December 2, 2024
Source: Meduza
Russian businesses are grappling with a software shortage as Western developers exit the market. Forced to rely on domestic alternatives, companies find that more than half of these programs fall short of fully replacing their foreign counterparts and will need extensive upgrades to function. And for many critical business tasks, no Russian-made software exists at all — a serious hurdle given Russian President Vladimir Putin’s directive for state-owned companies to switch entirely to domestic software. Meduza breaks down the challenges facing Russia’s software industry.
Since the onset of the full-scale war in Ukraine, dozens of software companies have exited the Russian market entirely. While some continued supporting existing clients, payment difficulties and sanctions targeting the IT sector have forced them to restrict access for Russian users. For nearly three years, Russian developers have been attempting to replace foreign software with domestic alternatives, but progress has been slow.
To maintain industrial operations, Russian companies need to transition 837 business processes to domestic software, Vedomosti recently reported, citing a mid-November presentation by Ilya Massukh, head of the Competence Center for Import Substitution in the Information-Computer Technologies Field. Yet, for 412 of these processes, no Russian software exists. Even where alternatives are available, many fail to match the functionality of Western products and are in need of upgrades.
The agricultural sector faces the steepest challenges, with no domestic solutions for 159 processes. The automotive industry follows, lacking software for 56 tasks, while existing programs for 45 processes require substantial improvements. Massukh noted that the worst software issues were in the machine building, engine manufacturing, energy, and utilities sectors.
The presentation didn’t detail exactly what kind of programs Russia lacks. However, sources told Vedomosti that Russian businesses remain heavily reliant on Western software for automation, design, and production chain management. Businesses also struggle to find adequate alternatives to operating systems, according to a study by the video conferencing service Kontur.Tolk, published in May 2024.
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Massukh’s assessments were largely supported by industry leaders interviewed by Vedomosti. Alexey Uchakin, the head of infrastructure at EdgeCenter, said entirely replacing software from major developers like Microsoft, Oracle, and SAP is “impossible.” “It’s like switching from a Mercedes to a Lada Aura — the wheels and steering wheel are in the same place, they look similar, but in practice, the differences are vast,” he explained. Vladimir Shirokorad, director of solutions expertise at Tsifra Group, estimated that about 15 percent of Western software used in Russian industry is difficult to substitute.
For example, despite President Vladimir Putin’s directive to phase out Western software by January 1, 2025, Russian state-owned companies continue to rely on products like Microsoft Office. In November, Kommersant reported that state enterprises spent over 24 million rubles ($226,000) on Microsoft software in 2024.
The electronic trading platform Roseltorg offered higher estimates, stating that Russian state enterprises spent more than 58 million rubles ($547,000) on Windows operating systems and Microsoft Office packages. While both figures reflect a decrease compared to 2023, they illustrate the ongoing reluctance to fully transition to domestic alternatives.
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Around half of Russia’s major companies have been forced to make the switch to domestic software due to the withdrawal of Western suppliers and regulatory pressure, according to Forbes, citing research by Orion soft. Under normal circumstances, these businesses would almost certainly have preferred to stick with foreign software.
One reason is frequent compatibility issues. An Orion soft survey revealed that 62 percent of Russian companies encounter such problems when implementing new software. Russian programs often struggle with compatibility — not just with Western software, but even with other Russian-made systems. Companies also face difficulties due to the complexity of implementing new software and the lack of a troubleshooting database. IT teams frequently don’t know what problems to expect when migrating from one system to another.
Uchakin believes that addressing these challenges — and fostering the broader development of Russian software — hinges on its widespread adoption. However, many companies are hesitant to act as testers. Alexey Nikitin, the CEO of Visiology, told Vedomosti that businesses want software with the same functionality as their previous systems. As a result, some companies continue to rely on Western programs, finding ways to bypass sanctions. However, this approach comes with risks: Western developers could block access at any moment, potentially causing data loss, production disruptions, and financial setbacks.
Russia’s software registry lists over 23,000 programs, but certain sectors are oversaturated with competing solutions, many of which are nearly identical and attempt to replicate Western products without significant innovation. This overcrowding has led to compatibility problems and made it difficult for clear market leaders to emerge.
Digital Development Minister Maksut Shadayev acknowledged this problem in an interview with CNews. He also noted that some state-owned companies are trying to develop their own software, even when suitable solutions already exist. The government, he said, plans to introduce restrictions to put a stop to this.
Despite ambitious plans by the Russian authorities to fully transition to domestic software within a few years, they haven’t had much success. Russian-made programs are often inefficient, expensive, and fail to address most business needs. Yulia Denisenko, the executive director of the Russian software company RT–Iridium, estimates it could take another 14 to 15 years to develop domestic alternatives for the software essential to industrial enterprises and the public sector. Whether these solutions can ever fully replace Western software remains an open question.
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