The Russians are coming!
"The Russians are coming!" The phrase smacks of cliche, yet it's the obvious way to headline a discussion of Russia's offshore computer-programming industry.
Oct 05, 2002
Column on Russian software outsourcing from the New York Times syndicate
"The Russians are coming!" The phrase smacks of cliche, yet it's the obvious way to headline a discussion of Russia's offshore computer-programming industry.
Indeed, cliches are the Russians' biggest problem as they attempt to sell their services outside their homeland. Potential customers tend to think of the Russian mafia, Soviet spies, deteriorating space vehicles and military buildups, not of brilliant coders or e-commerce development.
If they do think of programmers, they are more likely to imagine hackers than the group of earnest entrepreneurs who visited the United States (Boston and Seattle) earlier this month to promote not just their services but their very existence. Unlike Russia's sleazy oligarchs, these people did not get any handouts from the state; they built their own companies with the honest labor of their own minds.
The problems the Russians face are the problems of any group of newcomers in this globalizing world, but more extreme. They have a great deal to offer, given their numbers about 5,000 to 8,000professional programmers currently, but a source population of about a million scientists and engineers. They also have disadvantages, including a negative image worldwide, a lack of commercial experience and a government that often interferes more than it helps.
Russians are also extreme as techies brilliant at code, not so good at marketing. "We thought all we had to do was be good and people would recognize us," said Dmitry Loschinin, managing director of Luxoft, one of Russia's leading outsourcers. But things are changing rapidly. The industry has looked hard at the example of India and its $6.2 billion of programming revenues last year - to the extent that one of the group's presentations was titled "Can Russia Challenge India's Dominance in Offshore Software Development?"
The politically correct answer was, of course, no (who wants to tweak the competition?). Instead, said Ron Lewin of the American Chamber of Commerce in Moscow (www.amcham.ru), the Russian software industry is going in its own direction, more toward problem-solving than simply standard coding projects.
This is a little bit of marketing, but also generally valid. The Russians are trying to turn their deficiencies into advantages: Russians (as a generalization) are sometimes perceived as a little too arrogant. Many Russian programmers are not "mere' programmers; they are mathematicians and scientists who turned to software to make a living. Though they lack project- (and people-) management skills, they excel at complex, large-scale technical problems. They don't simply want to follow directions; they want to be creative. The idea is that they can be very creative at solving tough problems, so their customers can put those solutions to practical use.
Of course, the timing is awkward. The Indians have just lowered their projections for next year's revenues to about $8.5 billion, still an increase, but less than expected earlier. It would not be helpful for the Russians to go in with the message that they're replacing existing workers (Indians or local) just as the world economy is starting to go soft.
Instead, the message has to be, "We'll help your company be more successful so it can keep its people and grow." (What's wrong with this world that clever people willing to work can be perceived as a threat?)
But how DOES a company from a country outside the technology mainstream establish itself? Many Russians are envious of the Indians, whose government is actively involved in promoting the industry both with domestic tax breaks and with overseas promotion. But the more sophisticated people often echo Natalya Kasperskaya of Kaspersky Labs: "[We say to the government,] Please don't help us! The less help the better!"
In Russia, when some companies get tax breaks, others do not - and the focus moves to qualifying for government support, honestly or otherwise, rather than to earning customer satisfaction. And while the government may "help," the bureaucrats administering its policies are more likely to "take." Outside Russia, moreover, the Russian government's stamp of approval may not be much of a sales aid!
Instead, Russian companies are beginning to focus on accreditation - getting certified by various standards bodies for such internationally recognized credentials as ISO 9000 (www.iso9000.org). Such credentials aren't a guarantee of satisfaction but they are a sign that the company has gone to the trouble and expense of training its people and getting them tested. Instead of claiming they can do anything and learning on the job, the companies are developing specialties - customer relationship management, wireless and telecom billing systems, document management and workflow.
But by far the most effective sales tool is a good reference account. Traditionally, users of outsourcing often kept it secret, either to hide a strategic advantage from competitors or out of embarrassment at using foreign labor - especially Russian labor. That's where the real news came on the Russian road show - sponsorship of the Seattle meeting by the Boeing Corp. Boeing is a big customer both of Luxoft (owned by IBS; I am on the board) and of Parallel Graphics, another Russian software company, which specializes in graphics and compression.
While there was some grumbling at the exposure those two got, the industry is learning something: There is enough business for all, and they will only succeed by working together on such events even as they compete for business one-on-one with customers. Boeing's willingness to co-sponsor the event means more than any government's certification ever could. Unfortunately, the news was overshadowed by the return of the US aircrew to nearby Whidbey Island, but that, too, was one more reminder that the world is global.
The Seattle meeting was also sponsored by the Foundation for Russian American Economic Cooperation (www.fraec.org) and various other groups.
In the end, Boeing pitched its partnerships not as buying cheap code from Russia, but as its own increasing globalization. Much of the discussion was not about globalization per se, but about bridging cultural differences, about being clear in communication. And perhaps it was also about the cultural gulf between business and technology that is also global.
Alexei Pajitnov, who wrote the game Tetris more than a decade ago when he still lived in Russia (he has since come to the US to work for Microsoft), drew a laugh with his comments: "Yes, it's true that communication is good, and usually more communication is better. But sometimes there's too MUCH communication. The programmers get all this e-mail, and they don't know what to do with it. Does it need an answer, or can they just delete it? They get all these messages, and they get confused."
Perhaps one rule of communication is not just to send messages, but to make sure they can be understood.
The overall message is that the Russian vendors' problems are not new, but just more extreme - a negative image, communication difficulties, no branding, no differentiation, poor marketing. The Russians once had so much oil and gas they never needed to learn how to sell their brains. But if they now learn to use their technical skills productively, they will have liberated a resource that's renewable in a way that oil and gas are not. That applies not only to the Russians, but to any country that wants to be part of the new economy.
"The Russians are coming!" The phrase smacks of cliche, yet it's the obvious way to headline a discussion of Russia's offshore computer-programming industry.
Indeed, cliches are the Russians' biggest problem as they attempt to sell their services outside their homeland. Potential customers tend to think of the Russian mafia, Soviet spies, deteriorating space vehicles and military buildups, not of brilliant coders or e-commerce development.
If they do think of programmers, they are more likely to imagine hackers than the group of earnest entrepreneurs who visited the United States (Boston and Seattle) earlier this month to promote not just their services but their very existence. Unlike Russia's sleazy oligarchs, these people did not get any handouts from the state; they built their own companies with the honest labor of their own minds.
The problems the Russians face are the problems of any group of newcomers in this globalizing world, but more extreme. They have a great deal to offer, given their numbers about 5,000 to 8,000professional programmers currently, but a source population of about a million scientists and engineers. They also have disadvantages, including a negative image worldwide, a lack of commercial experience and a government that often interferes more than it helps.
Russians are also extreme as techies brilliant at code, not so good at marketing. "We thought all we had to do was be good and people would recognize us," said Dmitry Loschinin, managing director of Luxoft, one of Russia's leading outsourcers. But things are changing rapidly. The industry has looked hard at the example of India and its $6.2 billion of programming revenues last year - to the extent that one of the group's presentations was titled "Can Russia Challenge India's Dominance in Offshore Software Development?"
The politically correct answer was, of course, no (who wants to tweak the competition?). Instead, said Ron Lewin of the American Chamber of Commerce in Moscow (www.amcham.ru), the Russian software industry is going in its own direction, more toward problem-solving than simply standard coding projects.
This is a little bit of marketing, but also generally valid. The Russians are trying to turn their deficiencies into advantages: Russians (as a generalization) are sometimes perceived as a little too arrogant. Many Russian programmers are not "mere' programmers; they are mathematicians and scientists who turned to software to make a living. Though they lack project- (and people-) management skills, they excel at complex, large-scale technical problems. They don't simply want to follow directions; they want to be creative. The idea is that they can be very creative at solving tough problems, so their customers can put those solutions to practical use.
Of course, the timing is awkward. The Indians have just lowered their projections for next year's revenues to about $8.5 billion, still an increase, but less than expected earlier. It would not be helpful for the Russians to go in with the message that they're replacing existing workers (Indians or local) just as the world economy is starting to go soft.
Instead, the message has to be, "We'll help your company be more successful so it can keep its people and grow." (What's wrong with this world that clever people willing to work can be perceived as a threat?)
But how DOES a company from a country outside the technology mainstream establish itself? Many Russians are envious of the Indians, whose government is actively involved in promoting the industry both with domestic tax breaks and with overseas promotion. But the more sophisticated people often echo Natalya Kasperskaya of Kaspersky Labs: "[We say to the government,] Please don't help us! The less help the better!"
In Russia, when some companies get tax breaks, others do not - and the focus moves to qualifying for government support, honestly or otherwise, rather than to earning customer satisfaction. And while the government may "help," the bureaucrats administering its policies are more likely to "take." Outside Russia, moreover, the Russian government's stamp of approval may not be much of a sales aid!
Instead, Russian companies are beginning to focus on accreditation - getting certified by various standards bodies for such internationally recognized credentials as ISO 9000 (www.iso9000.org). Such credentials aren't a guarantee of satisfaction but they are a sign that the company has gone to the trouble and expense of training its people and getting them tested. Instead of claiming they can do anything and learning on the job, the companies are developing specialties - customer relationship management, wireless and telecom billing systems, document management and workflow.
But by far the most effective sales tool is a good reference account. Traditionally, users of outsourcing often kept it secret, either to hide a strategic advantage from competitors or out of embarrassment at using foreign labor - especially Russian labor. That's where the real news came on the Russian road show - sponsorship of the Seattle meeting by the Boeing Corp. Boeing is a big customer both of Luxoft (owned by IBS; I am on the board) and of Parallel Graphics, another Russian software company, which specializes in graphics and compression.
While there was some grumbling at the exposure those two got, the industry is learning something: There is enough business for all, and they will only succeed by working together on such events even as they compete for business one-on-one with customers. Boeing's willingness to co-sponsor the event means more than any government's certification ever could. Unfortunately, the news was overshadowed by the return of the US aircrew to nearby Whidbey Island, but that, too, was one more reminder that the world is global.
The Seattle meeting was also sponsored by the Foundation for Russian American Economic Cooperation (www.fraec.org) and various other groups.
In the end, Boeing pitched its partnerships not as buying cheap code from Russia, but as its own increasing globalization. Much of the discussion was not about globalization per se, but about bridging cultural differences, about being clear in communication. And perhaps it was also about the cultural gulf between business and technology that is also global.
Alexei Pajitnov, who wrote the game Tetris more than a decade ago when he still lived in Russia (he has since come to the US to work for Microsoft), drew a laugh with his comments: "Yes, it's true that communication is good, and usually more communication is better. But sometimes there's too MUCH communication. The programmers get all this e-mail, and they don't know what to do with it. Does it need an answer, or can they just delete it? They get all these messages, and they get confused."
Perhaps one rule of communication is not just to send messages, but to make sure they can be understood.
The overall message is that the Russian vendors' problems are not new, but just more extreme - a negative image, communication difficulties, no branding, no differentiation, poor marketing. The Russians once had so much oil and gas they never needed to learn how to sell their brains. But if they now learn to use their technical skills productively, they will have liberated a resource that's renewable in a way that oil and gas are not. That applies not only to the Russians, but to any country that wants to be part of the new economy.