Digital Transformation in Russia: Problems, Challenges and Prospects

In the beginning of 2015, President of the Russian Federation V.V. Putin prioritized the digital economy development. In order for the economy to be transformed into a digital one properly, it is necessary to define the concept of "digital economy" itself. Lots of researchers fairly believe that such a concept as "digital economy" appeared in the 90s of the twentieth century. One of the best definitions of the digital economy concept ideology was made by famous IT researcher N. Negroponte. He presented digital economy as the following metaphor: "the transition from atomic movement to movement of bits" (Alexeev, 2016).

There are obviously other opinions on this subject that exist in scientific community. Chairman of the Board of Directors of the Information Society Development Institute Y.A. Khokhlov, one of the experts on the topic in Russian Federation, noted that the term "Digital Economy" first began to be widely used by Don Tapscott, who wrote the monograph "Digital Society", which was publically presented in 1994 (InvestFuture, 2017).

P. Gribov, associate professor of the Economic Security Department of the RANEPA, notes that governmental discussions and President's prioritization has a linear correlation with the fact that nowadays the very concept of "digital" economics has not finally been defined and interpreted. P. Gribov believes that today almost everything could be covered by the concept of the digital economy, for example, such areas as hardware manufacturing, software development, computer technologies, as well as many other things, such as e-services, Internet-based products, instant messengers, etc. (Glaziev, 2017).

Russian economist V. Katasonov believes that the excitement around the digital economy topic in the Russian Federation is the usual "community talks" (Prasolov, 2017), which is just another "trendy" development direction. He notes that the digital economy itself was invented in the United States, believing that not only "economic futurologists" are responsible for that, but also representatives of American intelligence services might have taken part in it (which could be quite fair considering the fact, that digitalization, first of all, supplied us with enormous amounts of data, allowing 3rd parties know us better than ourselves).

Also, V. Katasonov states that the euphoria and statements that "digital industry will pull Russia out of the economic crisis" is not well validated by real data (InvestFuture, 2017).

However, it should be noted that such a phenomenon as "digital economy" is very serious. The transition to a digital economy has become one of the main priorities and development vectors for Russian Federation. According to experts, the level of digital economy implementation will be the key definer of country's competitiveness within the new technological order that is establishing nowadays. In this case, we can say that the digital economy acts as the "oil" of the future.

The formation of the digital economy is one of the key aspects of national security and independence in the future, as stated by V.V. Putin during the meeting of the Strategic Development Board. According to the President of the Russian Federation, the development of the digital economy can be compared with railway construction in the XIX century, or electrification in the XX century. President Putin stated following: "Digital economy is not a separate industry, in fact, it is the basis for creating qualitatively new business, trade, logistics, and production models, changing the format of education, health care, public administration, communication between people, and therefore, sets a new paradigm of development of the state, the economy and the whole society" (Plugotarenko, 2017).

In this case, it makes sense to agree with the Russian leader that there is no well-established and commonly used international regulation in this area, however, we need to understand that the main problem of the digital economy is the question of exactly where are its borders. In connection with the foregoing, we can assume in this study that the digital economy is a complex of such economic, social and cultural relations that are based on the application of digital ICT.

For example, experts confirm that, thanks to the presence of excellent schools of mathematics and theoretical physics, the Russian Federation has the opportunity to seek leadership in a number of areas within the framework of the new economy, and first of all - the digital one. IT-companies of the Russian Federation, without any doubt, are very competitive. Specialists from the Russian Federation offer simply the best and unique software solutions, and, in fact, create new areas of knowledge and new environments for the development of the economy and life (Prasolov, 2017).

O. Shibanov, who is a professor of finance and deputy first vice-rector of the Russian Economic School, is confident that the economy of the Russian Federation is open, and for this reason, it is very important for the country that it has the most access to technology and the market. . It would be strange to assume that in the very near future the share of the digital economy in the Russian Federation will be over 50% of GDP, however, the active introduction of the digital economy in all sectors currently serves as one of the fundamental moments for all industries (Kovalenko, 2017).

It is impossible to imagine the development of such areas as trade, logistics, certain types of industrial production, housing and communal services, transport and other sectors of the economy without accelerated development of the digital economy. However, the cost of information technology is very significant. As noted by Russian President V.V. Putin, in 2017, about 200 billion rubles will be spent on digitalization. As for A. Kudrin, he has offered to spend on the "digital revolution" till 2024 enormous amount of 185 trillion rubles, which is about 30% of GDP per year (Alexeev, 2016).

The experience of many countries makes it possible to conclude that the accelerated development of the digital economy is not always associated with significant financial costs. In this case, the matter is largely related to mental potential level of people and to how quickly the process of changing paradigms of thinking in the business environment is going. The state itself, of course, plays a very important role in this process, and that is especially important for developing countries. However, business continues to remain as a key agent, since it is the main actor to introduce all these digital innovations.

If we look closer at the banking system of the Russian Federation, we can see a large number of skilled workers in both the IT sphere and risk management, many of whom are engaged in introducing innovations without significant financial costs. If the information that is supposed to be saved with the use of the "blockchain" technology is secretive, then in this case it is possible that questions arise. However, this problem has a solution, since this kind of data can always be encrypted (InvestFuture, 2017).

Thus, it is possible to make a general conclusion that the digital revolution, which is taking place nowadays, is quite long process, the unfolding of which takes place over several years or even decades. Digital technologies already dominate in most of spheres of life in Russia: informational, financial and significant part in the manufacturing and social spheres of the Russian economy. Moreover, such technologies increase their penetration level in both households and business. At the same time, it should be noted that the monopolistic use of digital technologies in the interests of particular individuals, companies or countries might become a threat to the national security of other countries. But we have to remember that neutralization of such threats should be performed only by using legal methods.

Paying more attention to the analysis of new phenomenons and trends in the economy and relying on the papers of American researchers such as Nicholas Negroponte, Chris Meyer, Mohanbir Sawhney, Daniel Spulber, Don Tapscott, Steve Jurvetson, Patricia Seybold, etc., we can detect the desire of the authors to characterize new features of the modern economy using such terms as "New Economy", "Economy 2000", "Internet Economy", "Net Economy", "Web Economy", "Digital Economy", "E-commerce" (E-business), "intangible economy", "non-substances Renaissance economy ", etc.

These terms are often used as synonyms when new phenomena in economics is being discovered. It might be caused by the formation of a global electronic network, the global spread of personal computers (PC), the creation and continuous improvement of software, the development of information and digital technologies, the production of products and services by IT companies.

The founders and leading specialists in research and popularization of the theory of "information society", in particular "information economy", include U. Beck, Z. Brzezinski, R. Katz, M. Castells, M. McLuhan, I. Masuda, M. Porat, D. Tapscott, T. Stounier, E. Tofler, T. Umesao, E. Fukuyama, and others. The works of F. Machlup and M. Porat (1962) first noted the conceptual foundations of the information economy.

Classically, "digital economy" is an activity in which key production factor is digital data and its use, which can significantly increase efficiency / productivity in various types of economic activity. In addition, "digital economy" is the economy that uses digital technologies and services (Kapranova, 2018). The terms "data economics", "internet economics", "new economics", or "web economics" are often being used as the synonyms to the terms above.

Supporters of the information economy associate the formation of the information type of US society with the development of the fourth sector of the economy. F. Machlup includes into that sector: law, education, publishing, media, computer manufacturing.

Canadian scientist M. McLuhan contributed to the development of information theory as well. The author claimed that telecommunication technologies are the basis for the formation of socio-economic systems, the factor that determines material and spiritual progress. He calls such a society "Electronic", where telecommunications influence the subconscious of the masses, networks of such a nervous system are being formed, producing the effect of a "global embrace". Japanese scientist I. Masuda in his work describes the emerging information society as a high post-industrial stage. He points out that the development of information technologies will affect the structure of the economy, where the leading industry will be "intellectual production", while information and knowledge will play the role of the product. ICT itself will become productive force, displacing industrial machine technologies. He expresses the opinion that new production forces will influence the society and lead it to a classless society devoid of the contradictions of the industrial age.

The American-Spanish economist M. Castells makes the great contribution to science along with others. As the most important features of the information society, analysts point out the "network character". So, M. Castells asserts that the new social morphology is composed precisely by networks, and the spread of network logic greatly affects the course and results of processes related to production, daily life, culture and power. The author builds a theory of a network society with interacting, intertwining networks that form a network space.

The Japanese scientist K. Imai characterizes the network form of organization as a system of units between which more or less permanent links are being maintained within certain relations. Thus, in the basis of such an economy are new forms of socio-economic activity of individuals, forming a new model of social relations. Mass availability and involvement of economic agents in electronic networks, integration of economic activities into the Internet space in the late 90s of the XX century gave scientists a reason to build their concepts on the basis of the concept of "virtual economy". In that area stand out: A. Bulle, A. Crocker, M. Weinstein. In their opinion, society is moving to a new phase of capitalism, where the industrial system is being transformed under the influence of ICT.

In such conditions, a person is alienated from the flesh in the process of interaction with ICT and turns it into information flows that form virtual capital. Russian economists like A.A. Auzan, A.V. Buzgalin, A.P. Dobrynin, S.N. Evtushenko, A.A. Domrachev, Yu.N. Andriyashin, V.P. Kupriyanovsky, Avdeenko T.V. made a great contribution to the "digital economy" theory as well

Now there is no single definition of the concept of "digital economy". According to analysts Gartner, the digital economy - is the creation, consumption and management of value associated with digital products, services and assets in organizations. Analysts at Boston Consulting Group believe that the digital economy is the use of online-based innovative digital technologies by all participants in the economic system, from individuals to large companies and states. "Markets based on digital technologies that facilitate trade in goods and services through e-commerce," - the definition given by the OECD (Organization for Economic Cooperation and Development). The World Bank considers that "the digital economy is a new paradigm of accelerated economic development."

The governmental program "is based on the premise that the digital economy is an economic activity, which key production factor is data in digital form." There are no other analogs or generally accepted definitions, despite a sufficient data array and official documents on the digital economy that define trends, forms, methods and mechanisms of management. Most often, the digital economy is perceived as an object of strategic management. "The Development Strategy of the Information Society in the Russian Federation for 2017-2030", which is the basement for government's program for the digitalization of the economy, provides a close but more detailed definition: "The digital economy is an economic activity, in which key factor of production is data in digital form. Its processed large volumes and usage of the results of analysis, compared to traditional forms of management, can significantly improve the efficiency of various types of production, technology, equipment, storage, sale, delivery of goods and services " (Digital Transformation Program, 2016).

In some works, it is noted that the digital economy is one of the evolutionary forms of manifestation of the new economy. Consequently, as a "form of the form", the digital economy contains not only a set of signs of a new economy, but also contains a number of distinctive aspects that characterize the qualitative certainty of the digital economy. Along with the emergence of new laws and trends that did not occur in the "industrial" economy, new content of traditional economic postulates drawn attention. It is combined and interconnected with digital technologies, manifest themselves in a new way. Under the influence of scientific, technical and economic progress, there are significant changes in the seemingly canonical rules of a market economy, business rules, in new manifestations of traditional economic principles and laws. For example, the emergence and development of global electronic networks, computers, software, digital technologies, electronic products and services radically change the content, ratio and value of the following concepts in the new economy: material (material) and non-material (non-material), geography and distance, space and time, use value (utility) and cost, quantity and quality, competition and consumer preference, mediation and logistics, human capital and ethics and business, transactions and performance evaluation, sellers and buyers behavior, new relations of producers and consumers, marketing and sales technologies, etc.

It is also worth to be noted that together with creation and rapid development of Internet companies in developed countries, and especially in the USA, a new market of Internet services, products, services, service providers, etc., is emerging and transforms traditional spheres of the economy. Therefore, it is important to distinguish the Internet economy and the digital economy in the narrow sense: the digital economy is the economy of digital technologies, products and services of Internet companies and firms in the information society. In the broad sense of the word: digital economy is a new information economy, an economy of enterprises of any industry, operating in a global electronic network using digital technology format, and having a number of distinctive features compared to the so-called "industrial" economy, mainly corresponding to the 3rd, 4th technological structure.

The advantages of the digital economy, in the opinion of N. ??Negroponte, could be: the lack of physical weight of products, which is replaced by information volume, lower resource costs for the production of electronic goods, a much smaller area occupied by products, as well as almost instant movement of goods through the Internet (Umaev, 2017).

Figure 2: Definition of digital transformation

Based on the available research results in the topic, we can offer the following definition of the subject area of the digital transformation: the digital transformation is a system set of economic relations regarding the production, distribution, exchange and consumption of goods and services of the techno-digital form of existence. Digital transformation defines the maximum satisfaction of the needs of individuals through the use of information technology and digital infrastructure (see Figure 2). A feature of the digital economy is to increase the efficiency of interaction between all participants in the process of creating, distributing and exchanging goods and services. The basis of this transformation should be a digital environment that meets the needs of producers and consumers in their interaction. The purpose of these changes is the steady development of all sectors of the economy and competitive improvement of companies, and improvement of the quality of life.

Chapter 2. Methodology and Approach

Data collected from the Eurostat and the Russtat databases. They are the results of responses to a questionnaire on the use of ICT and e-commerce in enterprises (Eurostat, 2017). All data refer exclusively to enterprises of the production sector in accordance with the statistical classification of economic activities in the European Community (NACE - Nomenclature statistical information on economic activities of the European Community, Rev.2) (Eurostat, 2008) for companies with 10 or more employees. According to NACE Rev.2, manufacturing involves a wide range of activities, including the production of food, textiles, pharmaceuticals, equipment, etc. The measure is the proportion of these enterprises that recognized the presence of the element. Information for 2017 was available for all variables used, with the exception of enterprises that have an ERP software package for exchanging information between different functional areas and enterprises. If the particular variable was missing for a country, the proxy server was determined by means of hierarchical cluster analysis. Polish information was used to supplement Bulgaria's missing information on high-level CC services procurement (accounting applications, CRM software, computing power) and analyze big data from portable device geolocation (bd_geo) and Croatia's missing information on enterprises with ERP software package for information exchange between different functional areas (ERP). The missing value in Germany for purchasing services with high CC level (accounting applications, CRM software, computing power) (advcloud) has been replaced by Croatian. For countries where information was missing for more than two variables, no changes were made. As a result, for Belgium there is no information on any of the variables, and there is no information on the use of big data for Ireland, Greece, Cyprus, Latvia and Austria. Therefore, these six countries were excluded from the analysis.

A summary of the variables used is provided below:

mobInt - mobile connection to the internet for business use to use dedicated business software applications (Kagerman, Wahlster, Helbig, 2013; Hermann, Pentek, Otto, 2016)

speed - the maximum contracted download speed of the fastest fixed internet connection is at least 100 Mb/s (Smit, Kreutzer, Moeller, Carlberg, 2016; Hermann, et.al, 2016)

erp - enterprises who have ERP software package to share information between different functional areas (Smit, et al., 2016; Brettel, Friederichsen, Keller, Rosenberg, 2014)

intBP - enterprises whose business processes are automatically linked to those of their suppliers and/or customers (Hofmann & Rьsch, 2017; Brettel, et al., 2014)

tInvS - enterprises sending only paper invoices B2BG (Mithas, Tafti, Mitchell, 2013; Brettel, et al., 2014)

advcloud - buy high CC services (accounting software applications, CRM software, computing power) (Smit, et al., 2016; hermann, et al., 2016; Brettel, et al., 2014; Moeuf, Pellerin, Lamouri, Tamayo-Giraldo, Barbaray, 2017; Pedone & Mezgar, 2018; Wang, Zhang, Liu, Li, Tang, 2017)

bd_anysrc - enterprises analyzing big data from any data source (Hermann, et al., 2016; Santos, Oliveira, Andrade, Lima, Costa, Martinho, 2017; Wang, Wan, Zhang, Li, 2016)

bd_sensors - analyze own big data from enterprise's smart devices or sensors (Hermann, et al., 2016; Santos, Oliveira, Andrade, Lima, Costa, Martinho, 2017; Wang, Wan, Zhang, Li, 2016)

bd_geo - analyze big data from geolocation of portable devices

The final data set is presented in table 1.

Table 1: Values of data

Source: Eurostat, Russtat

During the collection of data was observed a large data scatter. For example, in Bulgaria only 12% of industrial enterprises have mobile access to the Internet for business purposes, while in Denmark mobile access to the Internet in enterprises is 56%. We would also like to note that in more than half of the countries less than 10% of industrial enterprises have a download speed of over 100 MB under the contract, but in USA, Denmark, Sweden, Finland and Luxembourg the level is above 20%. In addition, in most countries a low percentage of CC services. With regard to the use of ERP, the level of use of this system is quite high from a minimum of 11% in Latvia to a maximum of 60% in Finland and Sweden, with seven countries representing more than 50%. Regarding variables related to the processing and use of big data, the use of this type of analytics is usually quite low (less than 10%) among manufacturing companies, but when collecting data it was noted that in some countries more than 10% (but less than 20%) of enterprises work with big data from any source. Only in the Netherlands, 10% use big data collected from smart devices, and in all other countries less than 10% of manufacturers work with this technology to get information from mobile or geolocation devices.

2.2 Factor analysis