German Media On Cooperation With Russian IT Companies

The Russian IT market is booming. Russia is set to become an attractive partner in Central and Eastern Europe owing to a growth rate of 25 to 30 percent, whilst it was selected to be a partner country of CeBIT, the greatest worldwide IT fair, in 2007. For this reason, in February of this year, the Karlsruhe Department of Economic Development, in association with BITKOM (German Association for Information Technology, Telecommunications and New Media), CLOE (Clusters linked over Europe), CyberForum Karlsruhe and RUSSOFT (Russian Software Developers Association), commissioned a study to ascertain the possibility and readiness for cooperation between both countries and, based on the findings of this study, develop a model approach which would pave the way for business contacts and support cross-border economic relations. The first positive results were already to be seen shortly after the conclusion of the study.

Evgeni Deryugin, Business Development Manager of Auriga, came from Moscow to Karlsruhe and the Technology Region to begin exploratory talks with potential cooperation partners in Germany. Auriga has been in the market for 15 years as a development service for high-tech software, with particular focus on the areas of system software, embedded systems and real-time systems. In Moscow’s development centre as well as in locations in the USA and France, Auriga presently employ a workforce of 240. Globally active companies such as IBM, Hewlett-Packard, Siemens, Toshiba and Dräger Medical Systems rank as some of Auriga’s most prominent customers. The visit programme included exchanging information with member firms in the CyberForum and a discussion with the CAS chairman of the board, Martin Hubschneider, at the Karlsruhe Technology Park.

‘We have drawn the attention of Russian IT companies to Karlsruhe and the Technology Region with our initiative unique in Germany. The visitors immediately appreciated the existing networks CyberForum and CLOE as well as the international business strategy of our IT companies. The first reactions from Russia already show that Karlsruhe is taken seriously as a door to the German IT market’, illustrated Manfred Groh, Bürgermeister in charge of economic affairs, who is exceedingly satisfied with the outcome of the initiative, for besides Auriga, further companies from Russia have already expressed their interest in information talks.

As a summary of the results, the director of the Department of Economic Development in Karlsruhe, Dr. Adolf Kopp, stated, ‘The study has proved that there is a large market potential in the IT domain which can be opened up through German-Russian cooperation – and that Karlsruhe is an excellent location for such transactions’.

Ewgenij Deryugin was convinced that ‘the initiative from Karlsruhe came at the right time’. He further stated that ‘the IT market in Russia shows an enormous dynamism and there are many companies which are interested in a cooperation with Germany as a strategic partner in Europe. Karlsruhe has led the way and I’m impressed by the IT potential of this area.’

Identifying new prospects, Martin Hubschneider, managing director of the CyberForum and chairman of the board of CAS Software AG, stated, ‘The business start up platform 'CyberForum' supports firms in their activities in Eastern Europe opening up the potential of this continually expanding market. CAS Software, too, valued the approach and the exchange that will help us to find out the chances of cooperation which can ultimately benefit both parties.’

‘The merit of this study is to direct the interest of German firms towards the possibility of becoming involved in the Russian IT market’, said Dr. Mathias Weber from BITKOM. ‘For this reason we have chosen Russia as partner country of BITKOM in 2007’.

"Markets of information technology: Russia and Germany" - primary results of the project

The study was commissioned in February 2006. It was based upon a survey among eleven Russian and ten German firms and institutions. Decision makers were asked to define the chances and risks of cooperation and to outline the necessary basic conditions and activities that they deem necessary to promote cross-border cooperation.

The results can be summarized as follows:

• There is an interest in cooperation. However, scepticism still prevails on the German side.
  
• No single firm from Russia would decline to cooperate with German companies. 82 percent of the Russian entrepreneurs questioned have already initiated cooperation with German companies. 45 percent have a technology transfer commitment in Germany (offshoring, co-production, licensing). For 33 percent the relationship concerns a trade partnership (import, export).
  
• Only two of the German firms questioned reported a successful experience in the Russian market (one of them selling products, the second producing in Russia). The number of "inexperienced" firms on the German side is higher: Five firms still haven’t considered this subject but given the opportunity, it is likely that they would cooperate in business with Russia.
  
• 70 percent of German firms and 64 percent of Russian firms consider offshoring/ outsourcing to be a starting point for further intensive cooperation between Germany and Russia taking into account the countries’ specific conditions. This could be the basis for the development of other cooperation forms, which should be arranged so as to promote a "mutual win-win situation" for the German as well as the Russian economy.
  
• The survey revealed that the challenges met most frequently by German companies when working with a Russian partner were inefficient administration, corruption, cultural and language difficulties, which strongly affect the development of bilateral cooperation. It is interesting to note that cultural and linguistic barriers are still of importance though in recent times the cultural proximity between Germany and Russia has been emphasised.
  
• Russian firms have stressed that the positive aspects and the opportunities provided through cost reduction and access to new markets far outweigh the existing disadvantages and problems. Regarding a list of overestimated disadvantages, the Russian firms questioned were in agreement: 91 percent of the firms were of the opinion that cultural and linguistic difficulties can be overcome by direct contact.
  
• A fifth of the German companies questioned aren’t able to find any reliable information which would be useful for their business planning. About three quarters of the questioned firms are looking for direct, reliable sources. On the Russian side the situation is similar.
  
• Poor networking: Even if a majority of German firms see a strong commitment in the Russian IT market as a great challenge promising large profits in the future, the intensity of cooperation remains on a low level.
• For further development more than the half of German firms (56 percent) need both a strong commitment from the Russian side as well as more support and business recommendations from the German side. Russian companies agree 100 % that they need more commitment from the German side to support their business operations in Germany.

Conclusions and Recommendations

• It is both possible and useful to initiate and to modify German-Russian economic relations through offshoring/outsourcing.
  
• To improve the partners’ ability to cooperate is the most effective way to attain international competitiveness. Emphasis was given to the following points:
  
• Offshoring/outsourcing as a means of innovation obviously carries risk and is expensive.
  
• Offshoring should be seen as a precondition for further cooperation in the area of innovation. Furthermore, against a backdrop of increasing international activity and competition in the field of research and development, it should serve as a way into foreign countries (Russia) for local firms (German companies) and enable them to secure their position within Germany.
  
• Innovation networking and the integrated cooperation resulting fro