Far Reaching Designs
After his visit to Bangalore in 2004, inspired by the impressive results of the transformed Indian economy, Vladimir Putin instructed the government to enact measures that would create favorable conditions for exporting IT services through entrepreneurship and investment in non-energy related research and development.
As a result, a number of government projects have been planned such as the Federal Agency for IT Exports Development and Investment Fund for Technologies and Innovations. International IT firms participate as co-investors, and some British and American financial institutions representatives who invest in IT and know the Russian market well are ready to make financial contributions.
Importantly, Russian software exports are exempt from VAT payments, whereas Forrester predicts some problems for Indian companies in the near future: The tax-free status of software firms in India comes to an end in 2009, and there is a powerful political coalition that plans to oppose the renewal of such a regime.
Another incentive is the development of industrial techno parks in the areas of the cities with largely unused human resources and scientific potential. As a result, 19,000 jobs are to be created by 2008, and 75,000 by 2011. Such parks shall be set up all over Russia — in Moscow, St. Petersburg, Tyumen, Nizhny Novgorod, Kaluga and in the Novosibirsk and Tatarstan regions.
Credibility Witnessed
Recently, a Gartner analyst commented that it could take years for Russia to overcome the perception of being a difficult place to conduct business. A closer look at the situation, however, suggests that it’s not that risky to partner with ex-Soviets.
A recent report by the American Chamber of Commerce in Russia, for instance, states, “2006 proved to be one of the most successful years for Russia over the last 16 years.” Ninety two percent of U.S. companies in Russia believe that continued commercial engagement with Russia is positive for American business and 86% believe that Russia’s upcoming membership in the WTO will bring new opportunities for them.
World business leaders like General Motors, Toyota and Ikea seem to understand this well, and Russia is now enjoying a foreign direct investment upsurge, with $17 billion entering the country in 2006. “In 2006, IBM’s business in Russia grew by over 20%, and in the most recent quarter (Q4 2006), IBM’s growth in Russia exceeded 38% – faster than in China, India or Brazil,” says Kirill Korniliev, Country General Manager, IBM East Europe/Asia.
Russian providers deliver high-end, technically complex projects. Moreover, American organizations often perceive Russia as being a closer cultural fit than India, China, and the Philippines. Many customers like Consumer Aware (a company affiliated with Blue Cross Blue Shield of Minnesota) have established stable relationships with local providers such as EPAM Systems. “The EPAM team have been phenomenal at capturing our needs into detailed requirements,” says Patricia Ball, VP, Product Development and Management, Consumer Aware. “They helped us think about things we hadn’t thought of and the product is so much better as a result,” she adds.
