Russia Information Technology Report Q2 2016
BMI View: Russian IT spending collapsed in 2015 as the economy turned downwards, with sharp rouble depreciation rapidly reducing the affordability of imported devices and solutions. The outlook is for a further, albeit slower, contraction in IT spending in 2016 as economic conditions remain challenging - before a recovery from 2017. We are however cautious about the recovery, despite the pent-up demand across the market after deferred spending in 2015-16, as we envisage little of the erosion of purchasing power to be recaptured by 2020. Russia's international relations and policy umbrella for the ICT sector generates additional uncertainty, for instance through data localisation and technological independence initiatives, though these policies are creating pockets of opportunity within the market that vendors could tap with targeted strategies. For total IT spending, we envisage a CAGR of 7.1% over 2016-2020 to a total value of RUB1.2trn.
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Hardware: RUB446.9bn in 2016 to RUB551.1bn in 2020, a compound annual growth rate (CAGR) of 5.4%. Pent-up demand from the economic crisis in 2015-2016 has potential to see spending bounce back from 2017, but a subdued economic outlook means purchasing power will remain below 2013 levels, and consequently we believe lower volumes and greater share for low-cost brands will remain characteristic of the segment.
Software: RUB185.2bn in 2016 to RUB242.5bn in 2020, a CAGR of 7.0%. Enterprise software investments should bounce back more fully than hardware spending, but the policy of switching to domestically produced solutions could become a bottleneck and be a drag on software spending growth.
Services: RUB280.0bn in 2016 to RUB407.0bn in 2020, a CAGR of 9.8%. Weak economic outlook and the extent of investment in datacentres since 2014 provides a positive outlook for cloud services, which we believe will drive segment outperformance, but we caution that data sovereignty and aim of technological independence could dampen performance.
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