The IT industry is officially one of the hardest hit by the sanctions imposed on Russia at the level of the Russian government; the industry has been receiving substantial state support. However, state support is not the only reason why the domestic IT sector has avoided stagnation and even found resources for growth.
The real issue
Russian IT companies had to deal with two major problems in 2023. The first is developer relocation, which was to be expected, given that teleworking has become the norm in IT over the past three years. Traveling and changing locations have become quite common. On the other hand, some IT specialists have been showing diminished interest and involvement in their professional projects, distracted by planning flights and changing locations. If they travel to countries that require a visa or green card, these formalities take a lot of their time and effort. The time difference also has a negative effect on the industry’s growth. Besides, with teleworking, it is difficult to control the employee’s involvement in other projects, as developers often work for several employers to increase their income, while sacrificing their loyalty and involvement in each project.
Considering partnerships between the IT industry and the car market, this year has seen a decrease in the importance of IT solutions for new car dealerships.
Before Korean, German, and French automakers decided to pull out of Russia, they had reached a stage where they had to introduce innovations and follow market trends, which increasingly involved digital solutions in the past few years. Offering users convenient tools and working with big data, they launched new projects and created unique user experiences – online sales, subscriptions, fleet management systems for fleet customers, online redemption and much more. Unlike those companies, new players have enough on their plate with entering the new market, starting dealership networks, and introducing consumers to new brands. It will take some time before they start adding the innovation component, but it will definitely happen.
Recent market update
To date, the Russian economy has pretty much stabilized, and so did the car market. Due to the ongoing negotiations with new auto brands, IT companies can secure development orders that mainly involve the engineering part, in particular, the manufacturing and installation of ERA-GLONASS systems.
Additionally, almost every new brand makes sure to equip its vehicles with telematics equipment, followed by mobile app development. This client feature allows heating up a car remotely, using digital online services such as mobile gas stations, or making car maintenance appointments.
Thanks to new opportunities under state support and the growing demand for Russian IT solutions across all industries, developers and manufacturers of telematics equipment are now able to scale up their businesses qualitatively and quantitatively. For example, obtaining the status of an accredited IT company or a Skolkovo resident has become easier, more transparent and faster. Available perks include lower profit tax and VAT as well as insurance contributions, which significantly relieves the financial burden on businesses. Moreover, concessional lending and mortgages with lower interest rates for IT company employees motivated many relocated professionals to return to Russia. By the summer of 2023, one in every five IT professionals who had left Russia since the early 2023, returned. Not only did the government took measures to save the industry but most IT companies developed and implemented their own crisis strategies.
Priorities
The team comes first. Regardless of market fluctuations and geopolitical turbulence, the most important thing is preserving the team and common sense. Giving in to panic and dissolving the team means losing a business that took many years to build. Challenging times forge strong partnerships and scare off weak professionals, boosting staff loyalty. New development vectors can help stay afloat, although this measure requires fast decisions. Budgeting must be done with a cool head, to avoid excesses or incongruities.
If a company feels unstable due to market changes, the company should consider a crisis management strategy. It is best to implement the strategy on a permanent basis, to stay resistant to serious shakeups. Crisis management strategies imply negative scenarios, with redundancies, cost cutting, etc. For example, our company followed a different approach. Our goal was not to survive but to find new partners for new projects.
Five lifehacks to prevent bankruptcy and scale up in the process
- Preserve and expand your team no matter the hardships.
- Search for free market niches, new partners and customers.
- Use all state support opportunities. They certainly help.
- Explore new business vectors.
- Don’t stop developing, personally and professionally. This advice is good for both top managers and operating personnel.
By Anton Zhukov, founder, CEO of Tri Tochki