The substitution of foreign software in Russia —

An analyst from Finam FG on the transition to Russian software and the growth prospects of the market to 1 trillion rubles

The Russian government intends to consider all major types of information systems as Critical Information Infrastructure (CII) objects to accelerate the transition to Russian software in the country. Prime Minister Mikhail Mishustin shared planes during a strategic session on software import substitution. In an editorial for Realnoe Vremya, Finam analyst Leonid Delitsyn writes about how the substitution of foreign software with Russian software is currently taking place.

“The state wants to make all the birds out of one stone”

The substitution of foreign software with Russian software is a monumental historical experiment that has no analogues in history. It’s going according to plan, as it should these days, but there are a few flaws, so to speak. During a strategic session on import substitution in September, Prime Minister Mikhail Mishustin said that 80% of foreign programs already have Russian analogues. Since 400 types of critical business software have been detected, it can be concluded that there are about 300 Russian software products for business. As the Prime Minister said, in general, these products are ready, it is enough to complete them completely. In order not to fragment efforts and reinvent the wheel, 33 skills centers bringing together the efforts of more than 300 industrial companies have been created. The pool of applications submitted by customers is 200. There is the first result: the companies have formulated what they need.

This is why the state is quite optimistic about the process although it condemns large companies that register their subsidiaries developing software only for their parent holding, and not the market in general, as IT companies hoping for advantages. In turn, they promise that the software will also be available for other market players. The state wants to kill two birds with one stone – both to create a Russian software market and to solve the problems of companies that have lost access to Western software.

Generally speaking, it cannot be said that these tasks are in harmony. Companies in general don’t care who owns the software if it’s the same one they used (от SAP, Oracle и Microsoft). There is a famous method of TAM (Technology Acceptance Model) to introduce IT in companies. There are two main problems with such an introduction: the new software is complex and unnecessary. Employees are fine with the old, they’ve already learned how to use it, they don’t want to invest time learning the new. In particular, if this new software does what the old one did, its introduction does not offer new career prospects. Therefore, the ideal option for companies is to have the same interfaces and APIs and when users and business designers do not have to change anything. But companies believe that, of course, Russian developers should invest in such a combination. It makes no sense to them if they neglect the size of the cake they got.

For example, software costs in the United States exceed 20% of total IT and telecommunications costs, while here they amount to 5%. The entire information technology and telecommunications market, according to Gartner’s estimate, is worth $4.2 trillion and growing at 8% per year. Thus, the spending of Russian companies on software can increase from 240 billion rubles, according to my calculations, to almost four times — to 900 billion rubles a year. As a prominent harvester driver claimed in a Soviet film, “For such bread…” (cooked tea can be used to resist the struggle for the harvest). In other words, the client can be met halfway, which is what Russian developers usually do.

Spending by Russian companies on software can grow from 240 billion rubles, by my calculations, to almost four times — to 900 billion rubles a year. Photo:

“Microsoft has enveloped office workers with its software”

On the other hand, the likelihood that the political storms will subside and that the window of opportunity for Russian developers will close is far from nil. Some companies (and individuals – anyone can check what OS they’re using) resolve to abstain. In this situation, it is important for developers to make risky customers use Russian software. That’s why similar methods and step-by-step guides on how to replace foreign software with Russian software, etc., can be found on many Russian developer websites today.

As for the progression industries will switch to Russian software with, I think it will be the same as in the past during computerization. The financial sector, telecoms and utilities will switch first, then retail, resource-based industries, energy, transport and finally agriculture. Perhaps education will be one of the laggards. Now many write about the reasons that interfere with the transition of the education system to Russian software, but I will cite my own experience.

At the beginning of this century, my boss who was the public relations director of a large online company and at the same time held the position of department head at the university sent me to teach several subjects. Manners were different then, and I showed up at the dean’s office pleased with myself. Now it is unlikely that I dare to cross the threshold. First, I had to submit an application in MS Word. I didn’t know how to use Word, and since I didn’t need it, I didn’t hide it. The university, in turn, wonders: “How do you work in an online business then? Maybe the dean’s office thought the websites were created in Word.

Two decades have passed since then, and of course I’m fluent in Word. But the administrators who asked me this question probably didn’t need anything other than new versions of Microsoft products. The company has wrapped office workers in its software like babies. Informatization and computerization have been in universities for all these years, which has intensified the penetration of Microsoft products in the educational system – in different disciplines, such as exercises, practical work, practical work. Needless to say, when I worked in this system, I prepared templates in MS Excel for my students, not in something different. It is a practical instrument and there are manuals. It is good that there is an alternative as distributed for free, but the students have Windows and Excel in their personal computers. Only a missionary excited by some special idea could impose Libre Office on them in this situation.

The education system will be “stuck” to the installed MS software for as long as possible until it is banned. Photo:

The Russian software market may grow from 250 billion to 1 trillion rubles

Therefore, from my personal experience, I assume that the education system will be “stuck” to the installed MS software for as long as possible until it is banned. There is always a possibility of transferring responsibility to lower levels of the hierarchy so as not to burden the budget, and when there are complaints from the top, the staff will be rejuvenated with a sauce of infractions.

Recent events illustrate the difficulties of the process. Last week, the Russian Association of Software Developers asked the Ministry of Digital Development, Communications and Mass Media and the Ministry of Education to ensure the compatibility of the federal state information system My School with Russian software.

Developers are concerned that this federal state information system only works with Microsoft applications. And their fears and hopes are clear. Developers urgently need personnel capable of developing, introducing Russian software and using it. But IT in school and university is not about teaching IT – it is about studying Word, Excel, Power Point and Access database etc. To start teaching something different, you first have to write manuals, tests and invent exercises. That takes time. Probably a year. And then these manuals and tests must be approved. This means that it will take two years. But students must be taught now, which means that the federal state information system will only be able to teach Microsoft products in the next few years.

Perplexed, the Ministry of Education swept away the developers: as if no one forbade offering Russian developments directly to schools, while the information system of the federal state is not a market place. And the ministry can be understood also because import substitution is not its core task.

Developers are concerned that this federal state information system only works with Microsoft applications. Photo: Rinat Nazmetdinov

But no more sad things. Some can shake Microsoft’s monopoly. There have been at least four major Russian Linux developers – Astra Linux, Alt Linux, ROSA Linux and RED OS. Sellers sell computers with pre-installed Russian software. The Russian operating system costs about 3,500 rubles. From the user’s point of view there is also a problem here, of course — it is far more difficult to choose between several producers (which are not very well known) than to buy a computer with the usual MS Windows . And power users would prefer to download the operating system for free. But the process is underway: sales in stores have started, analysts are evaluating sales, regular reviews will appear in the press later, a debate between users will break out about which system is better; all this helps the market to grow.

If we consider the issue from the perspective of the stock market, in the future the potential of the Russian software market will increase from 250 billion rubles to almost a trillion. This means that Russian developers will grow faster and many will need additional investment in development. This promises new IPOs in the IT sector and promising public companies. A repeat of the success of Russian cybersecurity market player Positive Technologies seems quite likely. If the substitution of foreign software does not turn out to be a short-lived special operation but a long-term strategy, mass investors can also take advantage of the growth of the Russian software industry.

Leonid Delitsyn


The author’s opinion does not necessarily coincide with the position of the editorial board of Realnoe Vremya.