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25COMPETITIVENESS OF NATIONAL IT COMPANIES IN THE NEW ENVIRONMENT
Margarita Yu. Varawa
The Plekhanov Russian University of Economics, Russia E-mail: [email protected]
Abstract. In the current conditions of the economic downturn, the majority of national companies operating in the field of information entrepreneurship have identified a number of problems related to the assessment of competitors and the need to maintain their own competitiveness.
The purpose of the study: on the basis of new global trends, to analyze the competitiveness of domestic IT-firms operating in a post-pandemic situation. The article presents an overview of the current state of Russian IT-companies and their competitive positions based on content analysis and descriptive method. The main results of the study: the general trends and trends in the development of the processes of competitiveness of Russian IT-companies are reflected; it is shown that the information sector has been affected by the non-economic factors of the pandemic, which should be considered not only as threats, but also as opportunities for finding new competitive niches; it is noted that national players, being present in the global market of information goods and services, are actively involved in the global digital space.
The result of the study is the conclusion that domestic companies are inferior to foreign competitors in certain positions, but also have competitive advantages in the field of generating and promoting relevant digital technologies of Industry 4.0. The study makes a theoretical contribution to the study of national information sectors and allows us to expand our understanding of the practice of ensuring the competitiveness of IT companies in the changed conditions of 2020-2021.
Keywords: competitiveness of the Russian IT-sector; Digital technologies; glocality; digitalization; information and digital trends; economic recession.
JEL codes: A1, B52, D21, D40, D81, L1
For citation: Varavva, M. Y. (2021). Competitiveness of national IT companies in the new environment. JOURNAL OF REGIONAL AND INTERNATIONAL COMPETITIVENESS, 3(2), 55-61. Retrieved from http://jraic.com/index.php/tor/article/ view/31/24
DOI: 10.52957/27821927_2021_2_55 Introduction
Today's global transformation is defined by the next stage of technological revolution, determined by the pervasive processes of digital innovation of Industry 4.0.
Within the information and digital paradigm, the scientific community is actively studying and understanding the processes that have a multidirectional impact on the virtual business environment and business activity of economic actors. A review of scientific sources allows us to state that digitalization initiates new types of virtual business practices, organizational structures, regulations, and role models. Digitalization is transforming modern business models, prompting companies to reconsider their business context and strategic capabilities (Kagermann, Wahlster & Helbig, 2013). The Industry 4.0 philosophy seamlessly combines intelligent and physical manufacturing and operations with cognitive-digital technologies for realtime connectivity, access to analytics, processes, partners, products, and people (What is Industry 4.0 - the Industrial Internet of Things?, 2021). Early adopters of Industry 4.0 technologies benefit the most (WEF. White Paper, 2019). and their competitive advantage will far outweigh the costs associated with early adoption of I4.0 innovations. Under the I4.0 model, competitiveness and advantage arise not so much from its own assets, but from the characteristics of the digital ecosystem, while the model is part of it. In this case, it is possible to maximize the benefits both through efficiency and innovation (Gotz & Jankowska, 2020).
Digitalization as an active spread of virtual technology is turning into a megatrend, a mainstream, and a strategic development prospect, and information technology companies make up the majority of the most competitive corporations in the world, based on market capitalization. For example, Apple and Amazon
have reached a market capitalization of one trillion US dollars (Templeton et al., 2019). Each new stage of information technology development becomes a source of competitive advantage for the company (Byrd & Turner, 2001), pushes the boundaries of business, expanding its potential opportunities. It is through information and communication technologies that global competition is created, ... "innovation turns out to be more important than mass production, investments are made in new concepts or the means of their creation..."" (Encyclopedia of the New Economy, 2019).
The specifics of the latest technologies, processes, products, the multiplicity of business practices in the IT sphere significantly change the landscape of competitive interactions of all stakeholders. Thus, R. DAveni characterizes the environment in which modern companies operate as "hypercompetitive", where actors are aggressive and supermobile, "when rivals must act lightning-fast to gain market superiority and destroy their competitors' advantages ("Interfere with competitors creatively!") (DAveni, p. 57). As Manfred Bruhn notes, companies "are increasingly exposed to the combined effect of previously isolated competitive factors, which leads to the emergence of multidimensional, dynamic and aggressive competition" (Bruhn, 1998). Поэтому важнейшим аспектом становится непрерывное обновление оценок рынка, на котором действуют фирмы. Так, если в 80-х годах пересмотр наиболее важных рынков проводился в среднем один раз в 3-6 лет, то сегодня требуется непрерывная оценка рыночной конъюнктуры и своего положения среди конкурентов.
In the global competitive environment, people, markets and business processes are becoming increasingly interconnected (Sewdass & Calof, 2020, p.34), and new technologies are changing the business environment and competitive dynamics for all firms (Matthews, 2020, p.68). But globalization does not mean that all IT businesses standardize their internal processes and local practices, rather, they adapt global experiences and practices to their traditional local environment,... to local traditional conditions, creating a "glocal" landscape. Glocality makes ... the task of measuring competitors' behavior even more difficult, requiring ... a deep understanding of foreign markets (Stanat, 2008). Market turbulence and shortened life cycles of many products are forcing manufacturers to optimize costs, accelerate and localize production processes, so in an unpredictable and rapidly changing environment, IT companies are forced to seek new forms of strengthening their competitiveness through best practices around the world (Du Toit, 2015).
Main results of the study
Rapid changes in global IT markets, rapid transformation of the global economy, increasing complexity and risks, mobility of all processes create a number of challenges that all participants of competitive relations have to reckon with. In particular, Crayon's 2019-2020 State of Competitive Intelligence reports noted a number of challenges in maintaining their own competitiveness that companies face today:
— selecting accurate and reliable sources to obtain the best possible information;
— ensuring that the data are up-to-date;
— stimulating internal engagement of the team and the organization as a whole;
— disseminating information about their competitors, customers, and thought leaders in an increasingly crowded marketplace (State of Competitive Intelligence 2019, 2020).
The content analysis of Russian digital agencies revealed a number of general patterns and local specifics in ensuring their competitiveness. In 2021, more than 13,687 IT companies were registered in Russia and obtained a license from the Ministry of Communications and Mass Media of the Russian Federation. Most of them are concentrated in large Russian cities (Moscow, St. Petersburg, Yekaterinburg, Novosibirsk), which have been present on the IT market for more than 20 years, have their own developed niche and client network.
The largest players among the top ten Russian leaders include: Rostec, National Computer Corporation, LANIT, Softline, IKS Holding, 1C, Rostelecom, GazpromAutomation, I-Teco, Marvel Distribution (Ranking: The largest IT companies in Russia 2019). This top ten controls 54% of the Russian IT market (Pulya, 2021), forming 50% of the total revenue of the top hundred. The number of publications about companies at this level can reach an average of 20 to 50 per month.
The main activities of these companies are software development and production, distribution,
IT services. In the 2020 analytical review of TAdviser, it was noted that the key activities of Russian IT-companies included in the research rating were distributed as follows: 52 companies said integration, 48 said development, 28 said consulting, 15 said information security, and 9 said distribution (Ranking: The largest IT companies in Russia 2019). Russia's most successful IT companies create mass data protection products and services and are leaders in their segments both in Russia (1C Company) and globally: ABBYY, Kaspersky Lab, Speech Technology Center. Major global digital megatrends have initiated active development in large Russian companies of insourcing, Business Intelligence (BI — analysis and interpretation of Big Data), expansion of the range of cloud services providers. Thus, the Russian IT market is more service-oriented: the IT services accounted for more than 78% of its total revenue in 2019-2020.
The largest customers and consumers of IT products and services are the government, state corporations, telecommunications, and the financial sector (for example, the share of Russian software in Russian public authorities and budgetary institutions is 50%; by 2024, the state companies are planning to buy up to 70% of Russian software, and public authorities — up to 90%).
Significant complication of new technologies in Hi-Tech and large projects forces companies to focus on key activity areas, winding down business on inefficient practices in terms of benefits, abandoning long-term and high-risk investment projects. These aspects have led to a clear trend towards the consolidation of national IT companies (an "economy of scale" effect), which has been achieved through mandated mergers and acquisitions. Companies are actively seeking new opportunities for growth and competitiveness through collaboration and consolidation of efforts and resources. In this regard, it should be noted that the competitive positions of Russian IT companies are secured and supported by: 1) penetration and connection (integration) into the system of sectoral and cross-sectoral network links; 2) pooling of interests and resources (collaborations) with network members: partners, the state, educational platforms, research centers; 3) creation of their own chain of partnerships to optimize business relationships with the most important agents through non-company interactions and informal contracts at the lowest cost; 4) development and maintenance of own competitive advantages based on rare and unique competences, ideas, and knowledge (adversarial competition).
The outlined competitive positions of information sector firms are most effectively applied exactly in the institutional network environment, where intra- and inter-firm contacts arise. The integration of Hi-Tech IT entities into network structures clearly illustrates the growing role of institutional factors in competition, within which information business entities cooperate for mutual benefit. A selected part of parameters of networking in the leading Russian IT firms is presented in table 1.
Table 1 - Networking indicators of Russian leading IT companies
IT company Networking indicators
Rostec Rostec is a radioelectronic cluster (REC) of high-tech products, owns Shvabe and Roselektronika holdings, Avtomatika Concern, more than 200 enterprises in 35 regions of Russia. REC enterprises produce: electronic components and units, optical and medical equipment, complex software packages and systems; participate in projects to develop 5G wireless communications, industrial Internet of Things, blockchain, and other advanced high technologies.
1C 1C (software developer) operates through one of the most extensive partner networks, including more than 10 thousand of regular dealers; more than 4,500 enterprises of 1C:Franchising network certified by 1C; competence centers and certified training for 1C:Enterprise products; more than 1,200 authorized training centers, more than 200 authorized certification centers within 1C:Professional project.
IT company Networking indicators
Technoserv Technoserv is the largest Russian systems integrator operating in Russia, CIS countries, and Europe with large-scale projects on implementation, development, outsourcing of the IT infrastructure, information security systems, energy and engineering systems, application platforms for large enterprises and industries; it implements and develops digital communication and engineering systems based on its own technological developments as well as the solutions of IT leaders: Avaya, Cisco Systems, EMC, Hitachi Data Systems, HP, Huawei, IBM, Microsoft, Oracle, VMware, etc.
NCC NCC - National Computer Corporation includes more than 40 offices in the Russian Federation; own plant for the production of computer equipment; more than 300 authorized service centers in all regions of the Russian Federation; has 11,000 business partners and more than 260 partnership contracts with the world's largest manufacturers. NCC operates in most segments of the IT market: computer equipment manufacturing, IT equipment distribution, system integration and infrastructure solutions, IT consulting, management process automation, portal solutions, e-government solutions, custom software development, IT outsourcing, industrial automation, federal-scale corporate supplies, management consulting, implementation of in-house developed software solutions.
Source: composed by the author
The examples in table 1 allow us to conclude that there is not only a network effect but also a synergistic one, because partner network members benefit by being able to share positive experiences and reduce costs by sharing the same resources, services, customers, and suppliers. This model of organizing virtual business practices once again proved its success in the changed conditions of 2020, when it became quite clear that digital technologies create not only competitive advantages and many positive network effects, but are also the drivers of scientific and technological progress in the countries that operate within the trend of digital transformation.
Given the trends of global digitalization, the IT industry in Russia today has to operate and develop not only in a hyper-competitive environment, but also in local competition: today, it is no longer possible to make a project, innovation, service, or product successful and competitive if it is designed only for a narrowly targeted consumer market.
The 2020-2021 period has made notable adjustments to the competitiveness of the national IT sector.
In the changed conditions of this period, Russia found itself in a slightly better position compared to the European countries. Nevertheless, there is a clear decline in the growth rate of the national IT industry and a drop in demand and sales in a number of product segments: sales of mobile phones decreased by 8%, servers — by 12%. The Russian segment of the global IT market grew by 7% in 2019, or 25 billion USD, but has seen a drop of 30% since spring 2020; the share of Russian IT companies in the global market is insignificant and amounts to about 1.5-2.0% (it is worth mentioning that foreign competitors are also active in the Russian market, including such IT giants as Apple, Hewlett-Packard, Foxconn, TrendMicro, which have significant financial resources, technologies and seek to attract leading Russian IT specialists). National industries and corporate customers interested in information technology have reduced their demand for IT services and cut their IT spending, focusing on digital projects with short-term returns on investment. Savings on investments in the IT industry will affect the opportunities for continued digitalization of sectors of the Russian economy and the competitiveness of domestic IT products and services on local and foreign markets. Experts estimate that without tax preferences and with a significant drop in demand for IT goods and services from crisis-hit sectors in 2020, the industry will be able to return to 2019 levels of the GDP share and the number of employees not earlier than 2024 (Dynamics and perspectives of IT industry development, 2021).
The global trends of Industry 4.0 and the current state of the Russian IT industry in the changed economic and social and political conditions of 2020 allow us to highlight a number of fundamental positive points:
— there has been a marked increase in transparency and improved competition in the generation and diffusion of IT technologies;
— the quality of provision of IT products and IT services improved significantly;
— the activity of foreign integrators in the Russian market had a positive impact both on the IT industry as a whole and on individual companies, which gained new experience from technological and methodological points of view (for example, Russian companies are gradually abandoning Western software due to its high cost, and functional analogs have already appeared in the country);
— the departure of businesses to the Web has mobilized and accelerated the development of "end-to-end" digital technologies in the Russian IT space, which are promising, creating multiplier effects in various sectors of the economy: industrial internet, Big Data, distributed registry systems, quantum technologies, sensorics, 5G wireless communication technologies, virtual and augmented reality technologies;
— Russian telematic services technologies are successfully developing unfilled niches in the global market (applications for navigation and traffic monitoring can provide certain prospects);
— Russian developers have a good track record in the development and implementation of applications for mobile devices abroad (this segment is one of the main development areas of the global IT industry);
— there are developments and a certain advance in the field of intelligent information and neurocognitive technologies (many initiatives in this endeavor are coordinated by Sberbank, whose experts and IT specialists have developed a sub-technology roadmap: natural language processing, speech recognition and synthesis, neuroimaging, computer vision, neurointerfaces, neurostimulation and neurosensing, intelligent decision support systems) (Digital Russia - 2024. How new technologies will change the lives of Russians, 2021);
— the pandemic situation and economic recession have initiated a growing demand and popularity of digital technologies that can help with organizing activities from anywhere at any time, not only for the private business sector, but also for households (remote work and office, online education, telehealth, virtual leisure — digital museums, tours, theaters, delivery services, electronic shop, etc.).
Results and conclusions
In line with the indicated trends and the review analysis of the domestic IT industry, it is necessary to state that for the Russian IT sectors, the provision of competitive positions in the new environment can be ensured by:
— firmly entrenching themselves in those niches where they are stronger than Western manufacturers (this is the development of specific and specialized software products);
— intensive development of core market segments while maintaining the accumulated knowledge base and practices of the IT business;
— development of competitive exclusive intellectual services and products;
— retention of Russian IT specialists by creating attractive conditions for work and professional promotion (this is especially important for the country, since the tough conditions of IT competition and the increase in the intellectual component in IT development fundamentally change the staff "architecture": competent specialists working at the intersection of business, information technology, engineering, and linguistics are in most demand today) (Varavva, 2020);
— effective partnership between the state and the business enterprise sector based on willingness to interact, transparency, and technological neutrality;
— a clear recognition that digital technologies provide real opportunities and techniques to diversify, reorient different types of businesses and business practices and enable them to withstand critical moments of crisis.
Thus, the world's open economies are now faced with factors that cannot be foreseen or predicted. New threats and challenges of non-economic nature significantly transform and destroy the established models of competitive interaction of entities. With the global economic recession, national IT companies are faced with a set of challenges that need to be addressed. But even in the changed situation, national players in the global IT market are actively expanding their areas of competitiveness, finding undeniable advantages and strong
positions in the generation of relevant digital technologies. Against the background of the general slowdown of the global market, Russian IT companies can occupy their own promising niches.
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© Margarita Y. Varavva, 2021
Received 08.04.2021 Accepted 10.06.2021
