4 IT Companies Merge, Seeking Strength in Size

IT consulting and integration firm BAC announced Tuesday that it has merged with three other firms to form an umbrella company, in the first signs of consolidation in the IT sector amid the economic slowdown.

The newly formed company, called Asteros Group, is composed of BAC, Kabest, Averta and Ukraine-based Dialog Kiev.

"The present crisis could radically alter the landscape of Russia's IT market," said BAC founder Yury Byakov on Tuesday after a conference announcing the formation of the new company.

"The changes will be noticeable in 2009," he said.

Byakov predicted a gloomy future for small IT players as the economic meltdown hit home, leading to budget cuts and business closings.

"We expect companies providing IT consulting services and installation of big IT systems to lose market share," he said.

The country's IT segment has seen heady growth of 31 percent over the past four years, spurring the government to make it the cornerstone of its diversification policy.

But the financial crisis is also forcing IT companies to reorder their priorities and rethink established business models.

The financial crisis will lead to sharp reductions in investment into the sector, with only 10 percent of IT company budgets devoted to innovative projects, IDC Russia, an IT consulting company, said in an annual state-of-the-market research report issued in October.

The report said the lion's share of companies' budgets would be spent on propping up their businesses over the same period.

Byakov said smaller companies specializing in the construction of call centers have already stopped taking part in tenders for such projects because of the credit squeeze.

"A shift in emphasis from the construction of IT infrastructures, which currently accounts for 50 percent of IT revenue, to outsourcing as the mainstay of IT companies is inevitable," Byakov said.

Byakov said he expects Asteros to earn as much as $500 million in revenues next year. The company's projects include setting up the IT networks in the Federation Tower, which is slated to be Europe's tallest building upon its completion.