much larger, public offering. It has also been hired by the government as the Russian representative in a consortium of companies charged with developing the E-Russian programme.
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IT explosion helps to fuel boom times

Russia

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