Ukraine has urged software and cloud giants including Microsoft and SAP to cut ties with Russia to prevent Moscow’s invasion. This is what is at stake.
What is Ukraine demanding?
Digital Transformation Ukraine wants North American and European tech companies to completely halt any dealings with Russian customers, potentially disrupting the Russian economy and forcing the Kremlin to reconsider what they call “special operations” in Ukraine.
Some companies like Microsoft have stopped accepting new customers in Russia since the invasion began last month. But many customers have yet to close deals with existing customers, except for those targeted by new export controls and sanctions.
What role do Western companies play in Russia’s IT system?
Russian companies and government agencies have long relied on Western-developed technology as the foundation for their own and operated IT systems. Server from International Business Machine, Dell Technologyand Hewlett Packard Enterprise (HPE) is the market leader in Russia.
Also popular are apps from SAP, Microsoft, IBM, Oracleand Salesforce.com. These tools help organizations with email delivery, data analysis, record keeping, and general management of their operations.
Some technologies cannot be turned off remotely by a provider. But there are options for choking a customer’s system.
According to two former IBM senior salespeople in Eastern Europe, banking, telecommunications, transportation and other organizations in Russia could be hampered if suppliers stop supplying replacement parts. replacements, security patches, software updates, and technical support.
Customers may be forced to find alternatives, even pen-and-paper accounting, if services go offline or degrade due to lack of updates.
How will a western cloud outage affect Russia?
Russian companies for the most part do not want to rely entirely on cloud services, especially from US-based providers such as Microsoft Azure and Alphabet’s. Google Cloud, according to IDC analyst Philip Carter. According to Carter, when taken as a share of total domestic IT spending, the cloud accounts for 5% in Russia compared with 19% in the United States.
As a result, Russian companies excluded from the cloud will not be unduly crippled, he said.
However, the Russian cloud market has grown rapidly over the past two years, with the online commerce pandemic spurring it, according to the researchers.
Microsoft has the largest market share in Russia with 17%, followed by Amazon’s cloud unit with 14% and IBM at 10%, according to 2020 estimates from IDC. Yandex NV, a Russian company, ranks fourth with 3% market share.
But IDC says Russia and Ukraine combined account for just 5.5 percent of total IT and communications spending in Europe and 1 percent worldwide.
What did Western companies say?
On Monday, Salesforce said it had begun moving away from customer relationships in Russia, which it said added a small, immaterial amount.
The other companies declined to comment on whether they were considering removing existing customers.
Amazon Web Services says its biggest customers in Russia are companies with headquarters elsewhere and it has a longstanding policy of not doing business with the Russian government.
IBM and Oracle said they had suspended all business in Russia, and IBM added that they did not do business with Russian military organisations. HPE, Dell, SAP and Microsoft said they were shutting down sales. Google Cloud did not respond to a request for comment.
Who can benefit if Western companies bow their heads?
Russian companies can switch to homegrown workplace software like My office or local cloud providers including Yandex and ActiveCloud. However, the price and quality can be less favorable, said Carter of IDC.
Blake Murray of research firm Canalys says Chinese tech companies can fill the void. Cloud providers include Alibaba Group and Tencent Holdings. Last year, China-based Huawei Technologies opened a data center in Moscow for the Russian academic and scientific community.
However, any use of Western components in their operations could further complicate Russian sales within the framework of trade restrictions recently imposed by the United States.
© Thomson Reuters 2022
