Using exports to build the IT industry
The expectation that Russia will begin to take advantage of new technology, and that the demand for IT will grow sharply, is unlikely to come true in the near future.
Jun 14, 2002
The expectation that Russia will begin to take advantage of new technology, and that the demand for IT will grow sharply, is unlikely to come true in the near future. Instead, a brain drain will continue from Russia to the West, where there is an acute need for highly qualified IT specialists.
A U.S. IT association's statistics show there were about 900,000 IT specialist vacancies in the United States in 2001, and 425,000 remain unfilled. In this case, as in others, the only thing Russia can offer to the West as a contribution to high technology is brains. Leading Russian IT- sector businessmen confirm this situation exists.
At an international conference on IT market problems, held in Moscow, ISB head Anatoly Karachinsky stated that only exports of Russian software can finance the further development of Russian IT. But this leads to the question of how reliable is the the Russian programming base.
Alexander Andreyev of Brunswick UBS Warburg said the high competitiveness and qualifications of Russian IT specialists, and the low prices of programs and services, will push Russia into the group of leading exporters of software and information services.
Some companies have already achieved this: IBS has a department of some 100 people, dedicated to the design of software for Boeing and IBM, while Aktis and Reksoft receive up to 30 percent of their profits from foreign clients. Statistics show there are nearly one million IT specialists in Russia today, 7,000 of whom work for American companies.
Other statistics presented by Yan Doumanov, director of CEI-Intermatrix, at an April conference on cooperation opportunities between American corporations and Russian programmers, show the amount of offshore programming in Russia grows at a rate of 50-60 percent a year, and growth is expected to continue at that rate over the next three to five years.
In 1999, the sum of all offshore programming contracts amounted to $70 million, while by the year 2003 it's expected to exceed $500 million.
The first attempt at a serious offshore programming market study, conducted by EDC/Market Visio, tried to evaluate both the software itself and the offshore segment of the business in general. A survey of market participants showed orders of software in Russia were valued at $154 million in 2002 and $128 million in 2001.
Of those, 40.7 percent of orders were produced for foreign companies, a value of about $50 million. Other data suggests the Russian offshore programming market is worth an estimated $50 million to $250 million. By comparison, Irish programmers accounted for $6 billion in 2000, while Indian programmers generated $4 billion.
Some experts warn Russian programmers' entry into foreign markets will not be easy, as Russia is coming into this area late and will struggle to gain ground back from India. Instead, they say Russians should focus on creating technologies and products to sell in the West at discounted prices. Russian programmers could also succeed in selling specialized programs, considering their high professional and educational level in the exact sciences. There is a great deal of unique expertise in Russia in creating science-based high tech products, on par with international standards.
Market Visio/EDC General Director Sergei Makedonsky said a yearly growth rate of 20 percent is positive, but lower than the expected 60 percent. As a result, company officials have reconsidered last year's forecast for market development by 2005, and now anticipate that Russian offshore programmers will earn $350 million, rather than $500 million.
Russian programmers believe the change in projected income is the economic recession in the United States and the IT-market crisis in Europe.
No matter what the circumstances, Russian programmers are ready to challenge their competitors in the programming-outsourcing market. First of all, they united efforts under the umbrella of the Association of Software Developers, created in September 2001.
The association aims to develop the IT outsourcing market, assist in the development of member companies, and support Russian programmers in gaining headway in the global market. The association has already launched its Silicon Taiga program, which is oriented toward the domestic development of high technology and its introduction to the global market. As those behind the program emphasize, one of its main goals is to attract investment into software design in Russia.
The author is an independent expert on IT
A U.S. IT association's statistics show there were about 900,000 IT specialist vacancies in the United States in 2001, and 425,000 remain unfilled. In this case, as in others, the only thing Russia can offer to the West as a contribution to high technology is brains. Leading Russian IT- sector businessmen confirm this situation exists.
At an international conference on IT market problems, held in Moscow, ISB head Anatoly Karachinsky stated that only exports of Russian software can finance the further development of Russian IT. But this leads to the question of how reliable is the the Russian programming base.
Alexander Andreyev of Brunswick UBS Warburg said the high competitiveness and qualifications of Russian IT specialists, and the low prices of programs and services, will push Russia into the group of leading exporters of software and information services.
Some companies have already achieved this: IBS has a department of some 100 people, dedicated to the design of software for Boeing and IBM, while Aktis and Reksoft receive up to 30 percent of their profits from foreign clients. Statistics show there are nearly one million IT specialists in Russia today, 7,000 of whom work for American companies.
Other statistics presented by Yan Doumanov, director of CEI-Intermatrix, at an April conference on cooperation opportunities between American corporations and Russian programmers, show the amount of offshore programming in Russia grows at a rate of 50-60 percent a year, and growth is expected to continue at that rate over the next three to five years.
In 1999, the sum of all offshore programming contracts amounted to $70 million, while by the year 2003 it's expected to exceed $500 million.
The first attempt at a serious offshore programming market study, conducted by EDC/Market Visio, tried to evaluate both the software itself and the offshore segment of the business in general. A survey of market participants showed orders of software in Russia were valued at $154 million in 2002 and $128 million in 2001.
Of those, 40.7 percent of orders were produced for foreign companies, a value of about $50 million. Other data suggests the Russian offshore programming market is worth an estimated $50 million to $250 million. By comparison, Irish programmers accounted for $6 billion in 2000, while Indian programmers generated $4 billion.
Some experts warn Russian programmers' entry into foreign markets will not be easy, as Russia is coming into this area late and will struggle to gain ground back from India. Instead, they say Russians should focus on creating technologies and products to sell in the West at discounted prices. Russian programmers could also succeed in selling specialized programs, considering their high professional and educational level in the exact sciences. There is a great deal of unique expertise in Russia in creating science-based high tech products, on par with international standards.
Market Visio/EDC General Director Sergei Makedonsky said a yearly growth rate of 20 percent is positive, but lower than the expected 60 percent. As a result, company officials have reconsidered last year's forecast for market development by 2005, and now anticipate that Russian offshore programmers will earn $350 million, rather than $500 million.
Russian programmers believe the change in projected income is the economic recession in the United States and the IT-market crisis in Europe.
No matter what the circumstances, Russian programmers are ready to challenge their competitors in the programming-outsourcing market. First of all, they united efforts under the umbrella of the Association of Software Developers, created in September 2001.
The association aims to develop the IT outsourcing market, assist in the development of member companies, and support Russian programmers in gaining headway in the global market. The association has already launched its Silicon Taiga program, which is oriented toward the domestic development of high technology and its introduction to the global market. As those behind the program emphasize, one of its main goals is to attract investment into software design in Russia.
The author is an independent expert on IT