Digital Leap: The digitalisation of the Russian economy

Russia is one of the top 20 most digitalised countries in the world. Digitalisation affects every aspect of our lives, and online services have long been a standard feature of both business and public sector operations. So, how is technology transforming industry in Russia?

Digital business

According to the National Research University Higher School of Economics (NRU HSE) digitalisation index, the sectors where digital technologies are most utilised in Russia are IT and ICT, higher education, finance, and trade.

The agro-industrial complex and technologies for higher yields

The Russian Ministry of Agriculture is developing a ‘Single Window’ digital system for the entire agro-industrial complex. This will serve as the foundation for the planned Unified Digital Platform for the Agro-Industrial and Fishery Complex and ensure integration with the Unified Identification System and the Gosuslugi e-government portal. Companies themselves are also going digital. The purpose of digitalisation for 60% of the companies in this industry is to optimise production and logistics processes, reduce the risk of equipment failure and downtime, and cut labour and energy costs.

• A company engaged in raising cattle, producing raw milk, and cultivating crops has introduced a BI platform to process data. The system controls a range of aspects of dairy production, from planning forage yield and adjusting cattle feed, to assessing milk yield and fat content. This has led to a trifold increase in the speed of operations, reduced production expenses by 15%, and increased sales and revenue by 25% and 30%, respectively.
• An agricultural holding specialising in seed production and horticulture has introduced IT tools to automate equipment and analyse big data affecting the production cycle. Using autopilot has increased the daily output of the harvester, reduced crop losses, and decreased harvesting time by 6%.

Manufacturing with automation and AI

Although the digitalisation of Russia’s manufacturing industry started only two decades ago, it had already reached 79% by 2023. The ‘Digital Economy in Russia’ program adopted in 2018 had a staggering effect in terms of the rapid introduction of automation and robotics, the development of the internet of things (IoT), artificial intelligence (AI), blockchain technologies, and operations using Big Data and digital twins.

Key trends include the development of digital platforms that aid in standardising the conception and management of IT solutions to improve digital literacy among production personnel, and also help advance the development of generative AI and the copilot concept. 

Many powerful examples of digitalisation in the manufacturing industry come from Russia:

• A large Russian paper manufacturer with roughly a 20% share of the Russian market in terms of revenue has digitised the monitoring of over 20,000 types of equipment and machines. This has reduced labour costs by 40%, increased the equipment service life by 10%, and reduced the number of detected defects by half.
• A large rolling stock manufacturer has introduced a system for monitoring and predictive analysis of equipment condition. This has helped the company reduce repair costs by 30%, specific power consumption by 4.4%, and downtime by 12%. A mechanism for predicting the health of rolling stock has improved the quality of manufactured units by 10%, increased the technical readiness of equipment by 50%, and reduced maintenance and repair costs by 30%.

Self-service retail

E-commerce was up by 39% in the first quarter of 2024 compared to the same period the previous year, totalling 1.9 trillion roubles. Online retail calls for the development of payment platforms, recommendation systems, and other services based on digital technologies. 

As it happens, both online and offline retailers are interested in developing the cloud, outsourcing IT services and, most importantly, expanding their opportunities to use AI. Artificial intelligence is already a ubiquitous feature of retail operations, from video analytics at check-out or at the warehouse, to product-related decisions and business development.

Technologies facilitating self-check-out are becoming more widespread in offline retail and range from detection technologies based on computer vision that help monitor stock or facilitate payments using biometric data, to Soft POS solutions that enable cash-free payments.

• A large grocery distributor has automated its audit process. Prior to this, supervisors performed most routine tasks manually, such as filling out audit forms or monitoring sales representatives, which resulted in a high number of errors and increased operational expenses. Introducing an automated system has enabled the company to save more than 69,000 man-hours per year.
• A leading retailer is introducing computer vision technologies to enhance video analytics both in the check-out area and in the retail space. This reduces the number of visitors who fail to make a purchase by 10%, decreases the store’s losses by 20%, and means that planograms are more efficiently monitored.

Digital twins in healthcare

Healthcare digitalisation is a strategic goal for governments worldwide. In Russia, this means creating patient digital twins, using AI with patients, developing telemedicine, and creating medical devices using artificial intelligence. By 2030, the government plans to revolutionise healthcare with neurotechnologies, AI systems, and big data analytics, as well as enhanced wireless communications.

The Russian MedTech market has already grown by 40%, totalling 11.5 billion roubles in the first quarter of 2024. The key trend is in developing AI technologies, which explains the high growth rate here. For example, the number of online consultations has increased by 93%.

• A centre for diagnostic radiology has implemented artificial intelligence technologies in its medical image analysis procedure. Medical professionals use AI when analysing mammograms and other images. This reduces image analysis time and allows medical institutions to get a rapid second opinion in complex cases.
• Rostec’s digital Personal Medical Assistants platform lets patients with chronic conditions like high blood pressure or diabetes monitor their health remotely. This facilitates patients’ access to medical services and reduces the pressure on medical workers.

Neural networks in finance—and other new services

Russia is already a world leader in bank digitalisation and is continuing to develop its fintech. Key innovations include an Open API that allows for the integration of financial, insurance, and other services into a single system, a faster payments system, payment using biometric data, the introduction of pay services, NFC stickers, and the mainstreaming of BNPL services that allow shoppers to pay for their online purchases in instalments.

A current priority is to implement artificial intelligence systems in the financial sector.

• Sber already makes over 80% of its decisions on working capital financing with AI support and plans to increase this to 99% by the end of 2026.
• A company that grants short-term loans secured by moveable property has implemented remote customer service and payment systems. Following digitalisation, the average loan delinquency period has dropped by almost half, the number of commodity specialist operations has decreased by 34.5%, and transaction processing speed has increased by a factor of 1.5.

The prospects for high-tech cooperation between Russia and India

According to Oleg Abelev, head of the analytics department at Ricom Trust and assistant professor at the Russian Foreign Trade Academy, there are three areas where Russia has the potential to become a tech leader on the global market. “The first is cloud solutions and software for cloud storage in general. The second is software for storing, protecting, and processing data. A number of companies are already using these Russian solutions in Gulf countries.

The third is anything related to control systems, also known as automated systems, that can be integrated into specific manufacturing sites to improve operations,” says Abelev.

Russian potential in the tech sphere is of interest to Indian businesses both in terms of their domestic operations as they look to succeed in new niches and adopt new tech solutions, and in terms of their drive to enter the Russian market. The transformation of the Russian economy over the last two years, with its focus on import substitution and finding new partners to supply equipment, raw materials, and technologies, presents Indian companies with a unique opportunity.

It is important to be well informed on the key aspects of doing business in Russia in order to work successfully with Russian partners. Find out more in ‘Unpacking the matryoshka: How to work with your Russian partners’. It is also useful to understand how Russia’s approach to foreign trade has changed in recent years, and you can learn more about this in ‘Turn to the East: how Russia’s approach to foreign trade has evolved in the last two years’.