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. Last Updated: 07/27/2016

Spending Priorities Shifting as Local IT Market Matures

The local information technology market looks set to mature over the next few years as companies switch their spending away from hardware to software and IT services, repeating the pattern of IT expenditure seen in other markets such as Western Europe.

IT research company Gartner estimates external IT services in Russia will amount to about $400 million to $500 million in 2002, with average annual growth of about 30 percent pushing this figure up to $700 million to $800 million in 2004.

Research by Market-Visio found that 39.7 percent of Russian companies' IT budgets is to be spent on hardware in 2002, with just 19.6 percent on software. Spending on hardware is expected to fall to one-third of Russian companies' total IT budgets by 2004, while software is expected to increase to 22.6 percent. At the same time, the percentage of expenditure on external IT services is forecast to increase from 10.2 percent in 2002 to 12.4 percent in 2004, while voice and data transfer are to rise from 9.9 percent to 11.4 percent of total IT spending.

Many Russian companies, such as auto manufacturers, have sizeable IT budgets with which they continue to support large IT departments, even though IT is rarely a core competence. Market-Visio forecasts that IT spending on staff is expected to remain static at around 20 percent during 2002-04 as companies maintain their internal IT structures. However, change is likely in the future as Russian companies follow the international trend toward outsourcing.

Meanwhile, an area that remains undeveloped among local companies is benchmarking -- to measure and improve the benefits that IT systems actually bring by comparing performance with the best companies in the field.

Mika Ollikainen, research director at Market-Visio, said there is still virtually no demand for such measurement services in Russia.