How the digital innovation market works in Kazakhstan

Many startups consider Kazakhstan as a promising platform for business development. Trends tell about the specifics of the local market for digital products

Local companies are interested in innovation, but there is a nuance

The number of Kazakhstani corporations that are ready to attract digital competencies from outside is growing every year. PwC’s annual survey showed that in 2021 the number of companies in Kazakhstan willing to outsource technology partners increased by 20% year-on-year.

Nevertheless, there is still an attitude inside the market that outsourcing and outstaffing is expensive, time-consuming and inconvenient, while using in-house resources is cheaper and more reliable. At the same time, not every company is able to provide employees with guaranteed development and projects that contribute to this. If the team is constantly “stewing in its own juice”, this entails a low competitiveness of the entire digital market.

For this reason, one of the main tasks of digital partners of large businesses in Kazakhstan is to change the mindset of customers in the local market and show the effect of attracting digital competencies from outside. We are talking, among other things, about saving resources: an internal team can work on a project for two or three years, while an outsource partner with established operational processes and a product approach will do the same amount of work in one year.

What prevents the creation of breakthrough digital products in Kazakhstan

There are three main barriers that slow down the “quantum leap” of the local market.

What initiatives are already on the market

Despite these barriers, Kazakhstan remains the fastest growing IT market in Central Asia. On the one hand, due to the high share of state participation (for example, the Digital Kazakhstan program), on the other hand, due to the initiatives of commercial companies, as a rule, from the banking and telecom sectors.

Here are some examples of how businesses drive the development of the digital market:

• creation of innovative divisions in companies (BTS Digital, Magnum Tech);
• creation of corporate venture funds (BTS Digital Ventures, Most Ventures);
• investing and buying startups (Kaspi’s purchase of the Santufei startup and the launch of the Kaspi Travel service, Freedom Holding Corp’s investment in the CEREBRA startup);
• creation of IT academies and business incubators at universities (KBTU Startup Incubator, NURIS, Halyk Academy based on KBTU and MUIT, Beeline Kazakhstan Digithon, Nazarbayev University, Astana IT University);
• holding hackathons and competitions for startups (Halyk FinTech Hackathon, Baiterek Hackathon, BI Innovations, competitions based on Astana Hub);
• creation of business incubators at universities (KBTU Startup Incubator, NURIS, Halyk Academy on the basis of KBTU and MUIT);
• holding specialized events (Mobile Banking Day Almaty from red_mad_robot central asia and Markswebb).

Prospects for the Kazakhstani market

Creating an innovative product or service in Kazakhstan can be associated with a number of difficulties: personnel, bureaucratic, financial, infrastructural and others. However, business sees great potential in digital partnerships with entrepreneurs and start-ups, especially in “basic” areas: medicine, government services, banking, day-to-day retail – consumer “pains” in these areas need to be addressed first. turn.

In medicine, for example, start-ups such as CEREBRA, a product that helps to detect signs of a stroke in a person, are emerging. Kazakhstani state services are ready to openly share data with the commercial market and create lifestyle products in the field of fintech with functionality wider than the usual banking ones.

Fintech remains the driver of the digital innovation market in Kazakhstan, as well as throughout the world. Local banks offer the same services and services at the same price. That is why innovations that create a new user experience become a competitive advantage in the market. Now, in banking applications, in addition to the usual functionality, you can even get a driver’s license, child benefit or pension.

The local market of Kazakhstan has great potential for business for several reasons:

• the state supports the development of digital innovations in every possible way – for example, it provides free access to open data;
• Due to the narrowing of the CIS market, foreign venture investors are gradually attracting to Kazakhstan – interest in local startups is growing more and more.

Growth is observed throughout the market: it is estimated at more than $ 1,35 billion, large business is growing at 20% per year. The IT-specialist market is literally overheating – salaries have been growing by 40-60% in the last two years, while the number of personnel is growing by only 25-30%. However, for corporate innovation to become a standard business practice, leading companies must systematically work with open innovation tools, setting the trend for the rest of the market.