At the Gartner Outsourcing Summit in Dallas in March 2007, it was reconfirmed that IT offshoring is no longer as India-centric as it was before. By 2012, India’s dominant position will be significantly diluted by effective alternative destinations, the so-called challengers. Given that cost reduction is no longer the most powerful incentive to go offshore, the market repartition may be explained primarily by the need of customer companies for certain business drivers, specific expertise and niche skills, as well as follow-the-sun delivery.
The challengers’ group currently includes the Philippines (9%), Canada (8%), Brazil (8%) and Mexico (4%), whereas India, China and Russia make the leading trinity. Eastern Europe, too, is making its presence known as an outsourcing destination, for both IT and BPO services.
Growth Catalysts
The fact that the total value of Russia’s IT market has grown 25 times (from $550 million to $13.6 billion) over the last seven years shows that Russia is ready to lead. The country’s IT export-oriented outsourcing industry grew nearly the same fold up to $1.3 billion at present, with a $5.8 billion forecast by 2009 and $10 billion by 2010, says IDC.
Russia is respected for its complex software engineering capabilities. A 2006 study by the FCREUE, the Haas School of Business and the University of California concluded, “In terms of education and experience with complex software development tasks, Russian programmers are likely to outrank all others.”
Another study by Ernst & Young places Russia on top of several outsourcing locations in terms of skills and training of its IT workforce (See Table).
Despite being almost 80% smaller by population, Russia produces the same 200,000 graduates capable of entering the IT sector as India, according to Microsoft Research, and 20 times more scientists per capita, according to Forrester.
Another key consideration for companies seeking offshore partners is employee attrition rate. Currently, Russian IT outsourcing providers can boast three to four percent attrition rate versus India’s over 30%.
| Quality of Workforce: Russia on Top |
| Country Skills & Training |
| Russia A+ |
| India A |
| Israel A |
| China B |
| Ireland B |
| Singapore B |
| Malaysia C |
| Mexico C |
| Phillippines C |
| Source: PRTM (Pittiglio Rabin Todd McGrath), Ernst & Young |
| Selecting a Local Provider |
|
Though the Russian IT industry has been growing fast, it is still pretty young, and many emerging providers are inexperienced and not known abroad. So, it is critical that customers visit a provider’s office or delivery center. This allows establishing personal contact with the possible provider, get acquainted with its workflow, facilities, etc. They must also ask for client references.
Moreover, with dozens of newborn providers emerging each year in Russia, mid-size and large market players seek merger opportunities to gain more weight. 2006 and 2007 have seen several deals, in particular Exigen Services merger with StarSoft Development Labs; Bulgaria-based Stone Computers joining IBA Group; and EPAM Systems acquisition of VDI.
|
