A ceiling is being erected over programmers – Kommersant

As it became known to Kommersant, the Ministry of Digital Transformation and Russian software developers will sign a charter by the end of May, under which market participants will agree to raise prices by no more than 15% plus the Rosstat consumer price index per year. That is, for 2022, the growth ceiling would be almost 27%. The restrictions were insisted on by large software consumers who have already invested in foreign solutions and are not ready to overpay for Russian ones. Formally, the developers support the initiative. But in informal conversations, it is sharply criticized and warned that the price cap will slow down the release of new products.

“Kommersant” got acquainted with the draft “Pricing charter for socially responsible IT business”, which is being developed by the Ministry of Digital Transformation and large software associations – “Domestic Soft”, “Russoft”, APKIT and others. According to Kommersant’s interlocutors in the market, the document is planned to be signed at the Digital Industry of Industrial Russia 2023 forum at the end of May.

It follows from the charter that in the context of “the task facing the state, the economy and the IT industry is to achieve national digital sovereignty”, Russian software developers will voluntarily limit the price increase for their products.

The maximum threshold will be set according to the following formula: the price of a software product on the same date last year, adjusted for the annual consumer price index of Rosstat, plus 15%.

In 2022, the index was 111.94%, which means that the real price ceiling for software developers would be at the level of almost 27%. According to the results of the first quarter of 2023, the index was 108.62%, that is, the price ceiling could reach 23.62%. The Central Bank’s forecast of April 28 assumes the index at the end of 2023 at the level of 104.5–106.5%, that is, the ceiling may be 19.5–21.5%. The charter, according to the draft document, will be valid until 2028, but “in case of changes in foreign policy and economic conditions, the validity period may be revised.”

The fact that it is planned to limit the prices of software through self-regulation was announced by the Ministry of Digital Development on April 17 in its Telegram channel. At the end of March, large software consumers said that prices for Russian software had grown by 30-50% over the year. The developers themselves reported a multiple increase in revenue. So, for Russian OS vendors, according to the results of 2022, it increased two to three times (see Kommersant dated March 30 and January 20).

The ministry “counts on the principles of self-regulation of the market”, admitting, however, that formally “they do not have the authority to regulate the pricing policy of vendors.” APKIT and Otechestvenny Soft declined to comment, Russoft did not respond to Kommersant.

In official comments, market participants generally support the idea. “Under the current conditions, price capping is appropriate within reasonable limits, and the draft charter contains a balanced approach,” says Maxim Anisimov, CEO of Red Soft. In the short term, the proposed approach “will help to balance the purchasing power of businesses and the profits of vendors,” adds Daria Zubritskaya, director of marketing and communications at Raketa. However, she clarifies, the period until 2028 looks redundant: “Strict regulation of the market can help at the stage of becoming the main players and promoting products, after which it is worth returning to market mechanisms.”

The departure of Western vendors in the face of a shortage of mature analogues of their products has led to an increased demand for ready-made solutions, while individual players in the Russian IT market have shown excellent financial results due not only to an increase in the number of projects, but also to higher prices, says T1 CEO Igor Kalganov: “Given the economic difficulties and the vulnerable position of some companies that invested in products of Western vendors and were immediately left without them, regulation methods, including pricing, may have a positive effect on improving competition among Russian IT companies.”

However, Kommersant’s sources in the industry sharply criticize the initiative, arguing that officials are promoting it, “despite the protest of the market.” “Large corporations present price increases as a general trend, although there is none, but there are isolated cases of price increases due to the quasi-monopoly position of the supplier on the market,” one of Kommersant’s interlocutors assures.

“At one of the meetings, developers were told that under the current conditions, state-owned companies cannot afford to spend too much on software, and they will have to keep prices down,” explains one of Kommersant’s interlocutors. In response, he clarifies, a number of vendors noted that at the price threshold, the development of products “if not stopped, then seriously slowed down.” A top manager of one of the Russian IT companies, who is familiar with the details of the meeting, said that those vendors whose consumers continue to complain about the increase in prices will be deprived of the status of an IT company accredited by the Ministry of Digital Development for a short time: “This is necessary so that the FAS can check them out.”

Nikita Korolev