Microsoft Faces Russian Hurdles as Local Software Thrives

by Ilya Khrennikov
June 16, 2015 — 11:00 PM EDT
Updated on June 17, 2015 — 11:06 AM EDT

Russian companies are increasingly buying homegrown software to avoid international sanctions, posing a challenge to the likes of Microsoft Corp. and Oracle Corp. in the country’s $3 billion local market.

OAO Sberbank’s life insurer in February started an online service running local operating system Rosa-Linux using an open-source PostgreSQL database, skipping alternatives from Microsoft, Oracle and International Business Machines Corp. Late last year, OAO Gazprom’s oil division completed testing of GeoMate, its own software used to analyze geological data and designed to replace applications from companies including Emerson Electric Co. and Schlumberger Ltd.

About three-quarters of an estimated 157 billion rubles ($2.9 billion) in Russian software spending last year went to imports. That share will probably fall by several percentage points in 2015, according to researcher IDC. President Vladimir Putin’s government has laid out a plan to cut foreign program reliance to less than 50 percent by 2025.
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That presents a hurdle for SAP SE, Microsoft and Oracle. The three had combined sales of 59 billion rubles in Russia last year, according to State Duma estimates. Even without Putin’s domestic preference, the country’s software market will probably shrink by 10 percent this year as the economy slips into recession, while a weaker ruble also makes foreign programs relatively more expensive, IDC said.

‘Digital Sovereignty’

Banks and energy producers were among the first to answer Putin’s calls for “digital sovereignty,” after some were targeted in several waves of sanctions over Ukraine starting in March 2014. The U.S. first imposed sanctions on more than two dozen individuals and St. Petersburg-based OAO Bank Rossiya, prompting Visa Inc. and MasterCard Inc. to stop processing payments for some lenders. That’s when Grigory Gashnikov, an IT director at Sberbank’s life insurance unit, decided to go local.

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http://www.bloomberg.com/news/articles/2015-06-17/microsoft-oracle-face-russian-hurdles-as-local-software-thrives