Leading Russian cos propose stronger inter-sectoral cooperation on foreign software replacement

MOSCOW. May 22 (Interfax) - Russia's largest companies believe it is necessary to strengthen collaboration and cooperation on import substitution of software between industrial competency centers (ICC), which include various software developers and the largest customers, the heads of a number of such companies indicated at the CIPR-2024 digitalization conference.

"There are projects on which we are working together [with other ICCs]. Greater coordination of efforts is needed to increase effectiveness," the CEO of oil company Gazprom Neft and chairman of the Oil, Gas, Petrochemical and Mineral Resource Management ICC, Alexander Dyukov said at the conference.

The CEO of state nuclear corporation Rosatom, Alexei Likhachev, referring to the lack of adequate Russian software products, said that some planning and coordination is needed in the work of ICCs to fill gaps in sectoral information technology landscapes within the prescribed timeframe.

"Does the Digital Development Ministry need to turn into a digital State Planning Committee and plan the closure of gaps by exact deadlines..., but some coordination in work on closing gaps is needed. There is often a situation where everyone is running in one direction," Likhachev said.

This refers to the fact that many ICCs are concurrently working on the same types of software products, such as CAD/CAM, process control and ERP systems.

For example, Russian Railways (RZD), in a consortium with a number of banks and software developer 1C, is developing its own ERP system. RZD CEO Oleg Belozerov said all critical information infrastructure within the scope of the resource planning system that is owned by the company will be switched to this solution by January 1, 2025. Other subsystems that are not classified as critical information infrastructure will be fine-tuned for several more years.

The chairman of steelmaker Severstal , Alexei Mordashov said the Russian market does not have an ERP system equivalent to that of Germany's SAP and metallurgical companies intend to form a consortium that will develop an analog in four to five years that will take into account performance requirements for such systems and industry specifics.

"We will probably form a sort of consortium of large Russian companies. We understand that we're talking about sums in the billions of dollars that we will have to spend together on creating a SAP analog in these five years. We don't have any other way. SAP is becoming dated, we're cut off from the vendor, can't do updates, foremost concerning cybersecurity," Mordashov said.

At the same time, participants in the plenary session noted that sectoral ICCs or individual companies from various ICCs are successfully collaborating on some types of software as regards the use of existing know-how, including on CAD/CAM and process control systems. Or they intend to collaborate.

The CEO of fertilizer producer EuroChem and chairman of the Chemicals ICC, Oleg Shiryaev said chemical companies are not yet working on replacing SAP due to limited resources. However, in future they will have to tackle this problem and the participants in the ICC intend to use the know-how of colleagues for this, he said.

Likhachev said another reason to increase coordination and collaboration is the need for "compatibility of all solutions" developed by IT vendors and ICC participants. This problem is regularly raised by both customers and IT companies themselves, as well as regulators. The Digital Development Ministry said earlier that it planned to work out and approve requirements for software compatibility with Russian operating systems this summer.

The CEO of truck maker Kamaz and chairman of the Automobile Manufacturing ICC, Sergei Kogogin noted another possible area for stronger coordination of competency centers. He said many of the products of Russian software developers are not ready to replace foreign software, so the share of Russian software in the auto industry is only at 38%. In order to solve this problem, companies for which software features are critical are working on developing the necessary solutions themselves.

"Market companies are rarely the bearers of sectoral expertise. Perhaps the right thing to do would be to create sectoral insourcing companies that would work on developing specific sectoral IT solutions," Kogogin said.

Dyukov proposed strengthening coordination of ICCs by forming an inter-sectoral committee that would handle these issues.

Shiryaev said there are many products and solutions on the market, including those of ICC participants or individual client companies. "Looking for the necessary solutions takes a lot of time. Centralized libraries are needed," he said.

This refers to creating not just a registry of products, but a more informative resource that would include data on available features, customization options and so on.

In the middle of 2022, the Russian government decided to set up 35 ICCs, for which it planned to allocate 37.1 billion rubles in budget funding in the period to 2024 to cofinance import substitution of foreign software. The number of such centers has now increased to 38.

Prime Minister Mikhail Mishustin said ICCs are now implementing more than 150 projects to develop software products, 41 of which are supposed to be completed this year. Overall financing, from various sources, totals about 180 billion rubles for particularly important ICC projects, he said.

Digital Development Minister Maksut Shadayev told reporters on the sidelines of CIPR-2024 that the ministry might start selecting projects this year for ICC financing in 2025.

"ICCs have made a significant contribution, becoming an example of effective cooperation between businesses and the government on such joint fulfilment of the objective to ensure independence from foreign digital products," Mishustin said at the conference.

Software developers, meanwhile, told regulators earlier that budget funding to finance the development of sectoral software was being used inefficiently.

"The work of large state companies on the development of software products is worrying. The creation of ICCs presumed that customers would turn to IT companies in the development of the solutions they need. This does not always happen. Spending government money on something that already exists on the market is not always right," the president of InfoWatch Group and chairman of the Domestic Software Association of Software Developers, Natalya Kasperskaya said.

As a result, large companies' independent development of software solutions for their own needs, often with government money allocated for import substitution, has become a barrier for the development of Russia's IT industry, Kasperskaya said.