Interview: Andrei Terekhov
LANIT-TERCOM
Andrei Terekhov: "There will likely be a continued personnel shortage in the next few years, but we definitely won't be suffocated by a lack of professionals."
Russian software companies are feeling the effects of a shortage of qualified personnel more keenly with every passing year. Whether the labor market situation will continue to worse or whether we will see a breakthrough in the near future is the main theme of this interview with Andrei Terekhov, general director of Lanit-Terkom and head of the system programming department at St. Petersburg State University's math and mechanics faculty. Interview by Computerworld's Dmitry Zhelvitsky.
Because of a shortage of professionals we are seeing a slowdown in income growth from software exports. Will it grind to a halt in the near future?
The personnel problem is getting worse and likely affects sectoral growth rates. The labor market is overheated. Even programmers with an average level of training have started to pull in high salaries, and this is dangerous for everyone, including professionals themselves, since they lose any stimulus for personal growth, which could reflect in their career in the near future. However, there have been positive changes in sectoral personnel training that leave room to hope that in a few years time the labor market situation will change radically. Major Russian companies, international corporations and universities have started to work closely together this year to significantly improve the quality of students' education and increase the number of well-trained programmers.
The St. Petersburg State University math and mechanics faculty already has a targeted personnel training system. Fulltime university staff give the basic knowledge under the classical university program, while practical matters are taken care of by what we call "industry education." Lanit-Terkom professionals read lectures and oversee student projects. As a rule, no real products are produced during such projects; the main aim is education, but sometimes we get interesting results.
We explain to students what product management is, and about planning, accounting, budgeting, teamwork, drafting reports, specification, and risk assessment - in short, everything that is essential for working with foreign clients. The company pays for its employees to do the teaching. Some students become Lanit-Terkom employees in their fourth [and final] year at university.
Because we have limited human resources, I asked former students who had become company managers and colleagues to go and work with students if they needed employees. Many of them responded. Not all sections of the faculty train programmers, but more than half of graduates are programmers. The informatics section takes in 160 people every year. From September 1, 2006, they will start training people in software engineering. Thanks to this, the intake will swell by another 50 people. It's only a drop in the ocean, but progress is obvious.
Some might say that schooling in Russia isn't what it used to be, say, 10 years ago. There is another problem - a demographic hole, which is leading to fewer school-leavers.
Many people talk about this, but we aren't seeing this problem. Petersburg attracts school-leavers from other towns across Russia and the CIS. So competition to get into the faculty is growing, and the basic knowledge of students is still very high. This suits me fine.
Even so, just over 200 graduates is not much, if thousands of programmers are needed on just the Petersburg market.
We're not the only ones doing personnel training. Our experience in this area is not unique. There are interesting approaches being taken at other universities in Petersburg and other cities.
In Moscow, the Lanit holding found a good solution to training qualified personnel in a relatively short time period. The holding's management recently created a group of software companies (the Outsourcing Group), of which Lanit-Terkom is part. Because of this, there arose a need for mass training of qualified programmers. As a result, the Lanit Network Academy, which is also part of the holding, organized a two-year training program for people with good but uncalled-for technical knowledge, together with Moscow State University's higher math and cybernetics faculty. Students get a full second higher education, and quickly become qualified programmers.
We plan to do the same in Peterhof with the Petersburg State University's math and mechanics faculty. A preliminary agreement has already been struck. Other companies have similar educational schemes. Training like this, which involves a second higher education, can lead to a substantial reduction in pressure on the labor market in the next few years.
So there's no reason for panic - yet. There will likely be a continued personnel shortage in the next few years, but we definitely won't be suffocated by a lack of professionals.
In the regions, salaries are significantly lower than in Petersburg and Moscow. Would it make sense for companies to set up subsidiaries there, where the labor market is not so overheated?
In most cases, the low salaries are commensurate with the qualification levels of software developers there. Nevertheless, there are definitely substantial personnel reserves in the region. The universities of Perm, Izhevsk, Saratov, and Barnaul all do well at student world programming championships. Champions and prize-winners at prestigious student competitions can't produce fair weather on the labor market, but a poor university would be unlikely to have trained them.
So there is some base there. If efforts are made, then the qualifications of programmers in the regions can be pulled up to Moscow and Petersburg levels. And it seems these efforts are already being made. At the annual Teaching IT in Russia conference (www.it-education.ru) there were a number of interesting reports by representatives of regional companies and universities regarding training of programmers. This was not the case two or three years ago - my suggestions then got a hostile reception. Everything changes very quickly.
Apart from programmers, which other professionals do Russian software companies need?
We need good marketing specialists. Possibly even more than pure programmers. In our company of 300 people, only one employee has an economics education. This is very little. India gets export income of $20 billion of the back of outsourcing with not very highly qualified programmers - it's mainly to do with good marketing.
Is the opening in Russia of international development centers a good thing or a bad thing for the sector?
It's both, but there are more plusses. On the one hand, as a company director I don't like it when these centers poach my qualified professionals, in whose training I have invested time and money. But on the other hand, we maintain permanent contacts with people who have started to work at major global IT companies without leaving Russia. Through them we find out about new achievements, technologies and trends in our sphere.
Thanks to the work in Petersburg of international development centers, the programming level has risen noticeably. Previously, we were still clever, but we were stewing in our own juice, which held our development back. Some things have been reinvented, although they were known about abroad a long time ago.
In addition, foreign corporations through their Petersburg subsidiaries are involved in personnel training, sponsor universities, and create educational classes. One of them used to engage in outright personnel theft, but it is changing its policy, and intends to get into programmer education. Contact with the practices of leading IT companies is very important for students.
In large part thanks to international development centers, the brain-drain out of the country has almost stopped. This also reflects back favorably on the sector. It's possible that experienced programmers from these companies will start coming over to Russian companies.
Exports of boxed products can be somewhat more profitable for the country and for individual companies than software development services. Why are there so few boxed/license companies in Russia?
It is indeed possible to get rich quick off the back of developing programming products for export. Russian professionals can do anything. They've already developed a lot of good products - but after they've gone abroad. I would love to develop this side of things at my company. But to develop boxed products that will be in demand in other countries you have to know what's in demand in those countries. Unfortunately, we don't have enough necessary information on foreign markets.
In addition, Russian programmers aren't motivated enough to develop the box/license model. If they get a decent wage, they often don't look for ways to earn much more. But the Americans are dead set on it, which is why they're better at developing new programming products.
Nevertheless, our company is making some attempts - one of our employees is already developing simple programming products and selling them abroad.
What support do you want from the state?
For Lanit-Terkom, the most serious problem is infrastructure (in the broad sense). We need good conditions tobe able to live and work in Peterhof, which is a town with the status of a suburb of Petersburg. This means the roads, communications, tap water, and security. All of this is very important. Some things are being done, but in Petersburg the infrastructure is still much better.
Secondly, personnel training. And thirdly, changes to the tax system. The State Duma is currently considering a draft law to introduce a simplified tax regime for software companies that get over 85% of their income from exports. If the changes go through, our life will become easier. But I don't understand why exporters are being singled out. Software companies oriented to the domestic market have the same problems. And their activity is no less significant for Russia.
You could rant and rage about officials for ever. But you have to admit that the state is gradually taking an interest in the sector. Infrastructure is getting better, and new modern educational standards are appearing.
What do you think of state financing to build technoparks?
The technopark planned for St. Petersburg Telecommunications University is unlikely to affect the software sector at all. Most likely, they'll build a "palace" - if they build it, of course - and house major foreign telecoms companies there. The university has virtually nothing to do with programmer training.
Will there be any changes in how intensively different programming languages are used?
If Java has been popular in recent years, then I think the .NET platform will come out on top in the near future, although many professionals would disagree.
What expectations do you have for Lanit-Terkom and for the whole sector?
I hope we can maintain sustainable growth. You can't boost turnover by 200% in one year. It just doesn't happen. I am looking to seal contracts for permanent servicing. This is very convenient both for us and the client, and makes is possible to plan and forecast development.
