Russian IT Quarterly - Issue #14, January, 2008.
Choosing the best location to sell outsourcing services to, from Russia
Jan 23, 2008
Early December of each year is high season for the management - budget and strategy for next year(s) are being drafted, and Directors from the Board flock together to discuss and approve them. The management of software outsourcing companies is no exception. The same discussions on where to target the company's efforts in the future shake up meeting rooms and the question of prime locations to sell outsourcing services comes up second, if not first, in management talks.
I believe that the location issue for Russia-based IT outsourcers should be resolved in favour of Europe and I would like to devote this RIQ editorial to supporting this position.
Although the largest part of the outsourcing revenue pie is still eaten by the United States, it is easy to understand how inconvenient North-American orders should be for Russian technology firms (and vice versa). Totally different time zones and time-consuming travel are the first issues to come up. Add to that the internationalized US business culture, and it becomes clear that for US customers it is very hard to find a weighty argument to choose Russia over India for outsourcing.
Hence, the first and the most obvious "pro" item for choosing European markets over US and Asia. It is based on the fact that Russia is a nearshore location for European companies. This offers an array of attractions for prospective clients. Short traveling time allows for time savings. Close time zones mean smooth project management with easy communication. Cultural proximity - although impalpable an! d therefore immeasurable - is often mentioned in customer satisfaction surveys by European clients.
For a European company, cooperation with a Russian provider presents an alluring cost advantage when compared to expenses incurred in cooperation with nearshore providers from new EU member-states. On the other hand, enormous engineering labour pool in Russia undoubtedly beats that of alternative locations, both in EU and in lower-cost CIS countries.
The other good news for Russian software development providers is their excellent track record in Europe: Deutsche Bank, Nokia, TietoEnator, T-Mobile, T-Systems, and other respected clients, willingly speak about the success of their joint projects with Russian vendors. This positive past experience serves as a solid base for Russians, strengthening their positioning on European markets: hiring professional PR agencies, showcasing the services at Europe-wide events, etc.
The improved positioning of Russia-headquartered IT companies on the local mark! ets secures secondary benefits for them. Raised credibility among local job seekers eliminates the fear of working for a Russian employer, thus helping Russian outsourcers build up local front offices, staffed with people that literally speak the same language that their European customers do.
Sizeable compound outsourcing market in Europe (UK included) brings the promise of a wealth of revenue for Russian ESPs. According to TPI advisory firm, the demand in Europe jumped by 25 per cent in the first three quarters of 2007 to make it the strongest outsourcing geography. The Gartner Group analysts add that although spending on offshore services is three times higher in North America than in Western Europe, the gap is closing. The fact that the majority of the largest outsourcing deals in 2007 happened to be in Europe is a good sign of that there is an enormous opportunity for growth. The visible backlash of outsourcing to Asian countries is another plus to the! situation for offers from Russia.
If you need more arguments, try for yourself - Europe is well ready for outsourcing.
Reksoft RIQ, Issue 14, January 2008
I believe that the location issue for Russia-based IT outsourcers should be resolved in favour of Europe and I would like to devote this RIQ editorial to supporting this position.
Although the largest part of the outsourcing revenue pie is still eaten by the United States, it is easy to understand how inconvenient North-American orders should be for Russian technology firms (and vice versa). Totally different time zones and time-consuming travel are the first issues to come up. Add to that the internationalized US business culture, and it becomes clear that for US customers it is very hard to find a weighty argument to choose Russia over India for outsourcing.
Hence, the first and the most obvious "pro" item for choosing European markets over US and Asia. It is based on the fact that Russia is a nearshore location for European companies. This offers an array of attractions for prospective clients. Short traveling time allows for time savings. Close time zones mean smooth project management with easy communication. Cultural proximity - although impalpable an! d therefore immeasurable - is often mentioned in customer satisfaction surveys by European clients.
For a European company, cooperation with a Russian provider presents an alluring cost advantage when compared to expenses incurred in cooperation with nearshore providers from new EU member-states. On the other hand, enormous engineering labour pool in Russia undoubtedly beats that of alternative locations, both in EU and in lower-cost CIS countries.
The other good news for Russian software development providers is their excellent track record in Europe: Deutsche Bank, Nokia, TietoEnator, T-Mobile, T-Systems, and other respected clients, willingly speak about the success of their joint projects with Russian vendors. This positive past experience serves as a solid base for Russians, strengthening their positioning on European markets: hiring professional PR agencies, showcasing the services at Europe-wide events, etc.
The improved positioning of Russia-headquartered IT companies on the local mark! ets secures secondary benefits for them. Raised credibility among local job seekers eliminates the fear of working for a Russian employer, thus helping Russian outsourcers build up local front offices, staffed with people that literally speak the same language that their European customers do.
Sizeable compound outsourcing market in Europe (UK included) brings the promise of a wealth of revenue for Russian ESPs. According to TPI advisory firm, the demand in Europe jumped by 25 per cent in the first three quarters of 2007 to make it the strongest outsourcing geography. The Gartner Group analysts add that although spending on offshore services is three times higher in North America than in Western Europe, the gap is closing. The fact that the majority of the largest outsourcing deals in 2007 happened to be in Europe is a good sign of that there is an enormous opportunity for growth. The visible backlash of outsourcing to Asian countries is another plus to the! situation for offers from Russia.
If you need more arguments, try for yourself - Europe is well ready for outsourcing.
Reksoft RIQ, Issue 14, January 2008