RUSSIAN IT INDUSTRY STRUGGLES ON.

It is hard to estimate the size of the Russian computer industry - few companies publicly reveal their financial results for fear of a visit from the notorious, gun-toting tax police. But one thing is certain, throughout the 1990s, while almost all other sectors of the Russian economy have stalled or stagnated, the computer industry has continued to expand with the hope that, one day, one of its indigenous computer suppliers may even become an internationally recognized name. That was the thinking behind the proposed merger of the Russian enterprise resource planning software vendors Galaktika and Parus earlier this year. The two companies planned to merge their businesses, reorganize according to an American business model and, with the help of a cash injection from a Western venture capital investor, produce an ERP product they could then export to America and Europe. But when the economic crisis struck Russia in the summer, their Western financier got cold feet and pulled out. Without sufficient backing to execute the merger properly, Galaktika and Parus decided to call off the deal. Such has been the downturn in Russia's economy, even the region's most resilient computer companies are now finding it tough to survive. During the 1990s, a handful of local ERP, banking, insurance and other software vendors had prospered on the back of strong demand for their software from go-ahead Russian businesses that wanted to try to restructure and prosper in the post-Soviet era. Russian companies could neither afford the software nor the services associated with implementing market leading Western packages such as Baan or SAP, but found home-grown packages from companies such as Galaktika and Parus both affordable and easier to implement. Companies focused on the sectors worst hit by recession - banking, insurance and manufacturing - however, are now almost bereft of business prospects in their home market. Indeed, some banks are so short of cash that they have even started to sell off their office equipment, including PCs, printers and photocopiers, to raise money. In the immediate future, the Russian computer industry, particularly the software sector, may have to follow the Indian example. As an off-shore programming haven, Russia is today more attractive than ever, thanks to the plummeting value of the rouble, which in dollar terms has more than halved the cost of developing software in Russia during the last year. In the meantime, the political classes are gearing themselves up for a presidential election in 2000, but few are confident that a candidate capable of tackling Russia's real problems will emerge. So it seems that Russia's computer industry may be stuck in the doldrums for some time to come.