IT industry in Russia: consequences of the pandemic

16.06.2020

Alexey Gultsev – on the situation in the Russian IT industry during the COVID-19 pandemic

The head of the The Ministry of Digital Development, Communications and Mass Media of the Russian Federation proposed to subsidize leading Russian IT developers. According to Maksut Shadayev, such subsidies can be significant and reach up to 50% of the cost of new software product development for the real sector. The proposal was announced at the meeting with the President of the Russian Federation on June 10.

Alexey Gultsev, a member of the board of directors of InterPolyMech, shared his vision of the situation.

– Alexei, what do you think about the initiative of Maksut Shadayev?

– At first glance, this initiative can only be welcomed. In the context of the pandemic and the ensuing economic downturn, a certain collapse of demand is observed in the Russian IT industry. In the long run, this can have serious negative consequences – affect the competitiveness of Russian IT companies and lead to Russia’s technological lag in this area.

– Is there anything you didn’t like about the proposal of the minister?

– Unfortunately, we see that it is proposed to subsidize the expenses of leading companies only. Small and medium-sized IT business is left face to face with the consequences of the pandemic.

– What are these consequences for the IT industry – if you mean small and medium-sized companies?

– Compared to last year, from mid-April the revenue of software companies began to fall. For some, the figures were 20%, for others – 40% or all 100%.

In the IT sector, more than 75% of the finished product cost is made up of the wages of programmers and developers. Our business is a socially involved business.

– What is the reason for this decline in the industry?

– First of all, with the fact that some projects were postponed, some – fully or partially stopped. You need to understand that in the IT sphere, more than 75% of the cost of a finished product is made up of the wages of programmers and developers. Our business is a socially involved business. We provide jobs and even during the pandemic we try to fulfill our obligations to employees.

Alas, not all companies manage to survive economic recession. This is especially true for small and medium-sized businesses. That is why government support not only for market leaders, but also for small companies would be most welcome.

– Did you foresee such consequences?

– Of course. At the end of March, IT companies asked the government to consider them among the industries most affected by the crisis. Unfortunately, our request was not heard.

– Following the meeting, the President asked the government to prepare a comprehensive plan to support the industry and include measures in the national economic recovery plan. Does this inspire optimism?

– Everything will depend on whether the measures of state support reach the small and medium IT businesses and whether small but promising companies can realize their potential, both as creators of new IT products and as entrepreneurs, in the difficult current situation.