Moscow

Moscow is the capital of Russia, its largest city and Russia's major financial, industrial and scientific center. With a total population of more than 12 mln people, Moscow is among the three largest European capitals. It’s the most developed and dynamic Russian city, with great opportunities and challenges for business, but with a rather expensive infrastructure and high cost of living.

Moscow-based offshore software development companies have strong positions on the market and we estimate that approximately 35 % of all the income from offshore software development is generated in Moscow.

Certain domains for Moscow vertically focused providers can be identified as: billing systems, embedded systems, information security, real-time systems, PDA programming, banking software (especially for local customers), speech recognition and scientific software. Almost every provider states that it develops/ installs ERP, CRM, SCM, MRP, MRPII and various eCommerce systems. This is explained by the fact that Russian clients, due to financial reasons and peculiarities of tax and accounting rules, prefer local providers for such purposes. The aforementioned domains usually do not entail deep specialization in a given industry (like ERP for the FMCG sector) and providers still have wide opportunities for the further specialization and for moving up in the value chain.

The city's software sector is fueled by a substantial scientific base. Moscow higher education institutions occupy a very strong position in the world scientific and educational scene. Attracting the best students from the whole of Russia, Moscow's elite Engineering and Physics Institute, Bauman State Technical University, Moscow State University, Moscow Institute of Physics and Technology have a reputation for turning out top-class specialists. International IT-majors often create educational centers on the base of Moscow institutes to get access to talent as soon as possible. For example, The Moscow Technical University of Communications and Informatics supports training centers from Alcatel, Ericsson and Cisco. The total number of specialists in IT-fields who graduate every year is approximately 6000. In addition, approximately 18000 graduates in various engineering fields which have rather strong background in IT can be engaged as programmers every year.

Although total demand for software developers is satisfied with the supply of local educational institutions, the industry has to compete with domestic-oriented IT-companies on the labor market. This fact forces OSD companies to open distant branches in other cities of Russia and to resort to the 3rd party outsourcing.

International markets where Moscow providers are active include the USA, Germany, United Kingdom, Switzerland, Norway, France, Japan, Spain, Canada, South Korea, Poland, Netherlands. Moscow-based providers often have contracts with local governmental organizations, gas and oil giants, leading banks and other Russian blue chip companies.

Moscow possesses the most developed infrastructure in Russia, broad access to human IT-resources and a significant pool of large and reputed OSD providers. Up to 10 of them have total staff in excess of 400. Assuming that such companies often have diversified business (in adjacent domains like IT-consultancy and system integration) or belong to large IT-holdings, potential clients can benefit from their financial stability, economy of scale and advanced expertise. In addition, Moscow-based providers have a competitive advantage in terms of access to capital and contracts for the federal government and other domestic clients.

As has been already said, Moscow's infrastructure is the most developed, but is also the most expensive in Russia. High prices for office premises, which often exceed West European level, and high salaries in a tight labor market increase the costs generally. The infrastructure costs also impact on international businesspeople whose sojourn in Moscow can be very expensive in world tables of travel and entertainment.