Russia could become the world’s largest market for illegal IT technology and equipment following the country’s recent decision to allow parallel imports and encourage local companies to use the systems even without proper authorization.
The recent exodus of many global IT companies of Russia, prompted by the country’s invasion of Ukraine and subsequent international sanctions, has resulted in local businesses only be able to continue using the technology of these companies until the expiration of their license period.
As Russian companies often buy licenses for only one year, and less often for two or three years, they could soon face serious problems with the use of their IT system. The situation is complicated by the fact that most Russian companies, mainly large and medium-sized ones, have traditionally used IT products from Western vendors as the basis of their IT architecture.
But in recent weeks, some Russian user companies have faced the problem of renewing their licenses for foreign computer products.
Perhaps the most complex situation concerns Russian companies that use equipment and technology supplied by global giants such as Cisco and IBM.
According to experts writing in the Russian Vedomosti commercial paper, the greatest concerns relate to specialized server equipment based on the IBM Power microprocessor architecture, which is traditionally used to store and process large sets of data.
Such systems are traditionally in great demand among large Russian companies in various sectors of the national economy.
For example, Russia’s flagship carrier Aeroflot planned to purchase such equipment in early 2022, but after Russia invaded Ukraine on February 24, the company was forced to change its plans. .
IBM Power currently accounts for 10% of the Russian server market.
In the case of Cisco, the company was mainly represented in the Russian market by its network equipment, used mainly by large organizations and telecommunications companies. Among its clients were Rosseti, Russia’s largest electricity company, and Rosgeologia, the country’s main state holding in the field of geological exploration. The two Russian companies were not available for comment.
The exodus of global IT suppliers from Russia and the suspension of their local market supplies means that the only way for their former local partners to continue using their products may be through parallel imports.
In this scenario, deliveries of IT products to Russian companies can be carried out without the usual permits.
So far, the Russian government has allowed parallel imports in its computer sector, which has led some local analysts to predict that Russia could become the world’s largest market for illegal computer systems.
But despite some potential benefits of parallel imports, implementing such a system is unlikely to completely solve Russian industry’s problems, because without a license and regular maintenance, equipment could quickly become vulnerable to hackers.
If licenses are required to activate the equipment, this means that companies will have to “hack” it. But even after that, according to most analysts, the use of such equipment will be dangerous for organizations, due to the serious potential risk of data leakage and hacker attacks.
Moreover, any user of such equipment will face disputes with rightsholders – although probably without any repercussions for them in Russia – and will not be able to make the upgrades required for these systems. Another option for activating equipment when bypassing the licensing process may involve the use of special activation keys, although these may be blocked by original equipment manufacturers.
Another major problem with parallel imports is the high cost of delivering the products – the final price could be 70-100% higher than that of analogue equipment supplied via traditional systems – as well as a serious risk of supply disruption. . Finally, there is a high risk of counterfeit products being supplied under the guise of genuine equipment.
Due to the risks associated with the parallel import system, many Russian companies are now considering circumventing the existing restrictions legally. This could involve the activation of equipment and technologies in certain third countries before they are delivered to Russia.
Many companies are considering different routes for the delivery of equipment and technology, including Dubai as a re-export destination, with the purchased equipment that was resold to CIS countries such as Armenia and Kazakhstan, and later to Russia. But the final cost of products delivered in this way can be several times higher than the standard price.
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