A software crisis hits Russian industry with the withdrawal of technology giants

Russia’s reliance on foreign software to manage factories, farms and oil fields is turning into one of the biggest problems facing the domestic industry as more information technology providers withdraw from the market in response to President Vladimir Putin’s invasion in Ukraine.

International sanctions and tensions over the war have forced industrial companies, from Siemens to the SMS group, to cease operations in a market that was once considered one of the largest, and whose software is probably even more lacking on its devices.

The search for computer-aided design and manufacturing software is also becoming a major issue that will hamper development, according to Elena Semenovskaya, a Russia-focused analyst at IDC.

“Russian counterparts in this field are much weaker, and the need is great, but the approach at the moment is to rely on piracy and old copies, which is a dead end and unsustainable,” Semenovskaya said.

Foreign computer programs are often embedded directly in industrial machines, which control high-precision operations. In this regard, Sergey Dunayev, chief information officer of Severstal, said in an interview that equipment manufacturers closely monitor their intellectual property rights, and in many cases do not give customers access to the software needed to run their factories.

And in the steel industry, which can require precision in the range of a few hundredths of a millimeter for high-value products, small deviations can also make output worthless, according to Dunev.

While the Russian economy, aided by high commodity prices, has fared better than most expectations since the start of the war; But it faces a period of structural adjustment that pushes it into a recession. Severstal owner Alexei Mordashov said this month that steel production nationwide has fallen by 25-30% since the invasion.

The Russian government has stressed import substitution since several industries were hit by a previous spate of US and European sanctions following the 2014 annexation of Crimea, but its ambitions have not taken into account how modern facilities rely on programming.

In this regard, the steel industry alone has invested some 3.2 trillion rubles ($ 59 billion) in the past two decades to rebuild capacity following the collapse of the Soviet Union, according to the Russian Steel Federation. Much of this amount was spent on equipment provided by foreign companies such as Siemens, SMS Group and Danieli & C. Officine Meccaniche to increase the sector’s efficiency.

“All industries have the same problems, as many of the processes with modern units are controlled by software,” Dunayev said.

Mass displacement poses a challenge to the country’s oil and gas industry, as local software makes up only 5% to 10% of the industry’s tools, and according to Pavel Sorokin, First Deputy Minister of Energy, is often “suboptimal”.

The situation has also worsened with the depletion of Russia’s conventional oil reserves, which have forced producers to take advantage of reserves that are difficult to exploit, and which require more complex equipment and programs if the country wants to maintain production at current levels.

“Super-complex software for seismic monitoring, stratigraphic modeling, drilling and hydraulic fracturing would not be necessary if we did not have the equipment for all these operations,” Sorokin told the St. Petersburg International Economic Forum said.

Domestic food production, where Russia has made progress in domestic agriculture over the past few years, also faces challenges. The meat processing facilities of Ros Agro, one of the largest agricultural entities in the country, rely on imported processing implementation systems.

Comment on the topic; “We are critically dependent on European companies for the production of execution systems, and we do not yet know what to do if something happens,” Rosagro head Maxim Basov told the St. Petersburg forum.

Dunayev of Severstal also added that if the computer software malfunctions the equipment; Factories may need parts that are difficult to obtain, and that are constantly rising in cost. To avoid such delays, he suggested that players in the industry work together to create a database of parts that can be shared when needed.

It’s not just the industry that has been affected. SAP and Microsoft will stop updates and services for Russian companies in August, which will make companies and government services that rely on their software vulnerable to security breaches and viruses.

Russia’s ambitions for a 5G mobile network were also destroyed by the war, raising fears that the economy would lose competitiveness as it struggles to maintain existing services while other countries upgrade their infrastructure.

New regulations will not appear overnight. It took nearly a decade and about $ 100 million to create a local Russian alternative to Microsoft Office, according to Dmitriy Komisarov, a MyOffice developer.

“It is necessary to take a closer look at reality, identify the missing solutions and then start developing,” Komissarov said.

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