IT Europa: Russia goes global

The Russian IT market is going through a period of transition, as it inches ever nearer to Western norms of operation, and seeks to join the World Trade Organisation. The top dogs in distribution and assembly remain the local players, but, as this survey shows, companies like Dell on the hardware side, and German PC-Ware, one of Microsoft's biggest European partners, are betting that now is the time to get involved…

“Russia is not Europe – in almost every sense!” asserts Alexander Kutowski, general manager of PC-Ware's Russian operation. However, business is good for them – as it is for their partner, Microsoft, whose CEE boss Jean-Christophe Berthier tells us that Russia is Microsoft's fastest-growing territory. Nevertheless, it is obvious that Kutowski, a Russian-born German, comes across a lot of frustrations operating in Mother Russia. But it's a market his company feels it needs to be involved in.

This story, of economic good times off-setting the less comfortable aspects of 21st century Russia, is what seems likely to lead to little meaningful political change in the presidential and parliamentary elections next year. That's why, as a leading figure at one of Russia's largest IT distributors tells us, “Election time shouldn't have much effect. It won't freeze up the economy like it did in the Ukraine, for instance.”

In fact, Andrey Kostevich, distributor ASBIS' VP Russia and Belarus, says: “This is a wonderful time of sustainable development; we're setting annual growth targets of no less than 30%.” That's about twice the rate of growth of the market, which most agree stands at around 15% – still a healthy figure which puts Europe's more mature markets in the shade. Obviously, then, it's a place where money can be made.

We last surveyed Russia exactly one year ago, where the big news in distribution was rumou rs that Millennium and R&K were quitting the arena. That has proved to be true and, as Andrey Kostevich tells us, “we [ASBIS] have taken over warranty service for some of the products previously sold by Millennium Distribution.”

Perhaps those two ex-distributors were scared off by the apparent trend for vendors to move towards a direct model. To some extent that has continued, with such players as Samsung, Panasonic and HP registering trade offices in Russia, as opposed to just installing marketing representatives there. However, the channel still has a definite role to play, as components vendor Arrow tells us. “The commercial side of the business is challenging”, says Hermann Reiter, sales director, emerging countries, Arrow Europe. “We go through the channel, because they are the local companies who know how to operate in the local environment. They understand the regulations better than us, for example.“

Ah, yes – the regulatory environment. That's what gives PC-Ware's Alex Kutowski sleepless nights, and is also cited by Kostevich of ASBIS as a problem. It's not just the international players who have trouble, though – Yelena Samoilova, marketing director at Formoza, a Russian PC assembler, distributor and retailer, tells us that there are “a lot of issues” with import regulations. “The situation's still unstable”, she says. “Sometimes it's more economical for us to purchase components on the local market, and sometimes to import them ourselves. We check the market almost every day. But it is the same situation for everyone,” she concludes.

As if to prove how confusing the whole situation is, however, another industry insider tells us: “Customs duty is currently zero at the moment for the import of computer-related products and peripherals.” The problem arises, it seems, in the simple act of actually getting goods across the border.

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 Copyright: IT Europa (November 14, 2007)

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