Software industry eyes international market
Fledgling firms are reporting success, and insiders are optimistic.
Oct 11, 2001
Russia's software firms are looking for a unique selling point that could offer success abroad as the rapidly growing industry takes its first steps in an international market largely dominated by India.
"Companies here have not yet found a method to sell their products in Western markets," said Anatoly Gaverdovsky, vice president of research and development at Vested Development Inc., a Russian software developer that has a sales infrastructure in the United States.
He added that on the production side, Russia is no different from India, except for the fact that there are fewer professional programmers. But Russian software developers are still lagging far behind India's specialists, who are responsible for about 80 to 90 percent of the international market of offshore software development.
"In Russia, we're still looking for our own recipe, for an effective way to market to Western customers," he said.
"I don't think that Russia already has a full-fledged market of offshore software development," added Igor Kulgan, general director of Exteria, a company that actively works in the field, with incomes from offshore sales amounting to about 70 percent of the total last year.
"Every company in this business has its own tools, technology, solutions and product developed for its specific customers, and introducing its own products with a view to create demand for it would be a difficult and costly task," he added.
"The market is still in its formative stages," said Natalia Kasperskya, head of the Kaspersky Laboratory, a respected developer of anti-virus tools. "Shares of any of the players are no bigger than 3 percent".
Meanwhile, the value of the Russian offshore software development market is estimated to have reached between $120 million and $180 million a year. According to experts, outsourcing orders from foreign companies account for about 90 percent of Russia's total software exports.
The country's offshore software industry began to develop just a few years ago, with a number of software developers winning minor orders, mainly from U.S. firms.
"Historically, most of our clients have been located in the United States," said Dmitry Loshchinin, general director of the Luxoft software company, which is part of the IBS group. "The first wave of our clients was the biggest U.S. corporations, such as Boeing, IBM and Citibank," he said, adding that the geography of his company's customer base is expanding, with a significant proportion of new orders coming from Europe.
Although there are thousands of Russian programmers working on orders from overseas companies from their apartments or tiny offices, it is the larger firms that matter in the industry. And for them, the winning strategy is to manufacture at home and sell abroad.
"We develop software here and sell it in the States," said Vested Developments Inc.'s Gaverdov-sky. Vested has an office in the United States which is staffed by local employees and is responsible for sales in the West.
According to Gaverdovsky, U.S. marketing specialists have a better understanding of Western culture and business practices, so they are more effective than their Russian colleagues.
Luxoft also has U.S. offices in Seattle and Washington D.C., according to Loshchinin.
Orders from abroad have become more complex, industry insiders say. "While previously only simple and routine projects were outsourced to us, now Russian software developers are actively implementing orders in the areas of application integration, e-commerce and resource management systems," said Loshchinin.
"There are many wanted solutions and products on the market," he added. "But solutions for specific sectors - developed with the knowledge of the industry - have the best prospects."
Despite recent downward trends in the international IT markets, the offshore software market has every chance of developing, insiders say. "We're growing despite what's happening in the United States," Gaverdovsky said. "Software outsourcing will grow despite any downward trends in the market because it gives companies a real economy".
"Companies here have not yet found a method to sell their products in Western markets," said Anatoly Gaverdovsky, vice president of research and development at Vested Development Inc., a Russian software developer that has a sales infrastructure in the United States.
He added that on the production side, Russia is no different from India, except for the fact that there are fewer professional programmers. But Russian software developers are still lagging far behind India's specialists, who are responsible for about 80 to 90 percent of the international market of offshore software development.
"In Russia, we're still looking for our own recipe, for an effective way to market to Western customers," he said.
"I don't think that Russia already has a full-fledged market of offshore software development," added Igor Kulgan, general director of Exteria, a company that actively works in the field, with incomes from offshore sales amounting to about 70 percent of the total last year.
"Every company in this business has its own tools, technology, solutions and product developed for its specific customers, and introducing its own products with a view to create demand for it would be a difficult and costly task," he added.
"The market is still in its formative stages," said Natalia Kasperskya, head of the Kaspersky Laboratory, a respected developer of anti-virus tools. "Shares of any of the players are no bigger than 3 percent".
Meanwhile, the value of the Russian offshore software development market is estimated to have reached between $120 million and $180 million a year. According to experts, outsourcing orders from foreign companies account for about 90 percent of Russia's total software exports.
The country's offshore software industry began to develop just a few years ago, with a number of software developers winning minor orders, mainly from U.S. firms.
"Historically, most of our clients have been located in the United States," said Dmitry Loshchinin, general director of the Luxoft software company, which is part of the IBS group. "The first wave of our clients was the biggest U.S. corporations, such as Boeing, IBM and Citibank," he said, adding that the geography of his company's customer base is expanding, with a significant proportion of new orders coming from Europe.
Although there are thousands of Russian programmers working on orders from overseas companies from their apartments or tiny offices, it is the larger firms that matter in the industry. And for them, the winning strategy is to manufacture at home and sell abroad.
"We develop software here and sell it in the States," said Vested Developments Inc.'s Gaverdov-sky. Vested has an office in the United States which is staffed by local employees and is responsible for sales in the West.
According to Gaverdovsky, U.S. marketing specialists have a better understanding of Western culture and business practices, so they are more effective than their Russian colleagues.
Luxoft also has U.S. offices in Seattle and Washington D.C., according to Loshchinin.
Orders from abroad have become more complex, industry insiders say. "While previously only simple and routine projects were outsourced to us, now Russian software developers are actively implementing orders in the areas of application integration, e-commerce and resource management systems," said Loshchinin.
"There are many wanted solutions and products on the market," he added. "But solutions for specific sectors - developed with the knowledge of the industry - have the best prospects."
Despite recent downward trends in the international IT markets, the offshore software market has every chance of developing, insiders say. "We're growing despite what's happening in the United States," Gaverdovsky said. "Software outsourcing will grow despite any downward trends in the market because it gives companies a real economy".