With our own weapons

IT export is more profitable than arms export

Remember the Moscow military parades. Freshly painted tanks, rocket launchers, Su and Tu in the sky... It’s not a sin to broadcast this on all TV channels throughout the country. Great technique. And at the same time - a wonderful product. According to Reuters, we sold $10.4 billion worth of this product in 2007.

Can any export of high-level IT services compare with this military-industrial splendor? Indeed, it cannot. This strange export is much more profitable than the trade in military equipment. The easiest way to show this is by the example of India, one of the main buyers of Russian military equipment. India spent $5 billion on arms imports in 2007. The growth in sales of tanks and fighters to Indians would seem to indicate the success of our industry, which is increasing high-tech exports. In reality, this paradoxically testifies to the success of Indian, rather than Russian, exporters. No matter how many weapons we sell to India, it still exports more high technology than ours.

Here are the numbers. In 2007, India not only bought weapons worth $5 billion. In the same year, it exported its technologies worth $28.7 billion. This includes the export of IT services and business process outsourcing (data from the analytical company IDC). For comparison: Russian software exports (according to the RUSSOFT association, which unites exporting companies) amounted to $2.2 billion, i.e. more than an order of magnitude less than India.

Of course, this is not all of our high-tech IT exports. It is not limited to custom software. Here you need to add “boxed” software, i.e. replicated software products (such as those from ABBYY and Kaspersky Lab). And most importantly, the export of high-level IT services, that is, engineering services. Such an increase, however, is unlikely to double RUSSOFT’s data. In other words, Russian IT exports fall short of the amount Indians spent on weapons. We have to admit that Russia exported weapons in an amount almost three times less than the volume of Indian IT exports. At the same time, all Russian IT exports are inferior to the amount spent by Indians on the purchase of weapons.

Now let’s compare the world markets for weapons and the export of IT services and business process outsourcing. The Russian share of $10.4 billion in the global arms market is 17.4%. The entire 2007 market, therefore, was less than $59 billion (data from a Reuters report, which the news agency cited with reference to the US Congress). The IT services export market in the same year exceeded $46 billion, and the business process outsourcing market exceeded $38 billion (IDC data). We add it up and see that a weapons manufacturer, in principle, cannot earn more than an IT manufacturer.

IDC's forecast for the global IT services market for 2010 is $166 billion. It will most likely be revised due to the crisis. However, the proportions between this market and the arms market will undoubtedly remain the same. After all, India cannot spend more on weapons in a couple of years than it is destined to earn.

In conclusion, two speculative considerations. First: weapons are in the process of rapid evolution, and very soon, it is quite possible that the advantage will not be with the country that melts more steel, blows airframes in a wind tunnel and drives new models of tanks around factory sites. And the one with the best information technology. One that knows how to deliver its troops and ammunition to the target exactly on time - as Napoleon did in his time and as the computers of Russia's potential enemy do now.

Second. The defense industry is an industry of the last century. These are coke oven batteries, this is ore mining, this is a huge number of employed people, the education of which is limited to vocational schools. These are the dollars that the tank exporter will receive in return for the deterioration of the environment and quality of life of its people. Compare with India, which prefers to build technology parks rather than tank factories. With the development of the export of IT services and business process outsourcing, the quality of life of citizens of this densely populated country is rapidly improving.





Prepared jointly with iToday.ru

Andrey ANNENKOV, iToday.ru, - specially for Vremya Novostei