Today, Saint Petersburg is one of the largest software development centers in Russia and slow but sure drifts towards becoming the national Silicon Valley. Sure, because it possesses all the qualities necessary for this; slow, due to the brain-drain and lack of support from the government.
From the business point of view, St. Petersburg, compared with other provincial towns, possesses three serious advantages. First, it is an exceptional, by Moscow standards, inexpensiveness of personnel, office space to rent and technical servicing. Second, it is the traditionally high level of training the experts, who are annually made available to the city by several respected liberal and technical higher education establishments. Third, it is a wonderful infrastructure: in contrast to Novosibirsk or Yekaterinburg, where the number of qualified and undemanding workers is also not small, you can get to St. Petersburg from Moscow in as little as two hours.
One result of the lucky combination of these three factors is that several tens of companies, whose specialization is software development, have emerged in St. Petersburg in recent years. As estimated by McKinsey, the turnover of this market in 1999 made up about $40 mln; Prof. Andrey Terekhov, Head of the Chair of Software Engineering, Dept. of Mathematics and Mechanics, St. Petersburg State University and Director of the "Lanit-Tercom" Company, calculates that in two to three years this figure can grow up to several hundred million. Though McKinsey's predictions are more cautious, they also expect the market to be annually growing by 50% at the minimum.
The range of developments, in which the programmers are involved in St. Petersburg, is very wide. Here they construct everything - from systems that manage industrial processes or telephone exchanges to corporate document flow systems and solutions for e-commerce.
The demand is not the less heterogeneous: some St. Petersburg companies work for large corporate customers, some service the Western market, some deal with the Russian Internet. Besides, there are several American companies in the city, as well as about ten affiliates of Moscow firms, who for economy reasons prefer to move their programming out of the limits of the capital.
The most impressive proportion of the programmers in St. Petersburg are engaged in the offshore programming area: this is a system when the headquarters and client office of the company are placed, say, in Miami, while the technical personnel is in Russia. Such model allows to receive orders for software development in one hemisphere and fulfill them in the other. Because one-year employment of a programmer costs no less than $60,000 in New York and $80,000 in the Silicon Valley, while in St. Petersburg an average expert receives about $500 a month, this organization of the production process enables to reduce the cost price of the software at least 5-7 times. According to Valentin Makarov, President of the "Fort Ross" Consortium, which unites 12 software companies of St. Petersburg, about one half of all the offshore orders comes to the U. S. A., while the other half - to Germany, Great Britain, Switzerland and other European countries. It is usually little start-ups that become the clients of Russian programmers, because these firms are saving money and cannot afford hiring Western developers. To search for clients, software companies gather together in unions ("Fort Ross" is one of such associations).
Concerning the companies, who are oriented at large corporate clients, there are comparatively not so many of them in St. Petersburg, because the state structures and industrial giants like "LUKoil" are usually located in Moscow and prefer to deal with developers from there. Even those of such companies, who are here, virtually do not search for new customers, aiming all their efforts at technically servicing the old ones - mainly, banks, plants and municipal economy enterprises.
Despite the fact that the local software development industry is highly active, migration of experts still remains one of the misfortunes of St. Petersburg. Although actually no unemployment in the high-technology area is now perceptible, each year hundreds of programmers leave the city in search for a better fortune. "Many Moscow corporations prefer to draw classy specialists from St. Pete to the capital, in order to have them at hand in the head office, rather than use them in the remote mode", - believes Anatoliy Levenchuk, Director of the Moscow software company Techinvestlab.com. However, it is felt that the main "black hole" for personnel from St. Petersburg is not Moscow, but America, which constantly increases its state entry quota for experts in information technologies. Little can keep a first-class programmer from moving to Santa Clara, if he is offered a salary of $120,000 a year by the Alcatel company.
Nevertheless, the brain-drain does not worry the managers of the local companies too much: these losses are compensated by the major universities of the city - St. Petersburg State, Precise Mechanics and Optics, Polytechnical and Electrical Engineering. They annually supply several hundred of young technical experts, who, for a number of reasons, so far are not going to leave St. Petersburg: their post-graduate study is not finished, or their family status does not let them leave, or, after all, they just don't want to.
Andrey Terekhov thinks that it simply does not make sense for graduates without a working record to migrate to America: on one hand, it is not them, but experienced specialists, that are awaited there; on the other, they are risking to leave behind themselves "an unpleasant impression". It is not always profitable for youngsters to move to Moscow as well: though the average salary of programmers in Moscow is about $200 more, this difference is virtually eliminated by the higher cost of living there.
Therefore, despite the drain-away of middle-aged experts, the city still retains good chances to deserve the title of Russian Silicon Valley, by virtue of the young blood. "I'm getting an impression that there is a fresh technological wind blowing from St. Petersburg, that many new developments come from there, many interesting business ideas arise there", - says Levenchuk. - "As for the future, I see two ways that the events may take: either St. Petersburg turns into an informal metropolis of programming (as it was once the metropolis of music), or it becomes a mighty manufacturer of personnel for Moscow." Which of these two ways St. Petersburg will prefer, depends not in the least on the state, with whose support the market of servicing the new economy could easily position itself as one of the key industries of the city.
DANIIL DUGAYEV
Translated from "Commersant Daily" , 1 September 2000
Posted on: 08/17/02
Source: http://www.tepkom.ru/eng/press/aboutus/commers010900.htm
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