According to the latest report, since the outbreak of the Russian-Ukrainian conflict, we have been hearing about a large number of tech companies suspending sales in Russia. This is a broad response and clearly sends a message that businesses will not continue to do normal business in the country, but what real economic impact will these actions have on these companies?
As IDC noted in a report published earlier this week, as Ukraine comes under attack and sanctions are imposed on Russia, it will inevitably have some repercussions for technology companies operating in this part of the world.
The conflict has halted business operations in Ukraine, while the Russian economy is feeling the early effects of Western sanctions. This will strongly impact tech spending in both countries, with local market demand expected to contract by double digits in 2022,” the report said. the company wrote.
In pure numbers, however, Russia and Ukraine, while big powers, do not account for a large share of overall global tech spending. In fact, IDC reports that the two countries combined account for only 5.5% of European tech spending and just 1% of global tech spending.
Tech companies that have not closed their sales in Russia are facing such pressures, Canalys said. “Accenture, Apple, Cisco, Dell, HP, HPE, Oracle, SAP and TSMC (semiconductors) are the technology companies on a growing list of international companies (covering all industries) cutting ties with Russia,” the company said in a statement. “Companies that don’t will find themselves increasingly out of sync with the global sentiment,” wrote a report published earlier this month.
According to Canalys, Russia has 20% of the European smartphone market and 8% of the PC market. Apple leads the Russian PC market with a 17 percent share, sharing that lead with Lenovo. HP was slightly behind with a 15 percent share. Those figures represent about 2% of the companies’ overall sales, according to Canalys. All three market leaders have suspended sales in Russia.
As for smartphones, Chinese smartphone maker Xiaomi leads the market with 31%, followed by Samsung with 27% and Apple is far behind with 11%.
That’s 2% of Apple’s overall sales and 4% of Samsung’s. Both Apple and Samsung have suspended sales in Russia.
As for the big three cloud computing vendors — Amazon, Microsoft and Google? Russia accounts for a fraction of 1 percent of the companies’ overall business, said John Dinsdale, principal analyst at Synergy Research, a firm that tracks the cloud computing market.
“From the point of view of AWS, Microsoft Azure and Google Cloud, the interruption of cooperation with Russian customers will not have any impact,” he said.
But for these customers, it can still be painful. “Certainly, the impact could be very meaningful for customers who may be disrupted,” he said. “Russia is not a particularly developed market, but for companies that have made significant transitions to cloud-based operations, then the process of reversing will be difficult.”
Canalys analyst Blake Murray agreed but said that, like smartphones and PCs, customers struggling with sanctions could turn to China’s cloud computing giant. “In general, Russian companies are expected to turn to Russian CSPs such as Yandex and Chinese suppliers with data centers in the country,” he said. “They will also look to replace software such as Office with similar software registered in Russia .”
That’s not to say it’s easy, but Murray said that many groups within Russia have at least begun to move in that direction and are migrating.
You might be wondering about the implications for SaaS companies. The SaaS market tends to be more fragmented, with many domestic options, Dinsdale said. That said, “Russia is another small market, accounting for less than 1% of global SaaS revenue. For Microsoft and Salesforce, Russia accounts for less than 1% of their SaaS business.”
Cogent and Lumen will also reportedly announce the closure of their Russian operations this week. “Our commercial service offering is very small and very limited, as is our physical presence. However, we are taking steps to cease operations in the region immediately,” Lumen said in a statement.
Cogent has made no public statements, but it is widely reported that it is ceasing operations in Russia. It’s unclear what the impact will be, but Cogent’s network map doesn’t appear to have any data centers in Russia.
Still, cutting off internet access could have serious implications for those trying to get news abroad and for companies trying to do business. As Dinsdale points out, you can’t access any cloud services without internet access, so this could have potentially serious implications.