In this research, an attempt has been made to evaluate the global competitive position of the Russian software industry and, more important, to provide policy implications for each party concerned (from individual firm to government and multinational enterprises) to address the existing problems and shortcomings. The first stage of this research was gathering the data about the current situation in the Russian software industry and arranging it according to the diamond model of national competitive advantage. The results of it can be found in Chapter 3. The second stage was the search for existing problems and shortcomings. Some of them have been explicitly mentioned in the sources (research papers, industry reports etc.) used on the previous stage, others did require a deeper analysis to be uncovered. The problems have been divided into five levels depending on whose efforts are necessary to address them: individual firm, industry, cross-industry (related and supporting industries), government and multinationals. Some of the problems have been mentioned several times as they can be only solved with combined efforts of various parties (for example, industry and government, government and MNEs etc.). Then, the policy implications have been developed for each problem at each level. Finally, both the problems and solutions have been combined in the table that can be found in the end of Chapter 4 to provide guidance for decision makers.
Even though it’s not the first research trying to analyze Russia’s software industry using Michael Porter’s methodology, some important improvements have been made compared to previous works mentioned in Chapter 1. First, an augmented version of the diamond which takes into account the activity of MNEs (developed by John H. Dunning) have been used in order to address the underestimation of FDI importance present in the original Porter’s work. Second, besides studying the attractiveness of Russia as a destination for IT outsourcing, this research has also discussed the competitiveness of products and services of Russian software firms on the global market. Third, besides describing the current situation in the industry, this research has also developed a comprehensive set of policy implications for decision makers at various levels, which increases its practical value.
Of course, there have been certain aspects that may require further study. For example, the
question of business climate and entrepreneurial culture, including startup ecosystem, is so big that it requires an independent research to be studied comprehensively. Another topic for future research may be the possibilities of combining the relevant competitive advantages of Russia and neighboring countries and creating a bigger regional diamond – even though this topic has been partially touched in this research, there are still a lot of aspects that can be studied in more detail.
We hope that the practical findings made in this paper will be useful for both the researchers and policy makers at all levels. At the firm level, it calls for changes in strategy which will stimulate the firms' growth (so more small and medium firms will be able to grow into big ones) and help them to become competitive internationally. At the industry level, it highlights the possibility for industry leaders and associations to improve the supply of highly qualified IT specialists by cooperating with government and MNEs in creating new education programs. At the cross-industry level, it emphasizes the need for more complete startup
ecosystem (including acceleration programs and digital entrepreneurship courses), as well as for more rigorous choice of candidates for obtaining venture financing at all stages, which will make Russian startup scene more competitive internationally. Moreover, it also offers some important changes in cluster development strategy to promote international cooperation in this area. At government level, it provides policy consideration aimed both at addressing some internal problems and deepening the cooperation with multinational enterprises, creating incentives for latter to make their contribution into the “national” diamond, especially those areas where efforts by domestic firms and government alone may be not enough. At multinational level, it offers MNEs to change their view towards Russia, and make it a more important part of their strategy than just a destination for price arbitrage in skilled labor.
It may be argued by readers that some of the policy implications derived in Chapter 4 are relatively general. Yet we consider that the goals of this research have been adequately achieved.
As the problems and major implications have been discovered, it’s the policy makers’ task to develop concrete measures and plans for their gradual implementation. For some issues, multiple solutions may be available. Even though we’ve included some practical recommendations based on our own vision, we want the final decisions to be made by professionals after a thorough
assessment of the situation. Moreover, a general nature of some implications may be considered an advantage too, as it makes them suitable not exclusively for Russia, but for some other
countries that want to develop software industry too. For example, Taiwan (where this paper was written) is also trying to diversify its economy and rely less on the semiconductor industry that used to shape its development in the past, and software industry is listed among the possible
“engines” for future growth. Even though the “diamonds” or Russia and Taiwan are very
different (some notable features of Taiwan include its experience in hardware manufacturing, as well as smaller domestic market size which should make Taiwanese firms more active in
promoting their products and services overseas), this paper might serve as one of the reference materials in preparing a plan of actions. Due to broad nature of software industry as well as different initial conditions in every country, simultaneous development of software industry both in Russia and other emerging economies will not be such a significant threat for the former: as in the end every country’s firms are going to find a specific section of the market where their core competencies can be used, which may in turn allow cooperation between countries.
We hope that the practical findings made in this paper will be useful for both the researchers and policy makers. We also hope that this research will make its contribution in making Russia’s software industry highly competitive on the world market, which, in turn, will stimulate the economic growth in the country.
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Appendix A. Exports of major goods from Russia in 2016
(as calculated by Federal Customs Service)
Category Total trade volume
(US$ thousands)
Percentage in total trade volume
Mineral products $168,947,153.60 37.42%
Fuel and power $165,983,584.50 36.76%
Metals $29,076,197.00 6.44%
Machines, equipment and automotive
$24,293,376.50 5.38%
Chemicals, incl. raw rubber $20,778,671.40 4.60%
Food and raw agricultural products (excl. raw textile)
$17,044,501.00 3.78%
Wood, pulp and paper $9,792,309.90 2.17%
Precious stones, metals and products made of them
$8,905,706.40 1.97%
Other goods $5,492,225.10 1.22%
Raw textile, textile apparel and footwear
$899,263.10 0.20%
Leather, fur and products made of them
$261,648.00 0.06%
Total $451,474,636.50
Appendix B. The “double diamond model” for US and Canada
(as presented in Rugman, Cruz (1993) and Rugman, Verbeke (1993))
Appendix C. The performance of Russia in Internet Development Index
Source: ITU Measuring the Information Society Report, 2015
The final IDI score comprises three components: “access” (showing mainly availability of telecom and Internet services), “use” (the number and percentage of Internet and telecom users) and “skills” (consists of three indices such as literacy rate, secondary and tertiary education enrollment), attached weights of 40%, 40% and 20% respectively. While performing quite well in the “skills” part (19th place, higher than some European nations), Russia underperforms both in “access” and “use”, scoring 48th and 44th respectively, dragging its overall score down. The comparison of scores for Russia and other BRIC nations with a more detailed explanation of them is presented below:
In the ITU rating Russia is a leader among the BRIC countries (except the average
bandwidth per user where it has lost to Brazil195). However, the limitations of such comparison should also be kept in mind. The extremely low score for India, for example, may be attributed to a large population as well as huge disparity in economic development of various regions and in the people’s income. The problem of disparity in regional development, though not as acute as in India, is also characteristic to China. Apart from it, the relevance of the “Skills” sub-index to
194 Excluding Hong Kong and Macau SAR as they are assessed separately in this report
195 The Akamai State of the Internet report for Q1 2016 estimates the average Internet speed in Russia at 12.2
195 The Akamai State of the Internet report for Q1 2016 estimates the average Internet speed in Russia at 12.2