Andrea Siviero
Andrea Siviero (Associate Research Director, European Customer Insights & Analysis)
Robert Farish (Vice President and Regional Managing Director, CIS)
Robert Farish (Vice President and Regional Managing Director, CIS)
Phil Carter
Phil Carter (Group Vice President, European Chief Analyst and WW C-Suite Tech Research Lead)

The Russia-Ukraine War has created a critical geopolitical turning point for Europe and the world that will affect global ICT demand in the coming months and years. Our global and local experts are analysing the impacts across markets and regions to provide customers with timely insights and critical context for action. Here we have answered the top 8 questions from business leaders around the globe on the impact of the war on the ICT market.

How is the War Impacting ICT Spending Forecasts?

In a short-war scenario, worldwide ICT spending will grow 4.1% year on year in 2022 — a downward revision compared with IDC’s February 2022 forecast (4.8%). In this scenario Russian ICT spending is expected to experience a 25% contraction in 2022/2021, while the rest of Europe will increase 3.4% year on year. The rest of the world ICT market will grow 4.8% in 2022.

When looking at technologies, the devices market will be the most impacted at a worldwide, EMEA and Russian level. This is due to sanctions on component imports and exports, device vendors pulling out of Russia and supply chain disruptions due to shortages. At the same time, infrastructure spending will slow down, but spending growth will remain positive both worldwide and in EMEA.

Annual growth in software spending in EMEA and worldwide will continue to be positive during 2022–2025, even at a slow pace. This is due to renewed interest in software solutions to support digital transformation (DX) projects and the ongoing switch from on-prem to cloud deployment. Increased demand is expected for security software, data protection and supply chain management (migration and general supply disruption).

IT services will also remain resilient in EMEA. The need to carry on managed services, project-orientated and support services consulting projects will remain.

Do You See a Medium- to Long-term Transition of Tech Talent from Eastern Europe to Other Parts of the Globe?

We think the medium- to long-term impact will be on Ukraine and Russia and not on other parts of Eastern Europe. It’s more difficult to assess the long-term impact on Ukrainian talent than it is for Russian talent, as the engagement context is very different for Ukrainian nationals. There are unverified reports that up to 70,000 IT professionals have already left Russia and that a further 100,000 are likely to leave in the short term.

We also hear of Russian IT companies, particularly those with overseas activities or headquarters, working on likely expatriation plans for their workforce, with one rationale being to avoid the impact of sanctions in Russia. The situation remains very fluid, however. These are all short-term views and it’s difficult to make medium- to long-term assumptions now.

What About the Impact of These Global Changes on Accelerating the Pressure Against the Dollar (and to a Lesser Degree the Euro) as the World’s Reserve Currency? How will that Impact US and European IT Vendors?

The blocking of the Russian reserve currencies could have major consequences for the future role of the dollar and the euro as the world’s reserve currency; some countries and central banks might prefer to look for new currency or asset reserves that are unlikely to be frozen or blocked in the future (the yuan?). This, coupled with the potential geopolitical alliance of Russia and China, could create a new power base in the world economy. Saudi Arabia, for example, could accept the yuan in exchange for oil.

Over the next few years, however, the dollar will remain the world’s pre-eminent currency for international payments and for central banks’ foreign-exchange reserve holdings, so we are not expecting significant changes in IT investments due to this. In the long run, the overall effects on IT spending are uncertain, depending on how this develops and how the US economy reacts (new exchange rate dynamics, impact on trade, new developments in the domestic market, etc.).

Do you Foresee any Fragmentation of the Technology Ecosystems (Western and Eastern)?

We believe Chinese tech companies will aggressively localise technologies to build resilience. This is a significant change due to the war. The process had started with the recent strained US-China relations, but the Russia-Ukraine War has accelerated the urgency in China. China will work more closely with countries in the Asia/Pacific region, especially in Southeast Asia.

Southeast Asia is also the target for Chinese tech companies looking to build a base for their globalisation push. In Russia we think it’s now likely that we will see Chinese-made semiconductors powering Chinese-made IT infrastructure, and devices being implemented in conjunction with “national” Linux-based operating systems and applications.

How will Digital Sovereignty Affect Customers’ Investment in Public Cloud? Will Enterprises Go for More On-premises Infrastructure than Public Cloud?

The Russia-Ukraine War will not significantly change companies’ approach to public cloud. For companies that see the war as just another risk, it might even make them more likely to invest in (public) cloud. Companies will seek options for the “golden backup” (3-2-1 rule planning with one of the locations being in the cloud and preferably cloud outside of your country).

On premises will remain one of the environments, but investment will be triggered by locally driven needs, financially interesting options and the need for certain workloads to be processed locally (e.g., edge), but rarely by DigSov directly.

There will be more multicloud or multisourcing strategies, where companies do not want to be 100% dependent on one service provider or one infrastructure sourcing model.

A stronger on-premises focus might be the preferred option for companies in markets that see potential sanctions as a risk (with sanctions meaning that the cloud providers would stop delivering their services). For the average user, however, the risk of cloud service discontinuity is something that companies always need to take into account anyway.

If anything, we’d expect changes to DR/BC plans and enhanced contingency plans with possible investments in local infrastructure.

EU leaders are talking about European sovereignty and the need for the EU to be as independent as possible, but we don’t think this will directly translate into regulations or standards that will spur on-premises investments.

Will the Russia-Ukraine War Change the Focus of the Cybersecurity Market?

The cybersecurity market is poised to grow given the heightened cyber risk concerns and national cybersecurity agencies urging organisations to strengthen their infrastructure security. Security vendors report increased demand for advanced threat detection, threat intelligence and incident response.

Cyber resilience is likely to be a high priority for many organisations, and IDC expects a similar situation as in the first year of the COVID-19 pandemic: although IT spending overall contracted, security was the one area where organisations felt compelled to maintain or even increase investments in response to the perceived increase in risk. That said, we do not yet see direct evidence of increased cyberattacks on critical infrastructure and other targets in Western or Central and Eastern Europe.

What Impact Has the Russia-Ukraine War Had on the Semiconductor Industry?

Major semiconductor manufacturers say there is enough stock of critical raw materials not to impact production in the foreseeable future; steps are being taken to ensure more diversification in the long term, but this will take time to come online. If the geopolitical situation worsens this could impact supply, but at this point we do not see a negative impact on production in the short to medium term.

How Is the War Impacting Russian Organisations’ Digital Road Maps?

Russian enterprise users are focusing on business continuity, with digital transformation a far lower priority. As we discussed during the webinar, there has been a rapid migration of tens of thousands of digital professionals from Russia in recent weeks. Among these are many young, in-demand developers. There have already been public announcements from Yandex and Infowatch confirming they are struggling with this issue. Clearly some of these developers will leave the Russian digital market and find work elsewhere.

From what we can gather, the emergency shift from Western software and services to Russian alternatives also implies a shift largely to on-premises solutions. This would likely be an inhibitor in terms of digital development in any organisation.

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