Destination Russia
Within the last 15 years of its transition to the market economy, Russia has witnessed the creation of several new industrial branches. Software development as an industry in Russia was born in the 90s with hundreds of small businesses emerging...
Jul 02, 2005
Within the last 15 years of its transition to the market economy, Russia has witnessed the creation of several new industrial branches. Software development as an industry in Russia was born in the 90s with hundreds of small businesses emerging. Because the industry was completely neglected by the government, it was able to rely on exporting services as a source of revenue, rather than having to devote attention to complying with state orders. The software industry’s separation-from-state also forced its pioneers to study English, learn market rules and become largely integrated into the global market.
Geographical, historical and cultural links to Europe have facilitated Russia’s access to the European and American markets for software development outsourcing. The high technical qualifications and innovative approaches of Russian software developers and engineers were based upon Russia’s excellent educational system with its emphasis on mathematics and the physical sciences.
Some recent accomplishments in science and education include the Nobel Prize in Physics in 2001, and the Absolute World Championships in ACM International Programming Collegiate Contests in 2000-2001 and 2004. In 2004 three of the top ten winners of the ACM Contest were Russian universities.
More than 1.3 million people have been trained in software development in Russia in the last seven years. Only 70,000 people are currently employed by Russia’s IT industry, leaving a large oversupply of available labor.
The initial challenges that Russia’s software development industry faced in the early 90s in its effort to become an important destination for outsourcing were related to the small size of companies, poor marketing and poor English skills (as the people in the Soviet Union had been for so long behind an "Iron Curtain"). As the industry began to grow, the lack of governmental support also appeared as a stumbling block.
That proved not to be the case. These disadvantages have been largely overcome over the past few years as the industry has matured and specific training in skills that were initially lacking has increased.
As years progressed, there appeared dozens of companies of greater than 500 employees (in some cases employee headcount is in the 1000 to 1200 range) and several hundreds of small business with 30 to 300 engineers. A recent market study conducted by RUSSOFT and CNews showed a steady growth of Russian software exports, dominated by outsourcing of software development and software engineering.
The total export of software products and services has been growing at a rate of 40 to 50 percent a year for the last 3-4 years, and it is expected to reach $750 in 2004, according to RUSSOFT.
Moscow and St. Petersburg are dominating the market with more than half (51 percent) of these businesses. Another quarter of the industry is divided between 10 to 12 regional centers, such as Novosibirsk, Nizhniy Novgorod, Ufa, Tomsk, Ekaterinburg, Saratov, and others, leaving the remaining 25 percent to medium and small cities all across the country.
The country’s education system, and the mathematical skills and innovative approaches of its graduates, are helping to create what we see as a niche for Russian developers. Russia’s software industry provides R&D intensive solutions and complete sets of services and products for their customers. It prides itself on a "team spirit" that spans time zones, cultures, and national boundaries, to deliver new and effective solutions within cost parameters and on time.
The years from 2000 to 2003 were marked by revolutionary implementation of modern quality assurance in the leading Russian companies. The first ever certifications to CMMI Level 4 and Level 5 in Europe were achieved by Russian companies within these years under the leadership of RUSSOFT. Intensive activity in QA has been a vital element of Russian accession to the leading position in the field of CMMI certification in Europe as a whole (5 companies have been certified to SEI-CMMI Level 5 and Level 4).
And finally, the president and the government of Russia began to pay attention to this fast growing Industry. In 2004 an intensive dialogue between IT associations and the government led to adoption on November 18, of a "National Concept" toward IT Market development in Russia. The main directives include:
It has been well-publicized that Russian developers have a strong background in mission critical real-time systems, math modeling, scientific and military applications. There is less general awareness of the fact that from the days of the former Soviet Union, waves of Russian programmers have immigrated to the US and established themselves in the financial industry.
With the fall of the Soviet Union and the establishment of a free market economy, a significant amount of the financial knowledge base has been successfully transferred back to Russia. These IT expatriates took leading positions in IT outsourcing firms providing services for US and European clients.
A good number of Russian vendors such as Luxoft, EPAM Systems, IT Consulting International, Reksoft, DataArt, eStyle Software, InfoPulse, Leaves, FORS are notable examples of businesses with niche specialization in the financial industry. They provide services to leading Russian banks (such as Sberbank or Petrovsky Narodny Bank) and to Fortune 100 financial clients including global investment banks such as Deutsche Bank USA, Commerzbank and ABN AMRO. In addition, the recent economic boom in Russia has attracted major financial institutions around the globe to establish a local Russian presence.
These growth factors, coupled with recent government support, a solid educational system and a vast talent pool make Russia a logical destination for IT outsourcing in the financial industry.
Valentin Makarov is President of RUSSOFT Association, an association representing the largest and most technically competent software developing companies from Russia, Byelorussia and Ukraine, with headquarters in Saint Petersburg, Russia.
Geographical, historical and cultural links to Europe have facilitated Russia’s access to the European and American markets for software development outsourcing. The high technical qualifications and innovative approaches of Russian software developers and engineers were based upon Russia’s excellent educational system with its emphasis on mathematics and the physical sciences.
Some recent accomplishments in science and education include the Nobel Prize in Physics in 2001, and the Absolute World Championships in ACM International Programming Collegiate Contests in 2000-2001 and 2004. In 2004 three of the top ten winners of the ACM Contest were Russian universities.
More than 1.3 million people have been trained in software development in Russia in the last seven years. Only 70,000 people are currently employed by Russia’s IT industry, leaving a large oversupply of available labor.
The initial challenges that Russia’s software development industry faced in the early 90s in its effort to become an important destination for outsourcing were related to the small size of companies, poor marketing and poor English skills (as the people in the Soviet Union had been for so long behind an "Iron Curtain"). As the industry began to grow, the lack of governmental support also appeared as a stumbling block.
That proved not to be the case. These disadvantages have been largely overcome over the past few years as the industry has matured and specific training in skills that were initially lacking has increased.
As years progressed, there appeared dozens of companies of greater than 500 employees (in some cases employee headcount is in the 1000 to 1200 range) and several hundreds of small business with 30 to 300 engineers. A recent market study conducted by RUSSOFT and CNews showed a steady growth of Russian software exports, dominated by outsourcing of software development and software engineering.
The total export of software products and services has been growing at a rate of 40 to 50 percent a year for the last 3-4 years, and it is expected to reach $750 in 2004, according to RUSSOFT.
Moscow and St. Petersburg are dominating the market with more than half (51 percent) of these businesses. Another quarter of the industry is divided between 10 to 12 regional centers, such as Novosibirsk, Nizhniy Novgorod, Ufa, Tomsk, Ekaterinburg, Saratov, and others, leaving the remaining 25 percent to medium and small cities all across the country.
The country’s education system, and the mathematical skills and innovative approaches of its graduates, are helping to create what we see as a niche for Russian developers. Russia’s software industry provides R&D intensive solutions and complete sets of services and products for their customers. It prides itself on a "team spirit" that spans time zones, cultures, and national boundaries, to deliver new and effective solutions within cost parameters and on time.
The years from 2000 to 2003 were marked by revolutionary implementation of modern quality assurance in the leading Russian companies. The first ever certifications to CMMI Level 4 and Level 5 in Europe were achieved by Russian companies within these years under the leadership of RUSSOFT. Intensive activity in QA has been a vital element of Russian accession to the leading position in the field of CMMI certification in Europe as a whole (5 companies have been certified to SEI-CMMI Level 5 and Level 4).
And finally, the president and the government of Russia began to pay attention to this fast growing Industry. In 2004 an intensive dialogue between IT associations and the government led to adoption on November 18, of a "National Concept" toward IT Market development in Russia. The main directives include:
- Deregulation of IT exports
- Support for the international marketing of Russian IT companies and their QA certification
- Increased efforts to stimulate internal market growth
- Support for the creation of IT parks
- An easing of the tax burden on the industry; and increased state investment in infrastructure
- Creation of a state-owned investment fund for IT businesses
- The enhancement of the intellectual property system as it relates to IT.
It has been well-publicized that Russian developers have a strong background in mission critical real-time systems, math modeling, scientific and military applications. There is less general awareness of the fact that from the days of the former Soviet Union, waves of Russian programmers have immigrated to the US and established themselves in the financial industry.
With the fall of the Soviet Union and the establishment of a free market economy, a significant amount of the financial knowledge base has been successfully transferred back to Russia. These IT expatriates took leading positions in IT outsourcing firms providing services for US and European clients.
A good number of Russian vendors such as Luxoft, EPAM Systems, IT Consulting International, Reksoft, DataArt, eStyle Software, InfoPulse, Leaves, FORS are notable examples of businesses with niche specialization in the financial industry. They provide services to leading Russian banks (such as Sberbank or Petrovsky Narodny Bank) and to Fortune 100 financial clients including global investment banks such as Deutsche Bank USA, Commerzbank and ABN AMRO. In addition, the recent economic boom in Russia has attracted major financial institutions around the globe to establish a local Russian presence.
These growth factors, coupled with recent government support, a solid educational system and a vast talent pool make Russia a logical destination for IT outsourcing in the financial industry.
Valentin Makarov is President of RUSSOFT Association, an association representing the largest and most technically competent software developing companies from Russia, Byelorussia and Ukraine, with headquarters in Saint Petersburg, Russia.