The limitation of foreign procurement BY: hopes and doubts

The limitation of foreign procurement BY: hopes and doubts

MOSCOW, November 20. /Corr. Ekaterina Kazachenko/. Prime Minister Dmitry Medvedev has signed a decree according to which from January 1, 2016, agencies will have to purchase the software from speciesto Russian software, unless it is proved that the necessary foreign analogues ON the Russian warrior.

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The proposal has long been discussed in the market. Authorities say that the decision is aimed at implementing the program of import substitution. Developers, most of whom publicly refused to comment on the government’s decision, while not entirely understand how it would be enforced, but I agree that it will help domestic companies to win a place in the market.

According to the law

The resolution provides that the state will be required to limit purchases of Russian. The exception is cases where software with the necessary functional, technical and /or operational characteristics absent in Russia. The need for the appropriate needs to be justified in accordance with the law.

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For the examination on the inclusion of information about the software in the registry at the Ministry of communications will set up a special expert Council that at least 50% will consist of participants on the proposals of the Russian Association of software developers, it is reported in materials of the Ministry of communications. The Council shall be approved before the end of 2015, maintaining the register of Russian will be a special service provider registered in the territory of the Russian Federation. Within three months the Ministry of communications jointly with the relevant Federal authorities and organizations will develop criteria, which will determine the customer’s needs according to certain characteristics.

In addition, in six months the Ministry of communications will decide on the admission to public procurement, the country – members of the Eurasian economic Union (EEU) on equal terms with domestic developers. After coordination with the Ministry of economic development and the Russian foreign Ministry, the relevant proposals will be sent for approval to the government.

In summer 2015, President Vladimir Putin signed the Federal law which defined the order and conditions of recognition originating from the Russian Federation. In addition to that provided for the establishment of the Russian registry and identified the basic criteria for inclusion software products in the registry. In particular, the exclusive right to the software in the entire world and for the duration of the action should belong to Russian owners. In addition, such software should be freely accessed and distributed on the territory of the Russian Federation and the amount of the license and other payments for the year in favour of foreign copyright holders shall not be more than 30% of sales revenue.

On the path of import substitution

The regulation would facilitate the process of import substitution, in particular, will help competitive Russian products to get support from domestic demand, Minister of communications and mass media Nikolai Nikiforov. He is confident that Russian taxpayers ‘ money should be allocated FOR domestic.

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Currently, according to the Ministry of communications, the amount of annual license fees ON foreign manufacturers is about 285 billion /45% of total Russian/, while 30% of these contributions falls on the public sector. According to authorities, the dependence of Russia on foreign software developers for 5-7 years will be reduced by 30-50%.

The Chairman of the Duma Committee on information policy, information technologies and communications Leonid Levin is confident that this decision is the first real step to support domestic companies that have proposals for public institutions, competitive and ready to meet the requirements of the public sector. He said that it is not enough just to adopt the law, it is important to monitor its implementation, including through public organizations and industry communities.

Now Russian developers can’t provide analogues to all the products on the market. “If Russian companies will be expected to invent, it will take a very long time, however, they significantly lag behind the global market”, – considers a source in a large foreign company, engaged in software development and working in the Russian market. According to the source, to date, single solution international-level Russian companies do not have, they just go for it.

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“Now we can’t importozameschenie all used technologies, but moving in that direction. In addition, the support of domestic producers – the standard world practice”, – said the Executive Director of reason “National software” /is one of the co-authors of the document/ Evgeniy Vasilenko. “Now, according to the Ministry of communications, not more than 25% is used IN Russian. This is the industry where quite a lot of developers and their products,” she said.

According to the national directory FOR leading reason, now represented in the Russian market about 1 thousand products of more than 200 national companies.

The procedure of choice FOR government agencies should be transparent, says Vasilenko. “Now just announced tenders where the technical specifications are sewn up those settings, that fit only a specific manufacturer, either directly specify a particular software product that you plan to purchase”, – she explained. According to her, after the introduction of the resolution the customer is entitled to buy foreign software, if it does not fit the Russian. “But he needs to explain why its specifically Russian products are not satisfied, and to do so publicly by posting the justification in the tender documentation,” she said.

The questions and assumptions of the market

The main question that arises from major market players – what criteria will be used when determining whether purchases BY foreign state authorities. “While the criteria by which a determination will be made whether similar or not, is not defined. Almost all market players want to understand what this criteria, and together with the regulator to develop”, – said a source in the foreign company.

According to the expert, it is necessary to define what is meant by the term “localized product”. “If it is an open codes for special services, localization under local legislation, product development and servicing and training in the country, we all already have”, – said the source.

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State agencies are able to buy foreign SOFTWARE, according to a source in a major Russian company engaged in software development. “At the moment instruments are drafted in such a way that if the Agency or company wants to use foreign IN – it will do the job. Will be quite a lot of options on this purchase, despite a ruling can be made, because in the resolution there is a fairly large number of reservations”, – said the Agency interlocutor.

He also noted that interest in domestic developments, certainly, will grow. “Agencies and companies will pay more attention and be more actively apply domestic. It comes naturally, because it is more profitable at current prices and correlations of exchange rate,” the source said.

This rapid effect can be expected. “In our view, this ruling will not lead to a serious redistribution of the market, because in order to develop new unique software, which will be adapted to the needs of state customers, you must have substantial time, personnel and monetary resources”, – said the Director for work with corporate clients of the international company Softline Oleg Tremzin.

He doubts that customers will agree to wait a few years to get the Russian equivalent of any specific IT-solutions from a foreign vendor.

“We’re talking about software that ensures the functioning of very large offices, large mechanisms. Instantly translate it to the new “rails” technologically absolutely impossible,” – said the source in Russian company.

According to him, the share of Russian software developers on the market will change gradually. “Next year, many will be forced to purchase the same software that they bought in previous years, simply because they need to maintain existing infrastructure,” the source said, adding that a significant replacement of imported BY domestic public sector could happen within 5-7 years.

In spite of existing exceptions to the rules, to circumvent the regulation will not be easy. “Find loopholes will be quite difficult, because maintenance of registers the Ministry of communications will form the Advisory Council, over half of which will be Russian developers draw ON. To bypass this Advisory Council, which knows the company and products on the market, it will be difficult,” says Vasilenko.

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Prospects of creation of joint ventures of foreign companies with domestic a positive impact on the market in the future. “If we talk about the fact that foreign companies look to the side to get into the registry – this is good”, – says Vasilenko.

Positive will and desire of foreign manufacturers to transfer the exclusive rights to their products in the Russian legal entity. If they guarantee delivery of its products throughout Russia, including Crimea and Sevastopol, if at least 70% of the proceeds from the product will remain in Russia, then in Russia the industry is evolving, the expert believes. However, this behavior of foreign companies, including in partnership with Russian until safe to say early.

“Our company has a representative office in Venezuela, which limited the purchase or sale of us. American manufacturers sell their products under the local partner brands,” cited the example of Tremsin from Softline.

“We will watch how this ruling will be applied”, – said the Russian holding IBS.

Foreign Microsoft, SAP and Cisco declined to comment on this resolution. IBM representatives were not able to provide comment.