22 Jul Russia has the potential to become the world’s largest market for illicit IT.
Following the country’s recent decision to allow parallel imports and encourage local enterprises to use systems without official approval, Russia might become the world’s largest market for illicit IT technology and equipment.
The recent migration of numerous global IT businesses from Russia, triggered by the country’s invasion of Ukraine and accompanying international sanctions, has resulted in local enterprises being allowed to employ technology from these companies only until the license period expires.
Because Russian enterprises frequently obtain licenses for one year, and less frequently for two or three years, they may have major challenges utilizing their IT system. The problem is compounded by the fact that the majority of Russian businesses, mainly big and medium-sized ones, are foreign-owned, have typically relied on IT goods from Western vendors as the foundation of their IT infrastructure.
However, in recent weeks, several Russian business customers have had difficulties renewing licenses for international IT equipment.
The most complicated issue includes Russian enterprises utilizing equipment and technology supplied by global behemoths such as Cisco and IBM.
The main concerns, according to specialists writing in Russia’s Vedomosti business publication, are about specialized server equipment based on IBM Power microprocessor architecture, which is generally used to store and analyze enormous information.
Such systems have always been in great demand among significant Russian corporations in a variety of areas of the Russian economy.
For example, Russia’s main airline, Aeroflot, had planned to purchase such technology in early 2022, but following Russia’s invasion of Ukraine on February 24, the firm was obliged to rethink its plans.
IBM Power presently controls 10% of the Russian server market.
In the case of Cisco, the company’s network equipment was primarily represented in the Russian market by major organizations and telecommunications firms. Its clients included Rosseti, Russia’s largest electricity provider, and Rosgeologia, the country’s largest state-owned geological exploration business. Both Russian firms did not respond to requests for comment.
Due to the evacuation of global IT suppliers from Russia and the suspension of their supply to the local market, their former local partners may only be able to use their goods through parallel imports.
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Deliveries of IT goods to Russian enterprises might be made without the customary licenses in this case.
So far, the Russian government has permitted parallel imports into the Russian IT sector, prompting some local analysts to forecast that Russia may become the world’s largest market for illicit IT systems.
However, despite some possible benefits from parallel imports, the introduction of such a plan is unlikely to totally fix the Russian industry’s concerns, because equipment might soon become exposed to hackers in the absence of licensing and regular servicing.
If licenses are required to activate equipment, businesses will have to “hack” it. Even after that, most analysts believe that employing such technology will be dangerous for businesses due to the substantial risk of data leakage and hacker assaults.
Furthermore, any users of such equipment would face legal issues with rights holders – albeit likely with minimal ramifications in Russia – and will be unable to undertake any necessary system upgrades. Another way for activating equipment while avoiding the licensing procedure is to utilize unique activation keys, which may be restricted by the original equipment makers.
Another significant issue with parallel imports is the high cost of delivery – the final price might be 70-100 percent more than analog equipment provided through standard schemes – as well as the considerable danger of supply failure. Finally, there is a substantial chance of counterfeit items being sold as genuine equipment.
Because of the hazards involved with the parallel importation program, several Russian businesses are considering lawfully circumventing current prohibitions. This might entail activating equipment and technology in third-party nations before delivering them to Russia.
Many corporations are examining different delivery routes for equipment and technology, including Dubai as a re-export destination, with acquired equipment sold on to CIS nations such as Armenia and Kazakhstan, and finally to Russia. However, the ultimate cost of things supplied in this manner may be many times more than the regular price.
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