One year into using Russian software: Benefits and pitfalls

Import substitution of foreign software in Russia began back in 2014–2015 after the first serious sanctions were imposed. But the process went slowly and in 2022, when foreign companies left the market, it started to gain momentum. Statistically, until last year, only 35% of state companies had dealt with Russian-made software. In 2022, this share grew to 60%. According to the terms of the Russian Digital Economy National Program, 70% of state-run companies must switch to local software. We continue to see an organic and smooth transition although users and developers have been facing certain challenges.

Pitfalls of import substitution

When we speak about import substitution, it is important to understand where Russian software is generally used. Operating systems and components are the products that we have developed for a long time and yet quality integration will take a few years. Certainly, Russian companies have developed solid data security systems in the past decade and successfully compete with similar foreign software but when it comes to hardware, Russia can’t boast the same level of progress. We do not have the production facilities required to attract enough customers. In the current circumstances, however, market players remain optimistic and build up their own competences.

In 2023, a certain amount of foreign-manufactured software programs have proven useless, with either operations and support discontinued or limited functions available. Some organizations saw the exit of companies whose software products included their corporate HR data such as employees’ personal data as well as information on their salaries and job positions. Amidst this withdrawal, companies had to develop data systems on their own or approach third-party developers to this end, which requires additional expenses. For instance, certain companies used to work with macros in Excel to improve user experience, a practice that also had to be abandoned. After Microsoft wound down its business in Russia, these companies had to fully rewrite their interior data systems, with losses worth millions.

Although import substitution has yet to be fully integrated into the domestic business, many companies have already naturally switched to Russian-produced software, while the rest manage to operate without it.

The impact of sanctions on the IT sector

Sanctions have affected nearly all Russian industries, including IT. For instance, delivering microelectronics from the United States is now highly complicated; this is currently done through parallel imports, but the scope of purchased products is very limited. As mentioned earlier, companies that used foreign platforms and solutions were hit the hardest. Replacing them now is difficult due to the lack of offers in the market, despite the high demand. Although hardware components can still be delivered, there are pressing software licensing issues. Some organizations find ways to extend licenses; however, with certain foreign manufacturers having discontinued support of Russian clients, domestic vendors had to take prompt efforts to cover this demand. Most companies using such platforms operate in the mass sector; along with substantial financial costs, service failures may result in vast amount of losses and client outflows.

Positive effects. The Russian market can already offer solutions to partially cover customer needs in the system-wide infrastructure segment. These solutions provide all necessary basic functions – yet, vendors still have a few years to go to engage in the competition with foreign companies.

Switching to domestic software

The Unified Register of Russian Software has already been created to include all alternatives as well as other developments. The list contains several categories, including video conferencing software, social networks, corporate messengers, browsers, and others.

Companies can already operate utilizing domestic IT solutions, which is important for smooth performance of the critical infrastructure of the business and the state. Customers now have the opportunity to compare tools, performance and technologies, and see how a software solution fits into an existing infrastructure. There are entire ecosystems that could cover major user requirements in various business sectors; this is now the core focus of domestic developers. This segment boasts a high potential; in case Russian developers use the competencies they have gained while working with western-built equipment and apply this experience to local technologies, soon we may see our own relevant and competitive IT products.

Steps to switch to Russian-produced software

Define tasks and requirements. By doing so, your company can sort out unnecessary software programs and systems that fail to meet proper operational parameters.
Select products based on the desired software requirements.
Test the selected software. The process will help you understand what can be introduced and what other systems you have to adjust for integration, and see whether the selected software solution meets the necessary requirements.
Train your employees how to work with the newly introduced system. They should have an understanding of ways to run the software.
Be consistent. Gradual efforts to launch the new software and adjust to working with it will help you track minor failures and issues and properly handle them.

Conclusions

The major problem of the domestic IT market is a severe shortage of equipment and software solutions. We are yet unable to replace products built by foreign companies that withdrew from the Russian market. Our enterprises are operating at full capacity; sanctions and disrupted logistics make it difficult to promptly receive equipment, with a longer delivery time. Yet, all market participants are positive: customers have lunched a constructive dialogue with vendors, and most importantly, there is an understanding of the task pool, with priorities defined. This year, IT companies can cover more client demands as regards software import substitution.