Russia Software and Technology Blog

RUSSIA TECHNOLOGY MARKET CONTINUES DECLINE

According to official Russian data, the information technology (IT) market in Russia decreased by 18% in the first quarter of 2009. The single greatest area of decline was new hardware sales, followed by software and then IT services. The reduction made up 37% as compared to the first quarter of 2008.

Russia is not alone in an IT market being dragged down by a globally challenged economic climate. Even recognized software technology leaders such as Microsoft lack immunity against the world financial crisis. At the end of April 2009 Microsoft announced the first quarterly profit decrease in 23 years (by 5.6% as compared to the first quarter of 2008). Microsoft is also displacing five thousand workers around the world. Intel Corporation announced the same number of redundancies and other global and Russian technology companies are following the same unfortunate process.

News from Russian members of the IT market also lacks optimism. The majority of companies have been shaken since the middle of 2008. A survey conducted by @Astera channel among IT companies in February 2009 shows that slump in technology sales is experienced by 65% of the market members. Yandex and Mail.ru renounced IPO conduction. The companies of Betalink and Cifrograd are on the edge of bankruptcy. Several hypermarkets of the Mir chain were closed and significant financial problems have been detected in the Eldorado chain. Many IT companies are planning to conduct the second wave of redundancy soon.

The Russian IT industry has suffered much from the financial crisis. Information technologies act as a tool for solving specific objectives, tasks and problems. It has long been experienced that when Russian companies are financially pressured they cut IT investments more so than other industrialized countries.

As a result, IT budgets of most Russia companies are experiencing significant reductions. IT financed purchases and projects are virtually dead. Complex projects such as Enterprise Resource Planning (ERP) software implementations are in decline. Long-life projects are winding down or being cancelled and companies are trying to extract maximum value from existing infrastructure. For most companies, any new technology spending is limited to short-time IT projects which demonstrate low investment and quick payback. Changes in IT spending change business objectives and executives are bracing for continued challenging economic times. Russian IT spending is turning to IT optimization. Companies still have problems that must be resolved with hardware and software technology. When everything that can be cut is cut, it is time to seek new value from existing assets.

According to a 2009 IDC survey, expenditures on ERP software applications in Europe and Asia will be more influenced by the economic crisis than in America. 21% of surveyed respondents indicated that in 2009 their investments in ERP systems will be lower or much lower than in 2008. The strongest influence of the crisis will be experienced by France; the lowest influence will be on Germany and Scandinavia and Russia seems to fall toward the middle. Beyond just the reduction in new ERP software purchases, companies with more than 2,500 employees will have to sufficiently cut software and labor expenses related to ERP systems. The situation in Russia is the same.

CRM systems which are widely recognized to help with keeping customers and increasing revenues - even in hard times - are also experiencing decline. These software applications automate the sales processes, but are often not integrated with back office accounting software or ERP systems and therefore lose some efficiencies.

Statistical data of the Russian developer of financial B2B software and company management systems Meta Quotes Software confirm the increasing interest in short-term inexpensive projects that could help to optimize costs.

“Demand for company management systems started to grow. These software products help to cut costs; and the interest to them from business side is fully justified, - Gaines Chreis, the deputy CEO of Meta Quotes, says. True, recently there appeared a lot of companies interested in purchasing management systems. Moreover, they have proper financial possibilities for this. However, the uncertainty about the future urges companies to be cautious and postpone the introduction of new systems. This is the situation all over the world, not just in Russia. However, the very fact that the number of such prospects in the client base keep growing makes us feel optimistic about the future. The crisis will be over some day and the interest will remain.”

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THE BUSINESS CASE FOR CRM

In an interesting Harvard Business Review article about customer retention and the direct relationship to company profitability, the study found that for many companies, an increase in customer retention rates of just ten to fifteen percent can double company profits. This comes as no surprise to business executives that know well that their best source of income is their customer base. However, the challenge not as easily understood is how to identifying the most profitable clients and then implement a system that assures their retention and increased customer share over time – all while increasing the total customer base.

CRM (Customer Relationship Management) is a business strategy focused on customer management, retention, growth and profitability. It is a specifically designed and systemic method to help companies implement customer facing business processes to better accommodate customers, enhance customer relationships and increase revenues and profitability from customers. Information systems facilitate CRM business objectives and processes by using powerful software applications to automate customer facing tasks, activities and processes. In most cases, CRM systems integrate with back office sales order processing and inventory management functions in the accounting software application. This front-to-back office significantly increases automation and efficiencies. CRM systems enable today’s business managers and executives with increased visibility to real-time information and permit them to better control their businesses – without negatively impacting current staff or needing to hire more people.

For many Russian companies experiencing growth or incurring challenges in increasing customer share, a sought after benefit of CRM software is business process efficiency. Every executive and sales person knows it is faster to improve the bottom line by decreasing costs as opposed to increasing revenues. CRM software systems can help with both. CRM software systems leverage the time and activities of nearly all customer facing staff. However, depending upon the CRM application and particular implementation objectives, companies will likely differ as to who are the primary benefactors of CRM software automation and efficiencies. For some companies, the most benefited staff are the users, such as customer support representatives, marketing staff or sales people. Their real-time access to information and leverage of software automation permits them to more easily achieve their measured objectives, key performance indicators, financial metrics and quotas. CRM software often results in users becoming much more self-reliant and productive.

For other entities, the most significant benefits are achieved at the decision-making and managerial level. CRM applications empower decision makers with key dashboards, metrics and clear business process visibility in real-time. Graphical dashboards deliver detailed snapshots of operations from customer service operations to marketing campaigns to daily sales performance. Real time visibility into the business details is a major competitive advantage for today’s Russian executive. More so, with growing competition and rapid market changes posing constant challenges and pressures – it is critical that Russian managers be empowered with information in order to make the right decisions. The real time visibility provided by Customer Relationship Management software gives a company new flexibility and new strategic advantage by allowing for near real-time action and reaction in order to be proactive in meeting customer demands and growing the business. CRM software systems also permit executive management with competitive intelligence (CI) visibility, 'what-if' business strategy modeling and the added time needed to outperform the competition.

How companies’ plan and execute new market initiatives is another make or break business proposition. Not that long ago, companies had a limited number of effective methods to contact prospects, measure responses and view trends. Today, there are multiple customer contact and distribution methods that with real-time reporting and analysis can be effective. Example include e-mail campaigns, nurture campaigns, faxes, Web 2.0 and social media, online media, print advertising, network marketing, various Internet promotions, trade shows, VARS, distributors, seminars, radio and much more. Complicating the efforts, prospects and customers are overwhelmed with media noise and only certain customer touch points will be effective with each type of customer. Within a powerful on-premise or on-demand CRM system, companies can cut through the noise, target specific markets, collect and group consumer or customer data and then design, test and automate marketing initiatives that are based on quantifiable analysis – resulting in the most cost effective marketing programs and highest marketing budget ROI.

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