Replace foreign software. Why didn’t it happen?

Hello.

A little over two years have passed since foreign vendors providing corporate “software” such as ERP began to leave. It is time to take a close look at the situation. Let’s start with the big news that came out about three weeks ago on one of the authoritative resources on the IT market: “Rosseti PJSC published an offer worth 1.42 billion rubles. with the goal of serving SAP for three years in their enterprise management information system.”

What does this mean? And the truth is that there has been no real change in imports over the past years. Several large groups of companies reworked their IT strategies in 2022-2023, some earlier, some later – latency is typical for the CIS market. This is not the story of Charles Schwab, who personally spent a couple of months with the team to produce an online resource for brokers working in the investment market back in 1997. Moreover, in today, it is the degree of digitization that largely determines business competitiveness. I assume that the senior managers of large and medium-sized Russian businesses had much more important problems – sales markets changed, logistics “unopened,” and shocks similar to those of 2020 “Covid” occurred. Emotions and panic have subsided a bit, and it is time to replace foreign products with domestic products.

Yes, IT people got their belts, 1C teams started spending as much as a Boeing wing, they were full of projects, Sber announced that it would make the ERP the required market, and in general there were big plans there for import substitution, which I will talk about in more detail later.

In 2023, I did a project to develop a go-to-market strategy for IT solutions for a “boutique” company that specializes in operational efficiency for the mining industry. But this is not about the company. I combed through the entire value chain from the “mountain” to the finished product and for each step of this chain I determined what kind of systems were needed for automation, and then did I exercise to assess “import substitution”. The picture was very rosy – similar products were either on the market, or being completed, or the development was announced. For ERP class systems, 3 replacement systems were found, for mining planning, 3 domestic systems were also named, for BI – 5, for integrated planning – also 5 systems. We looked at a couple of other businesses, and the situation was exactly the same – one or two Russian sellers did not express their wishes and show working prototypes. We do not advertise brands and products – this is not the subject of this material. However, there were also gaps – CPQ class systems (Configure, Price, Quota – are actively used for online ordering of complex products with delivery / delivery conditions), quantity registration systems, process mining class systems (year after that they already exist). ready products ), systems of the transport management system class for full planning of multimodal transport with simultaneous optimization of logistics capacity. These systems are complex, have appeared on the market longer than the same ERP systems, and are a kind of “cherry on the cake” when the basic accounting tasks have already been solved.

But what about the manufacturers themselves and the relevant ministries that support them? Institutions such as the ICC “Metallurgy Industry”, Digital Transformation Association, ICC “Oil, Gas and Coal Complex of the Russian Federation”, ICC “Agro-Industrial Complex” were created and are working. Goals: creating software for business needs. All this with the support of regional executive authorities. After 2 years no new product is known!

Some brave people, after analyzing the available fields, hired teams and started to create. Without experience in product development, this is a rather difficult task, even with a very deep knowledge of the industry. Development was slowed after 8-10 months, when the product reached the minimum valuable product level (MVP), and then the budget ran out, neither the patience of shareholders nor the product raised interest. And here I have a reasonable question – over the last 15 years I have seen a large number of seed funds that give a day for the same MVP to small teams and prepare for the second round. Where are these assets? Why do they give 10-100 thousand dollars to micro-teams who have designed wonderful “parks” and unachievable business plans, and do not give more money to developers? This is a big question.

Let’s return to signals from the market. Rosseti Competition to support SAP for three full years. On the one hand, this is a long time, on the other hand, heavy systems such as ERP for a business of this size are not being implemented faster. 2-3 years is a completely normal period. The only question is why this period is counted not from the spring of 2022, but from the autumn of 2024.

The following news was published in Vedomosti: Rosatom, Gazprom Neft and Roscosmos want to cancel the transfer to Russian software – Association of users of the largest software and equipment, established by Rosatom, Gazprom Neft , Transneft, Russian Railways, Dom.RF, Roscosmos, Rostec and Rostelecom, appealed to the Minister of Digital Development Maksut Shadayev and the Chairman of the State Duma Committee on Information Policy Alexander Khinshtein with a request to provide separate dates for transfer to domestic software for critical information infrastructure items. What happens – is home software that bad? Considering our results two years ago, when we considered the departure of vendors from Russia, Russian developers work in the largest companies – Google, Oracle, Microsoft, SAP, Dassault Systemes , etc. Yes, perhaps the most talented left and stayed, and the return program, although it produced results, was far from the most promising. No, the software is not bad. It is just that in its development it has not yet caught up with the best foreign models. You and I believe that Gazprom and other Rosseti companies chose the best on the market? We believe. And something has already happened – systems based on 1C are very good, excellent domestic products have appeared for sales planning and supply chains, process mining systems have appeared, systems for modeling geology, seismicity and hydraulic fracturing. Why am I talking about these systems, and not about what is closer to the common man? Because mining and processing companies in Russia contribute many times more to GDP than small and medium-sized businesses, whose almost all needs are met by an almost standard 1C configuration (three and a half of them are currently working).

And yet it is sad that the transition of large businesses to domestic software is taking so long. With results, brains and a good deep understanding of business details.

I will continue my research and investigation into the situation, and will monitor developments. To be continued.

PS In Russia, after SAP left, a company appeared, created by people from SAP, which continues to support and support basic products such as ERP. The company is 2 years old and is developing successfully. I am watching this story with interest. At the same time, SAP began blocking connections from Russian IP addresses. Well, dear German Herrs and Frau, you have lost a large market, loyal, as we can see, customers and, most importantly, trust.