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Could Russia Be Starting a Software/Hardware Cold War?

Russia is considering giving preference to its own hardware and software organizations in a current legislative bill, reducing its reliance on foreign suppliers, Bloomberg reported today

Does this mean a major hit for companies that do business in the country — such as IBM, Microsoft, HP, Cisco and Oracle? 

Not really.

"In this day and age, every customer is valuable," said Alan Tonelson, an independent policy analyst who blogs at RealityChek. "But total Russia losses seem easily absorbable."

Global Economic Crisis Looming?

That's because Bloomberg also reported that IBM, Microsoft, Hewlett-Packard Co., Cisco Systems Inc, Oracle Corp. and Germany’s SAP SE had combined revenue of $8.1 billion from Russia last year, according to estimates by the Russian Academy of Sciences. About 77 percent of the sales, Bloomberg reported, were contracts from the government and state-controlled companies.

Tonelson, also citing Bloomberg, told CMSWire that US tech exports to Russia are "smallish."

Chump change or not, this isn't exactly good news for the global economy, according to Simon Mikhailovich, founding partner at New York City-based Tocqueville Bullion Reserve.

The Russian bill reported by Bloomberg comes after President Obama July 16 passed sanctions against Russia that includes hits to Russia's financial, energy and defense industries. It all stems back to Moscow’s intervention in Ukraine.  

“This all has to do with sanctions,” Andrey Chernogorov, executive secretary of the commission, told Bloomberg. “Given the current international tensions, substituting imports with local software and hardware becomes the key to ensuring self sufficiency.” 

Mikhailovich told CMSWire we may be "seeing the start of Cold War II." 

"Over time, this is very bad for the global companies, especially the high tech ones," he said in an email. "Snowden revelations have cast a deep shadow over the integrity of these firms and their products. Sanctions only sped up realization across the globe that American high tech companies may be unreliable partners since American government can modify their products and, potentially, cut off critical hardware and software supplies via sanctions. Whenever someone cannot rely on external suppliers, he has little choice but to develop his own."

Russian Presence

Some large software companies have made key moves in Russia. IBM announced in June of 2012 the opening of 10 new branch offices across Russia. IBM said it planned then to invest $6 million in the Russia and Commonwealth of Independent States (CIS) region to expand its operations and increase its footprint to 22 offices. IBM planned to double its staff in the Russian regions and CIS countries by the end of 2012. 

The IDC last fall predicted the volume of the Russian IT market will grow by 7 percent to $34.8 billion in 2013.

Emails today to Russian government officials and media representatives at Oracle, Microsoft and IBM went unreturned.

 
 
 
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