It has become a kind of leitmotiv, something like a mantra: At any given IT or Internet-related gathering in Moscow, these days, you’ll end up bumping into people who will tell you they want to be "like the Indians."
It would even seem there is a small number of Russian companies that have actually succeeded in becoming "Indians." Which makes the aspiring Indians’ desire even more ardent.
Those Indians have very little to do with the plains or buffaloes, somewhat more with India, where the phenomenon originated and is now in full swing, and everything with Western IT and Internet companies seeking to outsource part of their manufacturing processes to much cheaper locations.
The idea is for local — in this case, Russian — companies is to do off-shore work for Western businesses engaged in cost-killing.
That can go from simple program writing and data copying to designing and setting up a Website, or even IT counseling and testing the quality of products elaborated in the West.
And according to observers, the potential for Russia in that line of business is quite formidable.
"Although programming training in India and Russia is comparable in quality, India’s exports in that field for 1999 amounted to $4 billion, whereas Russia’s were a mere $70 million," said Alexander Andreev, an IT analyst with investment banking company Brunswick Warburg, "so the prospects for Russia are huge."
Russia’s advantage is that programmers there have excellent fundamental scientific knowledge. Cost effectiveness is also an important issue, most Russian entrepreneurs, backed by some analysts, said.
Of course, estimations of price differences with the same services offered in the West vary significantly, depending on whom you talk to. Alexey Lukutin, chief operating officer of Amphora Quality Technologies, a quality control company that tests IT and Internet products for its inceptors, said his company’s services were "at least twice cheaper than Western equivalents."
Pavel Cherkashin, CEO of Internet solution provider Actis Systems, reckoned his company can implement a Web solution for 70 to 30 percent of what it would cost in the West, depending on cases.
However, most specialists agree it is questionable whether Russia can really compete with India on a pure cost basis. And some wouldn’t stretch the comparison with that country either.
"Russians don’t have as good networks in the USA as Indians do, so that Russia isn’t yet a back office for American companies, as India is," said Mark Sanor, director of corporate finance at Arthur Andersen’s Moscow office.
"Also, whereas Indians can work in huge software shops, doing simple program coding en masse, Russians work in relatively small groups."
Most observers agree Russia’s real asset is the value for money it can provide and the creativity of its technicians. "Russians are more conceptual," Andreev said. So that if some Russian companies actually do such simple tasks as program coding, they are at their best on more sophisticated projects.
A company like Data Arts, which, in addition to program writing, does more and more development of Internet related software applications, is a good illustration of that point.
With the exception of Data Art, which, CEO Eugene Goland said has been doing offshore programming for five years, most Russian companies have launched in that trade fairly recently. One of the leaders on the market, IBS, started in 1999, and Cherkashin said Actis Systems has been working with American companies for a year and a half.
And the number of companies joining that trend is set to explode. Significantly, one of the Russian Internet companies that may have the largest staff, Sibintek, oil giant Yukos’ Internet arm, is planning to launch itself in the offshore business too.
According to Sibintek’s vice-president Igor Vasileiades, it has started retraining some of Yukos’ oil engineers into program writing and hopes to have its first orders from foreign companies in about three months.
Vassileiades said Sibintek already has 1,100 trained people, 600 of whom are "highly qualified specialists," and plans to train 1,000 more this year.
However, some observers are a bit skeptical of the effort, saying it mostly has to do with Yukos’ social plan aimed at retraining oil staff that are about to be made redundant in the oil sector. Vassileiades didn’t deny this, but said Sibintek had been able to create a 260-page test Website in three days.
Meanwhile, some Russian companies that have gotten experienced in the offshore business have started to do their own internal outsourcing, so as to lower their own costs as much as possible.
Actis System, for instance, although Moscow-based, has its programming done in Novosibirsk, its design in Kiev, Ukraine, and the early stages in some projects in Almaty, in Kazakstan.
Finally, observers say, what will be crucial in making Russia a successful place for offshore program writing and Internet solutions developing will be the extent to which Russian companies can improve on their marketing to get enough clients.
And although Data Art does have an office in New York City and another one in London, Eugene Goland did say that was an area where his company definitely has to improve.
Posted on: 08/19/02
Source: http://www.russiajournal.com/weekly/pdfs/69_13.pdf
(E-mail dot.ru at erich@russiajournal.com)
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