1. 1 Russian Software development Cluster in the Global market. Prospects of cooperation Valentin Makarov President of RUSSOFT Association www.russoft.org August 8, 2015 Seul

2. RUSSOFT Association (established on 9.9.99 as Consortium Fort Ross) www.russoft.org National Association of 100+ software companies from Russia and Bbelarus with 30000+ softwatre engineers, offering products and services to the Global market Lobbying Government for better legislation in Taxation (Law #27 ее участникам 2 of 2010 on social taxes) and in High Education. Promoter of a HighTech export support Program Organiser of annual market studies (12 years) and of different marketing and technology events (RUSSOFT Forum, Mobile Software Forum, Software Engineering Conference, Russian IT- Seasons,...) Partner to BITKOM (Germany), KISA (Japan), US-Russia Trade Chambers of New England, MidAtlantic and Minnesota (USA), to WITSA, NASSCOM (India) and BRASSCOM (Brazil)

3. 3 12 th Annual Software Industry Export Market Survey - Market estimations are based on a Survey conducted by RUSSOFT in January — March 2015 (12 th time since 2004) - 120+ respondents from our software export companies' data-base (1500 companies) - Industry leaders and leading analysts participate in the preparation of the report - survey is the unique source of reliable info about the IT- export for the Industry, for the Government and for the whole international IT-Community

4. - Number of software developers 140 000 (420 000 developers altogether in the IT-branch) - Total number of Universities' graduates with qualification of software developers 900 000 - Total turnover of the software development industry $12 Bln - Software and Software development services' export $6 Bln General characteristics of the software development industry

5. Human Capital: Quality 2015: World Champions, 2 Gold medals 2014: World Champions! 4 medals out of 12, 2013: World Champions! 4 out of 13 medals 2012: World Champions! 2 Gold Medals out of 4! (from appr. 25,000 contestants representing 2,000+ universities from nearly 90 countries on 6 continents) 2011: 5 of 12 medals 2010: second absolute place, 5 of 13 medals 2009: World Champions, 3 of 4 gold medals, 4 of 13 total medalists 2008: World Champions, 3 of 4 gold medals, 7 of 12 total medalists 2000-2007: 4 times World Champions, many medals Russia at the ACM International Collegiate Programming Contest

6. Composition of Export 40% 10% 50% Services 50% Software 40% Software services From DDC 10%

7. Captive centers of foreign corporations in Russia - Motorola (since 1995) - Intel (used to be the biggest R&D resource of Intel outside the US) - Oracle, EMC, T-Systems, Siemens, Deutche Bank, Schlumberger, IBM, Cisco Systems, Quest, … - 12% of the total software export from Russia ($500 M) with 12% growth rate

8. «Best 100 Global Service Providers» (Global Services, 2014) Russia Artezio, Auriga, DataArt, EPAM Systems, FirstLine Software, Luxoft, MERA Networks, Reksoft, ReturnOnInteligence --------------- Lanit-Tercom, ICL-KMO, Arcadia Byelorussia EPAM Systems, IBA Group, Intetics, Itransition

9. New Russian Software Leaders in the Gartner «Magic Quadrants» Three more Russia Software vendors got into the «Magic Quadrans» of Gartner in 2012-2015: PROGNOZ (Perm) - «Business Intelligence» Diasoft (Moscow) - «Core Banking» and «Retail Core Banking» InfoWatch (Moscow) - «Data Loss Prevention» Positive Technologies (Moscow) – “Web applications Firewalls”

10. 10 Russian Segment of Mobile Applications (including games)* Number of companies in the segment (2012) — 2300 Estimation of export - $200 M Annual growth rate — 60% Estimation of the Mobile appl. Market in 2016 - $1,3 B Anticipated growth of the segment from 2012 to 2016 — 8 times * Source - Jayson'&Partners, 2013

11. 11 Successful IPO of Russian IT-businesses 2010 Mail.ru ($5,4 B) 2011 Yandex ($8,1B) 2012 EPAM Systems ($570 M) $1 B+ 2013 Luxoft($700M+) 2013 Qiwi ($884 M) Who is the next? Kaspersky Lab, 1C, Veeam, iFree, JetBrains,... ?

12. 12 Dynamics of the IT-Export - according to preliminary data, the export of software and of software development services in 2014 has grown up not less than 9%, while the number of personnal increased 5% - the estimations for 2015 are much higher: encrease of personnal - 10%, export growth-rate - 18% (up to $6,7-$7,0 B) The optimistic predictions are related to: - the end of the mess related to the Ukrainian crisis, - evaluation of RUR vs USD (which has already helped Russia software export to grow as we were keeping saleries in RUR), - the economic crisis in Russia motivated business to think over IT- outsourcing and poushed entrepreneurs to put off part of IT-staff (which has ameliorated the situation in the labor-market for exporters). - there is an evident trend of increasing State interest to the high-tech (IT) export as an alternative to the export of raw materials

13. 13 Export of software and of IT- services from Russia 5% 20% 22% 15% 17% 16%( 10%) 16%( 18%) * * $5,7B $6,7B

14. 14 Changes in the geographical markets 1) USA: - considered as a priority market by 25%of respondents (10% in 2014) - Geopolitics and sanctions encrease risks, while there is no direct order to stop IT-business with Russia (except Crimea ), American clients are wating for political decisions, still - are looking more to India and China 2) Europe: - Austria, Swuitzzerland and the Southern Europe demonstrate a vector of interest to cooperation with Russia (including investmenst from the Russian IT) - on the total, the social mood turns in favour of the Russian IT-industry 3) Ukraine: - The share of Russian software companies with development centers in Ukraine diminished from 14% (2013) down to 2%. Only 1% of respondents plan to open offices in Ukraine 4) BRICS - Increasing exchange of delegations with BRICS countries, growth of interest to Russian IT as an alternative partner for high-tech cooperation

15. 15 Conclusions - the Global environment for development of the Russian software industry changed for better. Certain negative impact of sanctions was mitigated by devaluation of RUR and by the State support, - Sanctions and antiRussian propaganda in the US and EU had low impact on real business, but contributed a lot to the increase of interest to the Russian industry in the developing countries. -Geo-Political problems moved the Industry towards the diversification of geographies in our marketing, particularly initiating Strategic partnerships in the Far East and in BRICS. - Together with the Russian Venture Company, RUSSOFT members are open to learn opportunities of cooperation