To increase the competitiveness of Russian IT companies in the Asia-Pacific region, Russia needs to boost the level of state support for the tech sector.
Pictured: Eugene Kaspersky, head of Kaspersky Lab. Photo: RIA Novosti
In order to have a full-fledged pivot to the East and become part of the key economic integration processes taking place in the region, Russia needs to diversify its partnerships as well as increase the variety of its exports.
Russian tech innovation is still lagging behind in terms of overall competitiveness and is limited in its potential to become a significant part of Russian exports to the Asia-Pacific region. The key reason for that is quite simple – the Asia-Pacific countries like South Korea, Japan, Singapore and China are among the world’s leading technological centers, giving them the ability to define the rules of the game in the IT market.
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The IT market in Asia is steadily growing, and additionally, it has a high capacity and receptiveness for new innovations. After the 2010s boom, its growth rate slowed down in monetary terms. However, it firmly continues to grow in absolute terms. According to a Gartner forecast, in South East Asia alone, corporate expenditures in the IT sector will reach $62 billion by 2018.
Despite relatively small demand by Russian venture capital companies, information technologies serve as an example of a successful entry point and further promotion of Russian companies into the Asian markets. It is highly possible that demand for the products of such companies will continue to rise and in the long term, IT could become a Russian window into the Asia-Pacific.
Reasons to be optimistic
There are several reasons to be optimistic. First, promotion of information and communication technologies (ICT) is one of the priority areas of Russia’s policy, which is enshrined in the Russia’s Development Strategy in the Area of Information Technologies for 2014-2020.
Second, the relatively low IT workforce capacity in Asian countries creates demand for providing consulting services and Russia has good chances to win market share in this niche.
Third, very often, Asian software developers are incapable of addressing existing cyber-threats. According to data from the company Akamai Technologies, 43 percent of all hacker attacks happening in China target both private users and business structures. Moreover, during the last five years, there has been a spike in activity of the APT30 cyber-espionage grouping, which mainly targets the leading countries of the Asia-Pacific.
Experts from FireEye, an American network security company, note that since 2011, over 100 individuals and organizations have fallen victim to cyber-attacks and 70 percent of them reside in India. Therefore, the inability to address new cyber-security challenges in a timely manner increases demand for the products of Russian IT companies.
There are several Russian IT-companies and startups that are worth talking about, as explained below.
Infowatch is a developer of software products and integrated solutions to ensure information security of organizations and help them combat external and internal security threats. Its main clients are in India, Indonesia, Malaysia and Vietnam. The list of clients includes a Malaysian bank (Persatuan) and an Indonesian producer of pump equipment (KSB Group). Infowatch launched several pilot projects jointly with the state and private companies in Malaysia. It is one of the Indonesian government’s consultants on cyber-security matters.
SPB TV is a world leader in supplying ready solutions for IP TV, OTT and mobile TV technologies for TV, as well as video-content broadcasts for different devices. In 2005 the company opened an office in Thailand. In 2013 the company registered a representative in Singapore. The biggest deal it struck in South East Asia is the launch of mobile TV for Singapore telecom operator StarHub.
CDNVideo, a resident of the Skolkovo techno park, is Russia’s leading operator of services that distributes content from the geographically closest node to the end user and ensures fast response and download time of content. Its servers are spread throughout the world, including in Singapore, from where it sells its services in Malaysia and Indonesia.
Parallels is a private company and a global leader in cross-platform solutions, making it simple for customers to use and access the applications and files they need on any device or operating system. It has regional offices in Singapore and Indonesia.
GS Group is a producer of hardware for processing digital television and the largest Russian developer and producer of set-top boxes for television. In 2012 the company launched its first national operator of paid digital broadcast television of Cambodia ONE TV. The project has become one of the first world’s successful models to implement digitalization program for national television, which was supervised by the International Telecommunication Union with Russia’s direct involvement. Currently GS Group is considering launching similar projects in Indonesia and Myanmar.
LifePay is one of the largest Russian payment service providers. The company has strong positions in the South East Asian markets after purchasing mobile acquiring service iBoxPro, which works in Vietnam, Indonesia and Thailand. As a result of the deal, Life Pay and iBoxPro consolidated into LifePay Global, a company with headquarters in Singapore.
Ruvento is a group of companies specializing in investment into innovative high-tech products. The main partner of the company in South East Asia is Singapore. Its main goal is to support startups that want to expand to the Asian market.
BaseRide Technologies is a developer of cloud services for the work of car fleets. In 2014, the company opened an office in Singapore.
The flagship company of the Russian IT industry is Kaspersky Lab, a global cyber-security company that produces antivirus software. The company has offices in the majority of East and South East Asian markets (China, Japan, South Korea, Indonesia, Thailand, Philippines, India, Vietnam, Malaysia and Taiwan). At the moment the Asia-Pacific accounts for about 6.2 percent of the company’s income and the region has always an important role in the company’s expansion plans.
In 2008 Kaspersky opened its first regional office in South East Asia, which is based in Selangor, Malaysia. The regional office serves as a sort of command post for coordination and development of the IT industry in Malaysia, Singapore, Indonesia, Vietnam, Thailand and the Philippines, providing them with full-fledged support for Internet customers, managing operations and expansion of the services.
To intensify promotion of the Russian production into the Asia-Pacific market Kaspersky launched the specialized website Kasperskyasia.com, which allows local users to get access to information about products and regional marketing events in the most user-friendly format.
Thus, the countries of East and South East Asia are becoming a center for Russia’s venture capital and IT companies. This helps to increase Russia’s integration into production, distribution and technological chains.
As a result, in order to increase the competitiveness of Russian companies in Asia-Pacific markets and attract venture funds from the countries of the region, Russia needs to increase the level of state support in several areas.
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First, more support is needed for the development of “soft” infrastructure. It means increasing the productivity of funds such as Skolkovo that specialize in bringing high-tech products to market; creating national brands and helping them develop their own innovation production lines involving local human resources from the IT sphere; creating research and development clusters based around the leading Russian research universities; providing full-fledged support to business incubators; increasing support for the grant activity of research universities; and enhancing public-private partnerships (between the state and businesses).
And second, Russia needs to enhance “hard infrastructure,” including lands where techno parks, IT clusters and business incubators can be built. In this sense, these territories, possessing a solid base for advanced IT development, might become a place to launch new high-tech production.