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By Dmitry Loschinin
Offshore Outsourcing: Why Russia?
Feb. 20, 2006
Russia is about to become one of the most popular destinations for offshore software development. According to Gartner Group, the Russian market size for exported IT services approached $500 million in 2004 and is growing at a rate in excess of 25 percent per year.
So why should European and American firms choose Russia? The reasons are simple: Russia is the best location for technically challenging tasks; it has a huge pool of high-tech and engineering talent built upon one of the finest education systems in the world; it has a very strong home-grown IT sector that is receiving strong government support; it has both cultural and geographical proximity to the West; and it has a distinct cost of labor advantage. Let's take a look at each of these factors in more detail.
Boeing, Dell, Deutsche Bank, Alcatel, Reuters, London Stock Exchange and Siemens are examples of more than 250 global companies active in Russia-based offshore software development. Why are these giants turning to Russia rather than elsewhere?
Initially companies outsourced routine tasks such as mainframe maintenance and Y2K fixes. Western firms found it smart to hand tedious code work over to Asian firms. The next phase involved low- to medium-level software development tasks. Nowadays, however, more complex Oracle, Microsoft .Net and Java programming are in heavy demand. And Russia is the best place to find such resources.
Russia has gained a well-earned reputation for application development, data management, web application/design, content management, e-commerce, ERP, office applications, education, entertainment and middleware. Additional areas of strength include custom R&D and design work, embedded systems development, specialized testing,...