Wednesday, May 18, 2011

Why Russia and Ukraine are Hot Sports for Financial Technology Outsourcing

During the last decade, the Central and Eastern European region has been steadily gaining momentum as a hot spot for IT services and software outsourcing. Such leading high-tech firms as Intel, Sun, IBM, and most recently Google have long recognized the region as a lucrative destination. What makes CEE attractive and why companies should put it on the list of preferred outsourcing hubs? In our today’s post we’ll try to analyze two countries which are particularly strong in software development – Eastern Europe’s Russia and Ukraine – in terms of financial technology outsourcing.

The basic criteria that both high-tech and financial firms look at when evaluating an outsourcing destination are largely the same: labor market, infrastructure, legal/IP protection, local risks and cultural/work ethics flavor. Although one important, but often overlooked, detail that make outsourcing for financial companies more difficult is industry-specific knowledge – in today’s fast-paced world, even outstanding technology skills are often not enough.

Industry-specific Knowledge. Russia’s profile as a financial center steadily rises. Many popular products, including portfolio systems, FIX engines, and analytical and risk management packages have been and continue to be developed in the region. While Russia does not yet have big-hit stories like i-flex, there is a surprising number of leading financial technology firms who do development in Russia, which is a positive trend showing the region’s vast potential. Ukraine is also changing its image attracting more and more global financial leaders like Barclays Capital as the latest example.

Labor Pool and Costs in Russia and Ukraine. CEE’s advantage is in its cost-effectiveness coupled at the same time with high standards of delivery. The main source for qualified IT labor is universities with 50-70% of the labor pool composed of computer science and math graduates. The best technical universities are based in cities that participated in the state-sponsored Soviet programs of cybernetics studies: in Russia such key centers are Moscow, St. Petersburg, Novosibirsk, Nizhniy Novgorod, Yekaterinburg, and Tomsk; in Ukraine the key centers are Kiev, Kharkov, and Lvov. Moscow tops the chart for labor costs, St. Petersburg follows closely with 10-20% lower rates. In more rural areas, average engineer salaries may drop as much as 50%. Ukrainian IT salaries are slightly lower than in Russia but vary by region.

Security and Intellectual Property Risks. Contrary to popular belief, Intellectual Property is highly respected among IT providers both in Russia and Ukraine. Both countries have recently upgraded their IP laws making them compatible with the Western tradition.

All in all, Russia and Ukraine are known as excellent R&D destinations for a good reason – superior technical talent and a can-do attitude for the most complicated tasks. Basic operational commodities, such as reasonable costs, reliable infrastructure, telecommunications and a legal system are now widely available throughout the region and attract more global financial firms.

Source: ITO News