IT Outsourcing during Recession Time

IT outsourcing providers are likely to grow their business in the economic slowdown, researchers have claimed. Analysis of US Department of Commerce data by Forrester Research found that the IT budgets of North American and European businesses are expected to increase by three per cent. Chief information officers are expected to focus on improving efficiency and helping to cut costs by increasing productivity, the report said.

"Sellers of communications equipment, software, and IT consulting and outsourcing services will see one or two quarters of declining revenues, but on average will still grow modestly in 2009," said Andrew Bartels, vice president at Forrester.

IT outsourcing firms are predicted to benefit from companies looking to reduce costs. "Whenever there's a downturn people outsource more, not less," says Gartner analyst Linda Cohen. "Organizations want to take costs out wherever they can. CFOs are pounding on their CIOs to just outsource it, just offshore it."

Source: ihotdesk

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New Jersey's Fastest Growing Firms

NJBIZ, state's weekly business journal, recently announced the fifty fastest growing companies. Companies were ranked based upon both dollar growth and percentage growth in revenues from 2005 through 2007.

EPAM Systems, Inc., an IT outsourcing leader with subs in Central and Eastern Europe, was ranked 5th on this year’s list. Founded and headquartered in Lawrenceville, EPAM made the New Jersey's Finest list for the 3rd consecutive year, showing sustainable business growth.

"We are proud to be among the winners of this prestigious award. EPAM's technology expertise and global presence that help companies outsource critical IT needs in a timely and cost-effective manner — in our case, worldwide — have served us, and our clients, well. Congratulations to all the winners! We are committed to continue bringing value to our clients, while growing EPAM Systems in this difficult business environment," stated Arkadiy Dobkin, EPAM President and CEO.

Source: epam.com

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Innovation and Growth: The Software 500

Innovations drive the software industry which has once again been proved by The Software 500, a revenue-based ranking of the world’s largest software and services suppliers targeting medium to large enterprises, their IT professionals, software developers and business managers involved in software and services purchasing. This year The Software 500 saw more than 100 new companies on the list for the first time, and the public/private company breakdown is 58% public and 42% private.

According to the results of the survey, the software industry continues to grow in total revenue, representing growth of 14.7% from the previous year ($451.8 billion in 2008 compared to $394 billion in 2007), while the total employee growth rate of 1.3% shows modest increase in comparison with 2007.

EPAM is proud to be named on the list (having advanced to the 190th place) along with 29 of its ISV clients, ranging from promising start-ups to global software leaders including three of the Top 10 honorees.

"We would like to congratulate our 29 ISV clients who made this year’s list. We extend our thanks for the opportunity we have enjoyed to grow together and to leverage each other’s strengths," commented Arkadiy Dobkin, EPAM’s President and CEO, noting: "We are also confident that many of our younger, but nevertheless innovative and fast growing clients will make the list in coming years."

Source: Softwaremag.com

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Russian IT and Outsourcing Industry to Keep Growing

According to “Russia IT and Outsourcing Industry Forecast to 2011”, a new research report by RNCOS, the Russian IT & outsourcing market has been growing at a rate of more than 20% since the past few years. Software spending has reported high growth rates; furthermore, it’s believed that it will continue to lead the growth patterns in the IT industry during 2008 to 2012.

The Russian software and services market will be mainly driven by the country's emergence as an IT Outsourcing (ITO) centre, thanks to its close proximity with Europe, similar time zone, and availability of high quality workforce at a competitive cost. The ITO market is undergoing phased transformation and is progressive from nascent stage to the development stage. Investments are also being phased in from both the government and private sector. The Russian government is increasing its IT investments in order to expand and develop the IT infrastructure in the country. Private sector investments are concentrated into opening of new software development centers in the country and also towards the expansion of the existing software development centers.

Source: RESEARCH AND MARKETS

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IT will Survive the Economic Recession

In one of its recent articles CIO Magazine listed the major reasons why technology industry will survive the economic recession. It looks quite comforting that despite all of the forecasts and instability, most IT industry experts are predicting that sales of software and services will be growing at a healthy clip again within the next 18 months.

IDC forecasts that instead of the 5.9 percent growth predicted prior to the financial crisis, the market will experience only a 2.6 percent increase in IT services outsourcing. Poland, Hungary, and Russia are listed among the countries with healthiest economies in Central and Eastern Europe, while the Middle East, Africa and Latin America are also catching up.

Furthermore, Forrester predicts IT outsourcing will grow around 5 percent in 2009 and 2010 as many companies will freeze new IT initiatives for the next three to six months and turn to IT outsourcing because it provides near-term cost reductions.

Similarly, Gartner's worst-case scenario for 2009 is that IT spending will increase 2.3 percent, according to a report released in mid-October. Overall, Gartner said global IT spending will reach $3.8 trillion in 2008, up from $3.15 trillion in 2007.

Source: CIO

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Wealth Management Technologies in Russia

In a report published by US financial management and advisory firm, Merrill Lynch, half of Europe’s millionaires are Russian and their number is growing twice as fast as the global rate. So with all this money is the Russian financial sector geared up for wealth management? Sergey Shelyagin, director at EPAM Systems, observes that although the Russian banks are quite keen to offer such services, overall, they noticeably yield to the longstanding experience, knowledge and efficiency of European banks in this sector (such as UBS and Credit Suisse).

Shelyagin, whose employer, EPAM Systems, assists banks and various financial institutions with the development of wealth management technologies, observes that the interest in wealth management in Russia manifests itself in a host of dedicated conferences and forums. The neighboring countries of Kazakhstan and Ukraine are also promising markets, as well as Belarus. Product development, software maintenance and support, and application testing are up to the word’s highest quality standards at these countries due to a well-established education system. ‘Unfortunately, it is hard to gauge this type of market, as it is quite closed and understandably reluctant to go public,’ says Shelyagin. ‘So, there is more speculation than fact.’

In terms of IT, Shelyagin observes that more and more wealth management organizations turn to the CRM systems that enable a holistic view of the customer’s capital structure and allow operating these funds more efficiently. The tendency with the CRM solutions is to acquire a third party system and then customize it under the entity’s own steam or outsource the customization to a specialist firm.

EPAM has experience in the field although the company is under obligation not to disclose the names of its wealth management customers. EPAM customized Pivotal CRM – a CRM product suite from a Canadian provider, CDC Software. ‘We changed about 50 per cent of the software, leaving the main engine – document flow – intact,’ says Shelyagin. ‘We also developed a portal application so that a client has access to his/her portfolio via a personalized window.’

Source: IBS Publishing

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Financial Recession and Outsourcing: Who is in the Saddle?

In one respect it has been a record couple of weeks for “outsourcing”. Around the world, governments and taxpayers have agreed to help ailing financial firms offload their toxic loans and resolve their liquidity worries. Banks are not the only ones hoping that this will help keep them afloat. The multi-billion-dollar outsourcing industry that runs computer systems and other things on companies’ behalf is keeping its fingers crossed, too. After all, financial giants have helped drive the industry’s stellar growth in the past few years. Now they threaten to undermine it.

But let’s look on the bright side as huge outsourcing deals involving banks are still being done, though the figures may be a bit lower compared to the previous year. Moreover, some outsourcing folk claim that the financial crisis could ultimately help their business, even though it threatens to harm it in the short term.

Furthermore, they say banking survivors that already use outside contractors will give them more to do as they cut costs. Banks that have hitherto shunned outsourcing will have to embrace it to protect their margins. And those with their own offshore activities will be more likely to turn them over to specialists.

Source:Economist.com

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Forewarned is Forearmed

“Forewarned is forearmed” is a golden rule of life. Outsourcing is no exception. If your outsourcing initiatives are successful or fail depends mostly on the way you perceive outsourcing and communicate with your outsourcing partner, In other words: set firm goals and keep your eyes wide open.

InfoWorld talked to industry experts to summarize their best advice, based on their own and their clients' experience. The interviewees were Larry Harding, founder and president of High Street Partners, a global consultancy that advises company on how to expand overseas; Steve Martin, a consultant and partner at Pace Harmon, half of whose business is focused on helping companies repair the damage from an outsourcing deal gone bad; Peter Geisheker, CEO of the Geisheker Group marketing firm; and Patrick Dolan, CEO of BPO Management Services.

Here are some of the pieces of advice shared by the experts:

1. Clear objectives. It's not that the best-laid plans often go astray; it's that they often aren't the best-laid plans in the first place.
There is a lack of experience in what outsourcing entails. Going global with a sales and marketing initiative, for example, has implications in finance as well as most of the company's other departments.

2. Compatibility. As the provider is going to become a part of your team be sure it’s compatible with your company’s culture, communication skills and working style.

3. Communication. Be very precise and detailed when explaining the project specifications. And as you are distributing IT functions outside the organization, be ready to coordinate and communicate with the customer all the time. You may even need to have an “ambassador” onsite just to see what is happening.

4. Expect to get what you pay for. If you put the outsourcer under too much cost pressure, it will cut corners too, such as using junior resources. Furthermore, never think of IT as a cost center; instead, consider it a value center. This will clarify what can be a candidate for outsourcing in the first place.

And never consider outsourcing as a means of saving corporate money and getting quality just for nothing - good execution flies out the window.

Source: InfoWorld

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Russia Contributes to Hi Tech Future

One of the criteria taken into account when choosing an outsourcing destination is governmental support in this country. In this respect Russia is becoming a tasty morsel: firstly, the creation of technoparks, then the increase of university places for students of technical branch of study, and now spending on technology-based research programs (about $25 billion) including the creation of two national research universities.

Prime Minister Vladimir Putin made this announcement as he spoke at a science and education conference. “We have never provided this sort of money for such purposes before,” Mr. Putin said. And as he stated the money would go toward various federal target Hi Tech programs from 2008-2010.

Putin also announced that a five-year program for basic research worth $10 billion had been approved, and that two national research universities would be created. “The successes of basic science do not provide the necessary dynamism and quality of applied research, and they in turn do not fully take into account the real needs of the economy,” Putin said.

Source: EETimes

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The Economist Intelligence Unit Reveals IT industry Competitiveness Index

According to a new study conducted by the Economist Intelligence Unit, the business information arm of The Economist Group, and sponsored by the Business Software Alliance (BSA), the United States continues to rank first in the annual global IT industry competitiveness index. However its score has gone down a bit compared to the previous year as many other countries are nipping at its heels.

The study assessed and compared the information technology industry environments of 66 economies to determine the extent to which they enable IT sector competitiveness. According to the Economist Intelligence Unit, six factors combine to create a sound environment for the IT sector, including: overall business environment, IT infrastructure, human capital, legal environment, research and development environment, and support for IT industry development.

Interesting to notice is that in this study Russia goes right after India and ranks higher than China.

Source: BSA

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IT Services: Russia Excels. Part 2

According to a recent study by French analytical company Pierre Audoin Consultants (PAC), the growth rate of Russian IT services market is a bit lower compared to IDC calculations and it wasn’t half as high as in 2006 and increased by 18% only (vs 47.2% according to IDC). However, PAC’s estimation of IT services market volume equals to that by IDC: approximately 3 billion euro or 4.4 billion dollars.

Nevertheless, PAC admits that even with 18% growth rate in 2007 Russian IT services market is the fastest growing in the world. Its growth surpasses IT services market growth rate in Western (6.6% in 2007) and even Eastern Europe (15% in 2007).

Local integrators who participated in IDC survey don’t question its correctness. “We share the opinion that our market shows robust growth”, assured Sergey Matsotsky, Chairman of the Board and General Director of the IBS Company. "Outrunning growth of this segment [IT services] is obvious”, confirmed his opinion Andrey Ageev, Technoserve A/S marketing department manager. He claims that the market will continue to grow at the rate of 20% annually in 3-5 years to come, especially taking into account underdevelopment of IT services sector in the Russian Federation compared to Western IT markets.

Sergey Matsotsky and CNews confirmed the possibility of IT services market growth: “IT services comprise more than 50% in the mature market, whereas lion's share of sales in emerging markets is hardware. This world experience shows that Russian IT services market has “the whole life ahead of it”. Although growth rate can decrease a bit in the short-term prospects due to current global financial fluctuations. Still, in the long-term plan the market can develop quite dynamically at the rate of 25-30% annually. Obviously, Russian economy demand for effective IT which secures competitiveness will increase”.

IDC forecasts that in 2009 IT services in Russia will reach 8 billion dollars and this segment will comprise 26%.

Source: CNews

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IT Services: Russia Excels. Part 1

According to IDC last year Russian IT services market showed robust growth and reached 4.4 billion dollars. As company analysts claim this growth rate is considered to be the highest in the world.

According to IDC’s classification IT services segment consists of systems integration (30.4% of the services market), consulting and custom application development (28.8%), hard- and software support and installation (18.7%), IT education and training (4.3%).

The largest IT services buyer is the financial sector (18.2%), governmental customers rank second (16.2%), and telecommunication companies are the third (13.1%).

The top 10 IT service providers according to IDC are IBS, Technoserve А/S, CROC, Optima, Lanit, CompuLink, I-Teco, HP, EPAM Systems and R-Style.

IDC states high growth rate three years in a row: in 2004 it increased by 26.3% to reach 1.9 billion dollars being the highest in Europe, and in 2006 the market reached 2.99 billion dollars with the increase by 23.2%.

Oil prices and the launch of large federal IT projects are among the main reasons of IT services segment growth in Russia according to Alexander Prochorov, analyst at IDC. Stable political situation and favorable investment climate foster IT market development as well.

Source: CNews

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Europe Outsources for Quality

A new study by Ernst & Young completed last month found that Europeans are becoming more open to outsourcing. Being one of the few research works analyzing Europe’s openness towards outsourcing, the study showed that outsourcing was being used by 70 per cent of the European firms surveyed.

The British are, however, likely to outsource only a few standard functions, while the French and Belgians are open to outsourcing a wide range of functions.

Also, compared to 70 per cent of respondents that had at least one outsourcing relationship, only 49 per cent of respondents cited cost savings and higher productivity (revenue earned per employee) as the advantage of outsourcing for their organization. About 33 per cent identified better quality through use of specialized skills.

“French companies attribute less importance to cost-saving benefits, with improvements in quality and strategic organization being the key advantages identified. Belgian companies are also strong proponents of the improved quality brought by outsourcing, while in the UK, quality considerations are rated on a par with cost savings,” the study said.

Source: The Economic Times

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Outsource to Get Better Performance

The first thing to come to mind when talking about outsourcing is cutting costs. Or at least it was so… One of the modern trends for outsourcing providers today is to deliver excellence and quality, and consequently businesses are increasingly outsourcing to improve their performance. As Allie Young, VP at Gartner, said the shift towards enhancing business through outsourcing is a sign of a "maturing market".

Buyers of IT outsourcing anticipate increasing its use over the next two years and 88 per cent of the organisations currently outsourcing expect moderate to high levels of outsourcing compared to 67 per cent in 2007".

About 85 per cent of Europe, the Middle East and Africa organisations expect to continue at the same level or increase their outsourcing during the next two years, up from 62 per cent in 2007".

Source: Silicon.com

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Everest Reveals Q2 Trends in Outsourcing

The Everest Research Institute’s Market Vista: Q2 2008 Report on global outsourcing and offshoring revealed that, despite the unstable economic conditions in the United States, the outsourcing market continues to stably grow with help from European investments. Europe accounted for 41% of all outsourcing contracts in the second quarter, signing 417 new outsourcing contracts (70% of which were ITO, 28% of which were BPO, and 2% of which were both ITO and BPO) with a contract value of $2.6 billion dollars. Similarly, the report demonstrated an increase in the use of the captive model, in which a company builds a captive offshore center to either eliminate the middleman (thus saving money) or to exercise total control over outsourced operations. Additionally, Everest, based on the Q2 report’s profiles of outsourcing activity in Central and South America, deducted that labor savings in Brazil, Chile, and Mexico, will not be realistic for the next five to ten years.

According to the Everest Q2 Report, the outsourcing market experienced a 3% growth in outsourcing contracts compared to the first quarter. This growth is largely attributed to Europe (particularly the UK, whose outsourcing activity has gathered incredible speed) where contracts were signed in the UK, Germany, Sweden, and Switzerland with manufacturing and telecom industries. Fifty four deals were made with financial services in the second quarter, with $240 in annual contract values; a marked increase was seen in the amount of these contracts signed by North American companies - 41% compared to 26% in the first quarter. The captive model, despite much negative speculation, is also growing in popularity; with 18 new set-ups and 3 divestitures, the 2008 total for captive offshore centers has totaled 34 set-ups and 6 divestitures.

Source: Everest Research Institute

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European Outsourcing: current state of affairs and future trends

TEAM International shared some findings of the latest Annual Outsourcing Survey conducted by Ernst & Young. The 2008 survey questioned more than 600 members of upper management in the largest European companies with a turnover of at least 100 million Euros. The survey came up with these findings:

• 70% of respondents reported outsourcing at least one business process to lower-cost countries;

• 49% of respondents agreed that offshore outsourcing served as an efficient cost saving tool;

• 33% pointed to better quality through hiring the specialists among the major reasons for outsourcing;

• At the industry level, the finance industry is reported to be the most mature in adopting outsourcing; banking is considered to be the most focused on IT and telecommunications outsourcing with a 75% take-up rate;

• Medium-sized companies and multinationals are the major users of offshore outsourcing;

• The majority of respondents generally report positive experience they have had with offshore outsourcing.

• 20% of European companies admitted intending to increase their outsourcing level within the next two years.


Source: Ernst and Young

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IT Outsourcing on the Rise despite Global Economic Downturn

The global economic downturn is placing pressure on more and more companies to cut costs and maximize profits, leading them to outsource IT functions. According to research from Gartner, the IT services market will continue to grow in 2008, with spending on IT functions estimated to increase by 9.5%, reaching $819 billion. The strength of the IT services market can be further exemplified by the decrease in profit warnings among UK IT software service providers; in the hardware and equipment sector, only twelve profit warnings were issued in the second quarter compared to the twenty in the first quarter. Outsourcing consultants claim that companies seeking to reduce expenditures (as a result of these unfavorable economic conditions) should not even consider reducing spending on projects that affect the operation of a business, such as outsourcing contracts and major IT implementations.

So far, IT service providers have been left unscathed from any IT budget cuts. It is highly unlikely for long-term projects to be postponed due to economic factors. Additionally, small businesses continue to increase spending on IT, hoping to increase business and decreases dependence on manual processes (thereby reducing labor costs).

In this period of economic downturn, purchasers looking to outsource are increasingly searching for value-oriented contracts, heading towards locations in the east, hoping to save big and to eliminate the need to transfer staff. Although India has traditionally been seen as the place to outsource, China, Morocco, and Hungary are rapidly growing in popularity. In fact, the twenty largest IT services suppliers in the UK opened 21 new global delivery centers in January 2007, with four set up in China, three in Eastern Europe, three in Morocco, and only two in India.

Seeing as we are in a downturn rather than recession, companies have the resources to outsource; it is an expense they are willing to invest in, knowing the future benefits and savings. When outsourcing, companies should find IT service providers capable of catering to their needs; the provider should have quality resources and tools to find a strategic solution to the company’s needs. Similarly, finding a provider with a skilled tech team and personnel capable of communicating with the company and listening to its demands is of utmost importance in developing a quality product.

Both vendor and customer should look at this economic downturn as an occasion to do business more rigorously.

Source: ComputerWeekly

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Russian IT reports brilliant half-year

Last fall, a study was conducted by Linex analysts that helped formulate the assumption that there will be a change of trend in the IT market: the IT market, which was experiencing a slow rate of growth, is hypothesized to undergo a period of rapid growth.

The results of monitoring the first quarter validated the forecast that the market will be experiencing a faster rate of growth. The services that were most in demand on the Russian IT market were network and system integration, IT consulting - including consulting and custom application development, and maintenance and support of software and hardware.

Comparing characteristics of IT business from the first half year in 2008 with its analogous period last year showed that network and system integration, despite all forecasting and predictions, will not give up its place as the leader in Russia’s IT.

According to Linex’ “Real IT Market - Q2 2008” report, the results of the second quarter, and first half-year as a whole, allow the following conclusions to be made:

• The forecast that the IT market will experience a change in growth rate was accurate. The rates of growth during the first half-year increased by 55%, resulting in a 23.6% increase in profit compared to the 15.3% increase of last year.

• The growth rate of the Russian IT market for 2008 will be closer to the rate of market growth in the second quarter (20.8%), than to its anomalous high growth temps in the first quarter (27.3%). The irregular first quarter growth can be attributed to a marked increase in spending by the government sector on IT.

• The highest rates of growth in the first half-year were from the IT Services segment - 34.7% (in the second quarter, 27.7%). IT Services have become the engine driving the whole Russian IT market.

The full report is available in Russian at http://www.linex.ru.

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Russia: SAP obtained pass to work with government secrets

SAP NetWeaver became the first foreign ERP-system, certified by the Defense Ministry to work with secret government information. Admission to data labeled "Secret" will become, for SAP, a pass to a segment of power structures, and, similarly, a pass to a wide range of government customers.

SAP NetWeaver 2004 Application Server received certification from Russia's Defense Ministry for fulfilling the security requirements that were necessary to work with secret information. Alexander Federov, director of SAP CIS product development, explained to CNews that it took eight months for the product to be certified. Taking into account the complexity of the product, the Ministry of Defense held additional certification tests, and personally supervised the steps taken by the Certification Body to certify SAP.

Fedorov went on to explain that obtaining this certification is the first step for SAP entry to the military-industrial complex. According to Fedorov, by receiving this certification, SAP can now be seriously considered as a technological platform for the creation of the enterprise management systems.

The Ministry of Defense was, of course, the biggest, potential customer for SAP. With such a large infrastructure, which contains hundreds and thousands of enterprises, it is no surprise that the Ministry of Defense needs a unified management system for the maintenance of business activities to be built. After receiving this certification, the Ministry of Defense can now truly consider SAP as a potential ERP supplier.

SAP NetWeaver 2004 Application Server is now able to design automated systems up to the "1B" (security) level, and can process information containing government secrets. According to SAP, the company's next step will be to get certification from the Ministry of Defense for its other products.

Market experts, as a whole, have a positive opinion about the certification of SAP. According to Vladislav Kochetkova, a "Finam" analyst, fulfilling security requirements to process secret information indicates that national security is not threatened by the use of SAP; world leaders can now improve the quality of governance in Russian power structures to effectively meet objectives and reduce costs. "SAP's ability to work with undisclosed information gives them the opportunity to work with security agencies, and gives them access to a wide range of government bodies, each of which, in varying degrees, works with classified data," says Kochetkova in an interview with CNews.

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Russia to Enter Informational Society

At one of the latest State Council sessions Russian President Dmitry Medvedev said that in 2007 Russia was among global top three custom software development locations (after India and China) in terms of deals value. He also noted that the infrastructural progress observed now paves the way for a transition to informational society.

In his turn Minister of Communications Igor Shchegolev suggested introducing tax concessions for local providers of software development services. He emphasized that some measures had already been taken but appeared to be not as effective as desired. According to Mr.Shchegolev, tax remissions will help lots of companies, especially small firms, make a step to the forefront and find their place at the market. He also added that at present national ICT industry still depends on foreign suppliers.

Moreover, Russian President suggested discharging those officials who are computer illiterate, launching internet educational centers, compensating students’ internet expenses, and introducing electronic copies of school record books and registers.

Source: CitCity

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Eastern Europe Came to Stay

In 2007, Europe saw a considerable increase in their outsourcing activities. Of about $12 billion in mega deals awarded globally in 2007, over two third (68 percent) were closed in Europe. The demand for offshoring among Western European countries rose by 50 percent from 2004 to 2006, with Eastern Europe being a favorite destination. McKinsey estimates that offshoring operations in Eastern Europe could triple, to more than 130,000 jobs, from 2005 to the end of 2008. Dell, IBM and Morgan Stanley in recent times have outsourced their operations to Eastern Europe. At present, Eastern Europe’s outsourcing business is approximately $2 billion, which is still not a big fraction of about $386 billion global market. However, according to Gartner Dataquest, the growth in Eastern Europe would exceed growth in the rest of the market over the next four years; the outsourcing business is expected to expand by nearly 30 percent in Eastern Europe by 2010, as compared to 25 percent for the global market. Eastern Europe’s software industry grew by 12.53 percent in 2006, and is expected to grow at a Compounded Annual Growth Rate (CAGR) of 10.87 percent until 2008.

Many CEE countries have already come up as compelling alternatives to traditionally established destinations for offshore software outsourcing. Poland, Hungary, and the Czech Republic have shown bright prospects in the IT outsourcing market segment, newer destinations in CEE, including Romania and Bulgaria, are upcoming too.

It is forecast that 2008 will be the biggest year for the expansion of IT-service delivery and outsourcing capabilities beyond India. This has already helped to open new markets in regions like CEE, which can offer long-term benefits to its clients. According to A.T. Kearney’s Global Services Location Index study, CEE countries continue to be popular among European companies that are seeking alternative locations for their IT and business-process outsourcing services. And it’s no wonder as this region offers an educated, multilingual labor force, talented professionals who are trained in key technologies, reliable IT infrastructure, moderate to low cost of labor and access to the greater EU. Its secondary educational system and technology-oriented higher education has made it a strong contender for software development, R&D and engineering services.

Source: Global Services magazine

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Security Essential in IT Outsourcing

Many companies ignore the security problems associated with IT outsourcing until it is too late, it has been claimed.

According to the Information Security Forum (ISF), IT outsourcing and offshoring are attractive because of their potential to cut costs and increase speed to market.

Simone Seth, author of a new report published by the group, said the long term success of the outsourcing project can be damaged by a lack of security expertise or poorly identified information risk.

"Failure to involve information risk managers at the start of a project and through its lifecycle increases the enterprise's exposure to risk," she continued, adding that this could constitute data theft, information leakage or disputes that may arise from questions of ownership of intellectual property.

Earlier this week, the Irish Sunday Business Post reported comments made by the PFH Technology Group, which claimed businesses of all sizes are now choosing to outsource their IT operations and requiring different approaches from their service providers.

Source:ihotdesk

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EPAM Chairman and CEO Arkadiy Dobkin named Ernst & Young Entrepreneur Of The Year® 2008 award winner in New Jersey

Arkadiy Dobkin, EPAM Founder, Chairman and CEO, was named winner of the Entrepreneur Of The Year®2008 award in New Jersey, Information Technology Consulting category, organized by Ernst & Young, a global leader in assurance, tax, transaction and advisory services.

According to Ernst & Young, the awards are given to entrepreneurs who demonstrate extraordinary success in the areas of innovation, financial performance and personal commitment to their businesses and communities. The awards nominees were evaluated by independent regional panels of judges who assessed contenders for each designated category by the following criteria: vision, leadership, achievement, and social responsibility reflected in the revenue growth, innovation, risk-taking, and personal commitment to the business and the community.

"Ernst & Young is pleased to honor outstanding business leaders such as Arkadiy Dobkin," said Keith Brownlie, Ernst & Young Entrepreneur Of The Year Program Director for New Jersey. "Winners of the Entrepreneur of The Year award build leading businesses and contribute a great deal to the communities around them. Their success helps our area grow stronger."

"I would like to thank EPAM co-founders, veterans, and all employees for their hard work and commitment to our common goal. This success can be attributed literally to everybody in the company, in North America and Europe, and I am happy and proud to be a part of this innovative and dedicated team," noted Arkadiy Dobkin, EPAM Chairman and CEO.

As a New Jersey award winner, Arkadiy Dobkin is now eligible for consideration for the Ernst & Young Entrepreneur of The Year 2008 national program. Award winners in several national categories, as well as the overall national Ernst & Young Entrepreneur Of The Year award winner, will be announced at the annual awards gala in Palm Springs, California on November 15, 2008. The awards are the culminating event of the Ernst & Young Strategic Growth Forum, the nation’s most prestigious gathering of high-growth, market-leading companies.

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SOA: Promising and Long Lasting Trend?

As Gartner notes, approximately half of all 2007 major projects in the world were made on SOA. According to analysts, 60% of organizations will adopt the approach, and by 2010 it will be used in 80% of new systems. IDC forecasts that corresponding software expenses will constitute 11 billion dollars.

Whereas 2007 was the year of pilot projects giving an opportunity to customers to test SOA efficiency when developing and using business applications, the year of 2008 will witness double increase in SOA-related expenditures and further development of the most successful projects as customers are willing to implement the technology into business processes.

Experts at SAP believe that SOA is a perfect option for companies that previously had to choose between standard ERP solutions and pricey custom ones. Still with all its advantages (flexibility in changing business processes, service security and reliability, cuts in operational IT costs) SOA is not a panacea for all technology integration problems a company may face.

Expert forecasts concerning SOA advancement in Russia are pretty optimistic. Up to 70% of projects will use SOA in 2008 and at least one of the reasons for this is that all the current middleware platforms some way or another already use SOA at present. Various verticals demand SOA implementation however only a few, Finance and Telecom, have mature enough IT processes and sufficient budgets to start off with SOA.

Forrester analysts expect leading software providers will spend the next couple of years on developing more dynamic applications with better support of cross-functional business processes. Although the demand for SOA is growing, they will have to find new ways to promote their business applications. Hopefully SOA will be a more promising and long lasting trend than all the previous technological tendencies as the focal point of SOA is business but not technologies.

Source: Cnews (in Russian)

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When Business Meets IT: Software Development Summit 2008

In the outsourcing industry, where trust, reliability and credibility are a passport to success, establishing personal contacts during face-to-face meetings of customers and providers are essential. Quite a number of industry events which bring all its representatives together are held regularly all around the globe to facilitate discussions burning issues, experience sharing, and establishing new business relations.

The eighth annual Software Development Summit took place in St. Petersburg, Russia earlier this month. The focal point of the Summit was all the segments of software development industry combining export, internal market, licensed products, and IT outsourcing. Belarus, Russia, Germany, Italy, the USA, Finland, Ukraine, and many other countries delegated their representatives to the event. They all had a wonderful opportunity to present new projects done both for foreign and domestic companies, to discuss world business development tendencies. The problem of work force and its training was also given careful consideration to as qualification of company’s staff is one of the prerequisites for customer base expansion, reputation build-up, and market share enhancement in today’s highly competitive environment.

Among those who took the floor there was Peter Schumacher, the founder and president of Value Leadership Group who described the New Competitive Paradigm in the European IT services. One of the 4 strategic options for Russian offshore IT services firms presented by the speaker was developing alliance with India, which at the first glance seems quite an unusual scenario. Although there may be a couple of techniques Eastern Europe’s and Russia’s ITO providers could learn from them trying to combine their skills with India’s scope and scale.

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Want to Stay in the Game - Be Progressive!

A clear correlation between IT organizations that deliver IT services at a more strategic level to the business, and how businesses perceive their IT organizations was revealed in the research conducted by a UK based industry analyst Freeform Dynamics.

It says: “There is indeed such a thing as the ‘progressive’ IT organization”. For such organizations it is important to be delivering services to the business at a strategic level meaning taking into consideration what can be kept in-house and needs to be sourced; learning from the experiences of more progressive IT organizations; adopting new working practices and of course, being more than just a cost centre!

Moreover, the research provides a number of steps IT organizations can take to deliver a significantly higher level of service to the business:

- The IT organisation needs to get the basics right
- Create a common language between business and IT
- Establish a peer relationship between business and IT
- Work towards co-ordinated goals and objectives
- Manage IT as a business-driven portfolio
- Foster relationships with key IT suppliers.

The conclusion drawn by the research is “the more progressive IT organizations will be better placed to manage the ongoing integration process that will be required, and deliver appropriate services to the business as a result”.

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Russian Technical Power

At present in Russia and other CEE countries the growth of IT is quite impressive. According to some estimates the volume of Russian IT market in 2007 was between 11,9 and 17,6 billion dollars (source: CNews). And there are still opportunities for further growth as together with the government support Russia has a chance to become Global leader in the sphere of innovative hi-tech. That was forecast at the forum devoted to the Technological cooperation between USA and rapidly growing markets of BRIC (Brazil, Russia, India, and China) – "Russia, India and China – Our Partners in the New Global Economy" which took place in Boston.

Implementation of the government program of Technoparks development, the “Innovative Code of Laws" which is aimed at stimulating innovations, as well as creation of laws on copyright protection are some of the initiatives of the Russian legislative and executive branches which were highlighted at the forum. Besides, during the meetings with the representatives of the Massachusetts business community the start of Russian-American cooperation upon creating a new Technology University in Russia was discussed.

If at least 30% of the planned initiatives were implemented, Russia would have undisputable chances to become a global technology leader.

Source: Outsourcing-Russia

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Central and Eastern European IT Outsourcing Market Hits $3bln

According to the latest research, IT outsourcing market volume of CEE region hit $3 billion mark in 2007.

A number of IT associations and largest IT companies from 16 countries of the region were involved in the survey conducted in August 2007 - February 2008 by the Ukrainian Hi-Tech Initiative with the support of ITONews.eu news portal, Baltic Outsourcing Association (Lithuania), JNN Consult Ltd (Bulgaria) and Employers’ Association of the Software and Services Industry (Romania).

Now let’s take a closer look:
Among 16 examined countries, Ukraine, Romania, Hungary, Poland, and the Czech Republic occupied the leading positions in terms of market volume. These countries stand out for the scope of final IT products produced and delivered.

Ukraine, Romania, Belarus, Poland and Bulgaria took the lead in the number of IT companies. Central and Eastern European region now witnesses a thriving period when companies undergo intensive business development and experience both organic and non-organic growth. The interest to the region, thanks to its enormous ITO potential, is unlikely to fade yet another decade, analysts say. It attracts new clients by outstanding technical competencies and high professionalism of the experts, lower labor cost, and friendly legislation as well as by geographical vicinity and excellent nearshoring opportunities for customers based in Western Europe.

When calculating the number of IT professionals involved into IT services and software outsourcing, Poland, Ukraine, Romania, Hungary, and Bulgaria are singled out by the survey as having the greatest human resource pool.

Attempts were made to calculate also minimum and maximum annual cost per service of one IT professional for the end customer in each of the countries. The most "expensive" ones include Poland, Hungary, Romania, the Czech Republic, and Estonia.

Main indicators of IT Outsourcing industry development (market volume, number of ITO providers, number of IT professionals, cost of one professional for the end customer) take Central and Eastern Europe to the level of such global outsourcing centers as India, China, and Russia.

Source: ITONews.eu

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Offshoring: Today and Tomorrow

Plenty has changed in the field of offshore outsourcing, which has evolved from a little-used practice to a mature industry in less than a decade. And plenty of change lies ahead.

Here are some noticeable key developments in the global practice of offshoring.

Use of Collaborative Tools
Greater communication capability via the Internet was the initial driver of the offshoring trend, according to the Forrester report. With such remote networking techniques now coming into play, there is a movement away from manual and travel-intensive processes, according to cfo.com.

Discrepant India
On the one hand, India continues to lead the way as an offshore destination, ranking at the top of A.T. Kearney’s 2007 Global Services Location Index. But on the other hand, it is loosing its appeal. The reason U.S. companies went to India in the first place was to cut down on costs but over the past year the value of the dollar dropped notably in relation to the Indian rupee. Moreover, significant wage increases in India have further shaved the cost advantage.

Onshore and Nearshore
Offshore outsourcing companies are setting up their onshore development centers to be closer to clients in locations with better cultural and geographical compatibility.

Blended Contracts
As CIO Today says, clients will engage in blended contracts¬ – a combination of offshore, onshore and even local outsourcing.

Nipping at India’s Heals
Geographies are changing as the space matures. Behind India in the offshoring race is China, Latin America. Russia and eastern European countries are also in the game showing robust growth of IT services due to their high qualified human resource pool and the ability to accomplish complex creative software engineering tasks.

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When America sneezes, India catches a cold

That saying could prove particularly true for India's IT and IT-enabled services (IT-ITES) industry, where the US accounts for the largest share — at over 50 percent — of the Indian software and outsourcing market.

During a recent media briefing, Kemal Dervis, administrator at the UN Development Programme (UNDP), said the US slowdown might make it difficult for India to sustain its economic growth rate of eight percent. It has already had some impact on the Indian market. The rupee has been strengthening against the dollar for over a year now causing worries for Indian exporters.

"The implications for all of India's externally linked sectors are significant," Rajagopalachari, executive director at PricewaterhouseCoopers India, said. "The strongest and most immediate impact will be on the IT-ITES sector."

Though Milan Shethan, Ernst & Young India partner in business advisory services, noted that, while the budgets of US-based companies will undoubtedly be cut, the services of Indian companies that are adding value will be retained. Only those companies that haven't performed may lose out.

Over the last 12 months, Indian companies have been diversifying their risks by increasing their focus on non-US markets, such as Europe; by undertaking labor-cost rationalization by getting rid of poor-performing workforces and tightening recruitment policies; by reducing the average age of their workforce in order to reduce cost and improve overall profitability.

Source: ZDNet

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EPAM acquires pass to stock exchanges

EPAM Systems has acquired the B2Bits Company, an IT consultant providing services to stock exchanges and brokers. A special Capital Markets Competency Center headed by B2Bits president has been set up at EPAM, which enables the company to expand the range of services provided for the financial sector clients.

The EPAM Systems Company, a software development outsourcing services provider, has announced to acquire a 100% stake in B2btis, a provider of solutions and consulting services to professional stock market players.

One of EPAM’s service lines is development of mission-critical business applications for the financial sector organizations. About 600 of the company’s 4,000 employees are engaged in corresponding projects. EPAM now covers the entire value chain from domain knowledge and process consulting through customized high-performance architecture as well as product and application development, maintenance and support, and testing software. Russia, Western Europe and the USA are among EPAM’s top target markets.

‘The acquisition proves EPAM Systems is seeking to expand the range of services provided and become a leading service provider for stock market’, - states Arkadiy Dobkin, president and CEO at EPAM Systems.

Services for the financial sector will be provided by a specialized Competency Center headed by Mark Bisker, B2Bits president, who has worked for more than 25-year for leading technology companies, such as Schwab Capital Markets and Lava Trading.

If the IT consulting market grew by 20% in 2007, the financial segment growth was at least 1.5-fold higher, experts say. Due to transaction with B2Bits, EPAM Systems pledges to intensify related operations on the Russian market. ‘The given market is sure to continue developing due to growing professionalism of local players, foreign companies’ expansion and competition intensification’, - says EPAM. ‘Consulting for financial organizations is in greater demand than on the market in general, as financial organization are far ahead in IT implementation as compared to other entities, - says Alexander Lyubinsky, CMO at ISG. – The easy money period has finished for the financial sector, so competitive advantages might be achieved only when using updated infocom technologies’.

...According to CNews Analytics, EPAM Systems’ consolidated revenue has grown by 37.7% in 2007.

Source: CNews

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US IT outsourcing changes its geography?

Given the uncertainty about the US economic situation continues, a recent survey has forecast that spending on IT by the world’s biggest economy will shrink in the April-June quarter for the first time in nearly seven years (according to http://www.offshoringtimes.com). So US companies are looking for cost reduction, thus choosing cheap labour outsourcing destinations.

As outsourcing to India becomes more expensive, North American companies are seeking alternatives. In years past a company could save 40% to 50% by hiring Indian firms to handle IT and other services, says Atul Vashistha, chairman at neoIT management consulting firm. Should the U.S. dollar continue its descent, that differential would shrink to 10% to 20%, he estimates. "If you're only going to have a 20% savings, clients start to think about time zone," Vashistha says.

Though costs are increasing in India, anyway the country is generally less expensive than Latin America and most other locations, especially for companies that don't require high-end software development services. It’s envisioned that Mexico and the rest of Latin America will only act as a complement to India and other offshore locations. So, Europe can benefit from US recession and who knows, may be, it’s on the threshold of an IT outsourcing boom?

Source: BusinessWeek

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IT outsourcing in London and UK 'on the up'

Large and small British businesses are increasingly outsourcing their IT.

Big Four firm KPMG signed a five-year contract with BT last month but smaller firms are also seeing the benefits of IT outsourcing, according to Accounting Web.

The news provider reports that London accountancy firm Andrews Cross & Co has committed to outsourcing 100 hours of work per month, helping to solve its recruitment difficulties.

West Midlands-based accounting firm AGS has turned to outsourcing to bring its IT to the level required to support the company's professional work, according to the website.

AGS founding partner Steve Aston says: "We had to get the IT spot on. [Outsourcing ] was about that extra 10-20 per cent that dynamic, innovative IT delivery could give us."

Better value and improvements in broadband internet services are meaning an increase in the popularity of IT outsourcing as more large and small businesses realise it can bring a competitive edge, reports Accounting Web.

Source: ihotdesk

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Russian ITO market: possible development scenarios

At present Russian IT companies are on top of the IT export boom curve. But what is behind this flourishing? Which factors stimulate and restrain export of Russian IT services?

According to Vladimir Karacharovskii, consultant of IT publication CNews, there are two possible scenarios of the development of ITO - extensive and intensive - which are closely connected with Russian IT companies’ priorities. The extensive scenario is based on price competition (with other offshore outsourcing providers like Indian and Chinese ones), the intensive scenario - on the quality of services, their uniqueness, diversity and individual approach to each customer.

According to a 2007 Gartner survey of 750 IT and outsourcing executives in North America, Asia/Pacific and Europe, 41 percent of organizations that were currently outsourcing IT said they use ITO to enhance business outcomes and performance but not to reduce costs as compared to only 28 percent in 2005. It means price competition shouldn’t be the top priority.

Therefore Russian IT companies have to use other differentiators positioning themselves as providers of qualitative solutions. The advantage also lies in the fact that innovation product markets are never saturated, just vice versa - they tend to expand with each appearing innovation. This strategy requires higher employees’ commitment but will be finally rewarded with higher profits.

Government support plays a critical role in facilitating Russian IT outsourcing exports growth. The degree of government support provided in the global market differs from country to country. In Russia it results in the creation of techno parks, specialized support investment trust ICT, Federal agency on export development in IT sphere. But as Vladimir Karacharovskii claims there may be some adverse effects of the government’s intent attention if their measures are introduced and controlled by too many authorities: IT export might get overtaxed which will raise its costs.

It’s not quite clear at present which of the scenarios will be the base of Russian IT sector in the near future, but the answer will surface within the next couple of years.

Source: CNews (in Russian)

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EPAM under full steam to true full service in Finance

On the third of April, 2008 EPAM Systems Inc. announced the acquisition of B2BITS Corp, a provider of solutions and consulting services to capital markets organizations within the financial services sector. Since its foundation in 2000 B2BITS has been known for its unexceptionable performance delivering pre-built solutions, customizable frameworks, specialized testing tools as well as process consulting for Client Connectivity, FIX, FX, Options, Fixed Income, market data feeds, exchange gateways and electronic payment services.

The acquisition allowed EPAM to combine the extensive domain knowledge of B2BITS and EPAM’s high- qualified team of software engineers developing, maintaining and supporting mission critical applications for the Financial industry. That’s good news for both current and prospective clients from financial services industry as EPAM now covers the entire value chain starting from expert analysis and consultancy to the development, maintenance and 24/7 support.

As Mark Bisker, the head of EPAM’s new Competency Center and CEO of B2BITS Corp, said: “By leveraging the scale and experience of the most disciplined and efficient software engineering organization in the region, we can now better leverage our domain knowledge and consulting skills.” In his turn Arkadiy Dobkin, CEO and President of EPAM Systems, noted: “The management and consulting teams from B2BITS significantly enhance EPAM’s expertise and capabilities in this important market segment”.

Source: EPAM Systems, Inc.

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Eastern Europe: The next silicon valley?

One key to driving healthier economies in the countries of Eastern Europe, particularly in the former Soviet republics, could be significant investments in Web 2.0 development. Could Eastern Europe foster its own Silicon Valley?

The Soviet Union had its own technology capital once, though you might be surprised to learn it wasn't located in the Russian Federation.

"Belarus was regarded as the 'Silicon Valley' of the former Soviet Union, manufacturing over 50 percent of the computers and components in the former USSR." said Sergei A. Rachkov, deputy permanent representative, Permanent Mission of the Republic of Belarus. "The country is able to provide expert services in application development and testing. Belarus’ software and IT services sector is one of the most successful and fastest growing industries in the country." Rachkov spoke on Wednesday before an audience at an UN conference in New York entitled, "The UN Meets Web 2.0 and ICT Entrepreneurs."

Although India's success story garners a lot of attention, countries in Eastern Europe are also turning to IT as a way to upgrade their economies. During the UN's Web 2.0 conference, representatives of Hungary, Belarus, and Croatia talked up government and private sector initiatives that have helped to lure the likes of Microsoft, IBM, Cisco and SAP to either outsource services from or set up shop on Eastern European turf.

Meanwhile, Rachkov said that, back in 2005, Belarus set up a High Technologies Park. Since then, about 40 domestic and foreign companies -- including software developers and exporters -- have become residents of the Park, Rachkov said.

Rachkov cited Belarus companies IBA Group and EPAM Systems as two of "the largest and most established European IT outsourcing providers based east of Germany." These and other companies in Belarus "have world-class project management infrastructure [and] certification, and [they] successfully serve world-renowned clients, including IBM, Colgate-Palmolive, Samsung, Siemens, Alcatel, British Telecom, Ford-Union, and Microsoft," according to the Belarusian official.

Source: BetaNews

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The 2008 Global Outsourcing 100 announces winners: the Russians excelled!

The International Association of Outsourcing Professionals (IAOP) has finally announced the long-awaited Top 100 world outsourcing service providers. Four critical characteristics are taken into account by an independent jury: size and growth, customer references, organizational competencies, and management capabilities. It’s good news to know that six Russian companies have been included in the rating in comparison with only four in the previous year: Auriga, DataArt, EPAM Systems, IBA, Luxoft, and Mera.

The results of the rating speak for themselves: the most rapidly growing segment of IT services in Russia is IT outsourcing. As Maxim Troitsky, director of special solution and service sales department at ISG, says “…those engaged in retail sales, finance sector arrangement, and several state enterprises and institutions, are currently especially interested in strategic outsourcing cooperation”. Though, India is still occupying leading positions in outsourcing, Russia and CEE countries seem to be close at its heels. “The given sector [IT outsourcing] is becoming more and more attractive from year to year, as many recent obstacles have been eliminated’, says Troitsky.

However some experts claim that the attraction of Russian and Eastern European countries as outsourcing destinations is the result of constant price rises and overheated labour market in India. “The Eastern European IT outsourcing is becoming more popular… due to India image downward”, as Anatoly Gaverdovsky, senior vice president of EPAM Systems, says. But however that may be, specialists point to the interest of global players in the Russian outsourcing market as one of last year’s key tendencies.

Source: CNews

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Any hints about the IT Outsourcing next day?

Looking back at the past often helps predict the future… or at least gives hints about the next day’s trends. According to Gartner approximately $730 billion was spent on IT services in the world in 2007 which was by 8.7% more than in the previous year. The following segments showed robust growth: IT management, IT consulting, custom software development, and maintenance and support. Russia, Ukraine, India and China provide about 10% of the world volume of outsourced IT services.

In Russia and other CEE countries the growth of IT services is even more impressive. Younger but no less mature and credible than the mainstream offshore outsourcing destinations, this region’s ITO industry has already caught up with the ITO pioneers in terms of delivery quality in line with international standards. It has been forecast by IDC that the volume of Russian IT services market will reach $7.8 billion in 2011 in comparison with only $3.0 billion in 2006. At present IT outsourcing services are in great demand not only with foreign customers but with local companies as well.

Moreover, according to IDC, US recession will make leading providers have a closer look at emerging markets. In Brazil, Russia, India and China the growth of IT in 2008 will be twice or thrice as much as of the global one and will constitute 16%, and the total volume of the markets will be $115 billion. And as the experts suggest this may fuel further consolidation trends in the IT market.

Although some still find outsourcing risky, others, making the majority, get engaged into outsourcing relationship to access specific skill, optimize their business process through advanced technologies or cut costs of keeping IT work in-house. Besides, according to a recent survey jointly conducted by Bernstein Research and Everest Research Institute, if the business environment of IT services customers were to substantially weaken, most individuals believe that there will be a slowdown in onshore budgets and the buyers will look to move work offshore as it has always been one of the most effective savings levers.

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SAP reports solid growth in 2007 revenue in Russia and CIS

Following the 2007 results SAP reports its total worldwide revenue in 2007 reached 10,25 billion euros, which is a 9% increase as compared to last year (corresponding increase in US dollars is about 20%). The revenue from software and corresponding services sales grew by 13% (or by 24% in US dollars), while the level of the net operating margin made the 26-27% planned. SAP’s share in the world market of applied software and corresponding services amounted to 28.4% (a 4% growth) in 2007. Its immediate rivals Oracle and Microsoft closed the year with 16.5% and 3.3%, respectively.

In terms of the Russian and CIS markets SAP experienced even more dramatic results: SAP CIS' total annual revenue made 47,2%, while the maintenance services sales increased by 59,3%. This makes SAP CIS the 4th most effectively operated business unit of the German giant following the SAP headquarters in USA, Germany, and UK.

Out of 398 contracts in 2007 closed in Russia and CIS (which is a 48% increase as compared to previous year's 126 contracts), more than half (261) were concluded with small and medium-sized businesses outside of the oil, metallurgy or public sector. Having realized that need of the SMEs in prepackaged solutions, in 2007 SAP CIS expanded its presence in the given segment by 30% and plans to expand by 40% in 2008. With the wholesale (Megapolis) and retail (X5 Retail Group) companies being among SAP’s software largest customers, the company considers last year to be a real breakthrough into the retail trade and basic goods segments. Business process automation in the Russian and CIS building industry has seen rapid development lately as well, according to the company.

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Ukraine to lure ITO buyers

With rich farmlands, a well-developed industrial base, highly trained labor, and a good education system, Ukraine has the potential to become a major Eastern European economy. According to The World Factbook of CIA the growth of GDP in 2007 was 6,9% which was fueled by high global prices for steel - Ukraine's top export - and by strong domestic consumption, spurred by rising living standard.

Economical stability is one of the key factors for ITO services buyers when choosing on offshore destination. as well as for ITO providers who plan new development centers launch. Currently Ukraine boasts the fastest-growing software development Industry in Eastern Europe. In its study Goaleurope, an Eastern European advisory firm, estimated the size of the outsourcing industry in Ukraine reached over US$246 million in 2006 and employed over 7,500 people, and the figures are increasing. With a number of definite advantages over India or China in terms of IT services and software engineering, Ukraine is increasingly becoming an attractive offshore IT outsourcing destination.

Firstly, government support and the support of different organizations play a critical role in offshore IT outsourcing. According to the online survey ”Offshore IT Outsourcing and Transition Economies” conducted by Business School of the University of East London several associations have supported software development firms in Ukraine, including an industry association (Ukrainian Association of Software Developers or UASWD) and a professional organization (IT Committee of the American Chamber of Commerce in Ukraine).

Secondly, the Ukrainian labor force has traditionally had significant software development skills with a very high level of language proficiency with English as the predominant foreign language.

Besides, the educational system is also well supported: multinational companies like Motorola, Hewlett-Packard and Dell have provided equipment and support for some of the country’s educational institutions. Motorola has also established its own direct investment software subsidiary within the country, and has publicly stated an intention to stay and grow in the Ukraine. In general, Ukrainian authorities regularly declare a keenness to encourage foreign investment.

The consultants at PriceWaterhouseCoopers described Ukraine as a country that ‘focuses on fostering closer integration with the rest of the world’. One of the government’s priorities is to join the WTO which is about to happen this year. As Director-General Pascal Lamy declared: “Ukraine’s WTO membership will… boost its growth and prosperity”.

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Hungary: Optimal Nearshoring Choice for IT Outsourcing Buyers

Hungary, a beautiful country conveniently located in Central Europe, successfully made a transition from a centrally planned to a market economy at the end of the 1980s. Although the economic growth of the country has been often cyclical, the accession to the EU had an overall positive effect on its economic performance.

According to European Information Technology Observatory (EITO) the IT outsourcing market is showing a robust growth: already in 2006 it reached 91 million EUR (over 135 mln USD) and continues growing at an impressive pace. Hungary’s strong ITO value proposition, geo and cultural proximity to the Western Europe which recently outrun the US in terms of ITO activity (source: Forrester) makes it an optimal nearshoring option.

The global shortage of IT professionals has not touched on Hungary yet. The country supplies highly educated and well skilled IT workers who are in growing demand on the market as their level of education and overall background is above the European average. In terms of communication crucial for effective ITO relationship, Hungarians are also among the toppers: many foreign employers find them very flexible, highly motivated and dedicated. Foreign languages proficiency is also remarkable as according to the survey ”Offshore IT Outsourcing and Transition Economies” conducted by Business School of the University of East London over 50% of the workforce can speak either English or German, or both which helps eliminate the language barriers.

As for the infrastructure it is reported fairly adequate with all necessary facilities available for IT companies. Hungary has benefited from significant technical and infrastructure investment: Since the beginning of the transition to democratic market economy Hungary has attracted a steady stream of foreign capital, well-balanced across the various sectors. Hungary, a country of 10 mln inhabitants, can currently boast of having lured Foreign Direct Investment (FDI) of more than 60 billion EUR to date which represents the highest per capita rate in the Central/Eastern European region, reports Hungarian Investment and Trade Development Agency. According to the forecast of the Economist Intelligence Unit Hungary will retain its leading role in FDI stock/capita in the coming years.

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Russia in 2007: Turning Point. Part II: IT Industry Overview

Russian IT market has in recent years been the star performer in the region in terms of growth dynamics. According to Pawel Olszynka, Head IT&Telecoms analyst at PMR Research firm in 2000-2007 the share of IT services in the total IT spending increased from 9.5% to 28%. The total number of IT companies in Russia in 2007 was about 2,000 and the IT market in Russia was worth around $16.3bn. The Russian Ministry of IT and Communications is even more optimistic saying the market volume reached 17 bln USD in 2007.

The government also contributes to the development of IT sphere. Several dedicated institutes were created, technoparks are being constructed, special tax regime was introduced, various promotional events are held – all of these are aimed at supporting the expanding national IT industry. Another recent initiative: in early January 2008 the City Administration of St. Petersburg launched the Innovation Program to invest ten billion rubles into the development of the technology enterprises in Russia’s North-West in the coming four years. The primary spending will be geared towards funding of infrastructure projects, such as special economic zones, IT park, Science City in St.Petersburg suburb of Peterhof.

Taking into account the global shortage of skilled IT professionals, Russian authorities pay heed to the national education system. Russia continues to hold one of the top positions in the world in terms of tech training. Dozens of universities practice the educational methods of the ex-Soviet Union which are a time-proved and globally appreciated approach to raising quality engineers, mathematicians, physicist, software developers and other IT specialists. Their excellent theoretical background coupled with hands-on training, high analytical skills and problem-solving mindset make them capable of meeting the most complicated challenges and delivering comprehensive solutions. This is the most critical factor in securing a successful IT outsourcing relationship.

See also: Russia in 2007: Turning Point. Part I: Economic Overview

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Russia in 2007: Turning Point.Part I: Economic Overview

2007 was a turning point for Russia whose GDP grew 7.6 %, says a UN annual report titled “World Economic Situation and Prospects 2008”. Economic growth was particularly promoted by the increase in consumption and investment levels, high oil prices and Russia's stable fiscal policy. The rapidly growing economy and the strengthening national currency are also reflected in the robust increase in exports which, in terms of volume, is expected to grow three times faster than total output in the next few years according to Bank of Finland BOFIT.

Russia has also significantly improved its international financial position to finally vanish the aftermath of the financial crisis of 1998. The federal budget has run surpluses since 2001 and ended 2007 with a surplus of about 3% of GDP according to the World Factbook of CIA.

The main trend in 2007 in Russia was its continuous economic and political stability which fostered foreign investments inflow. According to Vladimir Kvint, President of the International Academy of Emerging Markets, the year of 2007 saw an unprecedented volume growth of foreign investments: they are 2.5 times up. None of the 15 leading world economies can boast of such progress. During the last 12 months 100 million dollars from the United States were invested in Russia, which became an absolute record among developing countries.

As for human resources in Russia, the situation is also stable. Thanks to the strong Russian system of education a sufficient number of well qualified graduates in all spheres enter their jobs annually. Many universities now offer modern programs (MBA, MA, MSc, and BA) that meet the world’s education standards and finally the corporate needs. Innovative programs are emerging, often in cooperation with foreign universities, mainly at master’s level.


See also: Russia in 2007: Turning Point. Part II: IT Industry Overview.

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Eastern European vendors in the ITO elite

Some key trends in the global ITO industry development were revealed with the announcement of this year’s Global Services 100 survey results. IT outsourcing evolves and current trends are more than positive for Eastern European outsourcing vendors that come to the global arena and prove as solid players that shall be taken seriously now. The findings of the study attest that Russian and Eastern European software development companies have joined the Big League of IT outsourcing services providers to compete with India-based recognized giants.

Over its 4-year history, the GS study has earned a reputation of a trusted source of global outsourcing information for ITO buyers which manifests the leading providers of business and technology services and reflects major trends of ITO market development. This year New Jersey based EPAM Systems with major development centers in Russia, Hungary, Belarus and Ukraine not only reconfirmed for the third time its leading position in the Eastern European market. EPAM also became the first and the sole software engineering services provider with development locations in Central and Eastern Europe that made the global Top 10 "Best Performing IT Services Providers" list, rated 8th overall. Recognition of an Eastern European outsourcing vendor alongside such established leaders as TCS, IBM, Infosys, etc. testifies to its demonstrated delivery capabilities, depth of the engineering talent and client satisfaction, which makes the achievement even more crucial for the whole region.

CEE (Russia, Central and Eastern European countries) could always boast excellent software engineering skills and a vast resource pool practicing creative approach to task solving and focusing on delivering the most complex IT solutions. Until recently customers from Western Europe and America would opt for India when it came to software services outsourcing. But with the region’s current maturing economies on the whole and sustainable growth in its IT industry in particular Western customers turn to accept Central/Eastern European and Russian software services companies as trustworthy outsourcing partners offering top quality services and deep technology expertise. Acknowledged by numerous expert surveys as distinctively strong in software engineering, Eastern Europe is now viewed as a lucrative offshore location. Whereas Forrester predicts 9 percent increase in the global demand for IT outsourcing services in 2008, Central/Estern Europe and Russia step to the forestage as a strong competitor to the today’s ITO services mainstream destinations.

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Consolidation in Eastern Europe: Who is Still in the Outsourcing Game?

For a long time the management of EPAM Systems, Eastern Europe’s largest software development company, was looking to enter the Russian outsourcing market. At the same time the labor market in Belarus, with a population of nearly 10 million and EPAM’s first offshore location, began heating up. So the need for new resources became more urgent.

EPAM management selected Vested Development (VDI), a Russian software development company headquartered in Burlington, Massachusetts. “We looked at a number of companies, but with VDI we knew each other for many years and there was a strong level of comfort,” says Arkady Dobkin, CEO of EPAM. VDI, founded in 1993, began life as an offshore software development company. However, since the beginning of 2000, the company has placed a strong focus on the Russian market.

Such is the picture across Russia: many software development companies have seen more success on the local IT market than abroad. The Russian economy, rich in natural resources, finally showed a need for the talented engineers back home. Besides, unlike publicly-listed Western companies looking to squeeze every cent of efficiency out of their outsourcing business case, privately-owned Russian businesses pay well to keep the best suppliers delivering the best results.

The growth of the IT industry in Russia has been remarkable. According to the estimates of Russian information agency RosBalt, in 2007 the IT market in Russia grew by 25 percent compared to the previous year; the market has maintained that growth rate for a number of years in the past. The increasing local market need for IT professionals, exceeding existing supply, resulted in the first signs of the industry consolidation.

…As for EPAM Systems, the acquisition was a success; it completed the post-merger integration in 2007. “As a result of the merger we’ve got interesting CIS clients, and now 50 percent of our resources are in Russia and Ukraine,” concludes Arkadiy Dobkin.

Source: GoalEurope

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IT outsourcing Klondike in Europe

Every December is a high time for top management to gather and make serious decisions: drafting budget for the coming year and devising the company’s strategy. And IT outsourcing buyers are no exception. Board Directors gather in conference rooms and discuss plans for future company growth plans and new market expansions. And the question “where” they should outsource various IT services comes up in the first line.

A recent survey showed that Europe became the world’s largest outsourcing consumer. Given the evident nearshoring benefits – time-zone compatibility, cultural and geographical proximity leading to better communication and fewer costs on travel – which are coupled with an enormous pool of highly skilled  professionals in software engineering, Eastern Europe and Russia are likely to take place as chosen outsourcing destinations.

What’s more Russian IT outsourcing companies are highly lucrative for European customers if compared to new EU members in terms of quality of complex software engineering work, project management eхpertise, available skill set, and general credibility and maturity. Add to this the exceptional track record of Russian software development companies like EPAM Systems: SAP, Reuters, London Stock Exchange and many others. All of them are more than satisfied with the level of service they met in Russia, and keep returning there with new projects to outsource.

Another strong side of companies like EPAM Systems is the distributed delivery model. Numerous offices across Europe, US, and CIS and allow both the provider and its customers literally speak the same language.

The above being said, the market may see a surge of mutually beneficial Europe-Russia outsourcing relationships.

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Top 10 Leaders, Emerging European Markets--2008 Winner EPAM

While the IT-services outsourcing market of Central and Eastern Europe is not more than 1 percent of the nearly $386 billion (est. 2007) global outsourcing market, providers like EPAM are grabbing this opportunity to emerge as global players

With a high-profile clientele such as Reuters and Oracle, well-entrenched delivery capabilities that spreads from Ukraine to Budapest, the Russian services company makes it to the top of this list thanks to galloping growth coming from the U.S. market. Surprisingly, in 2007 the company was not even among the top five service providers.

EPAM had started off as a software development and maintenance company in the U.S.A. However, it witnessed growth after the rise of the offshore delivery model.

“In 2007, we won over 40 new clients, and thus expanded the company’s total clientele by over 30 percent,” says Arkadiy Dobkin, CEO, EPAM. “We launched six new development centers in Russia, Belarus and Ukraine.”

While the IT-services outsourcing market of Central and Eastern Europe is not more than 1 percent of the nearly $386 billion (est. 2007) global outsourcing market, providers like EPAM are grabbing this opportunity to emerge as global players.

“EPAM is located in a more favorable time zone — making the communications and distance resource management process sustainable,” says Marina Shabin, VP, Applications and Information Strategy, SAP America. “From the stability perspective, we appreciate the fact that employees tend to stay with EPAM for a much longer time than with an average India- or Czech-based companies. This gives us the benefit of continuity and uninterrupted cycle of systems development and deployment.


STATS
CEO: Arkadiy Dobkin
Skill set: Custom software development & maintenance, engineering
Verticals: Financial services, hi-tech, travel, hospitality
Customers: BEA, BT, Colgate Palmolive, Reuters, SAP, Samsung
Delivery centers: Hungary, Belarus, Ukraine, Russia
Employees: 3,100
Revenue: $118 million (est. 2007)
Year founded: 1993
Website: www.epam.com

Source: GlobalServicesMedia

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The Old World to set the pace of outsourcing

Europe took the lead over Americas and now is the world’s largest it outsourcing market, both in the number of major contracts signed and in their total value.

In the past year European share of the IT outsourcing market showed impressive growth and even left both Americas far behind. While American companies signed 194 contracts, worth €21.3bn (£16bn), Europe settled 220 major contracts for €32.7bn (£24.5bn).
According to Duncan Aitchison, TPI Europe president, the reason behind such a leap is the rising popularity of the outsourcing model in the countries, traditionally avoiding it.

Apart from the well-established outsourcing market in the United Kingdom, Northern European countries like Germany, Netherlands, Switzerland, Sweden and France enhanced their outsourcing activity lately. Compared to 2006 rates, the number of contracts in Europe has surged by 31%, while the worldwide increase amounts to mere 13%.

The global market keeps growing. The last quarter of 2007 brought contracts for more than €12bn (£9bn), and proved to be the strongest one in total value over 11 years. According to Aitchison, the similar market growth is expected in Europe and Asia-Pacific region. According to Mark Kobayashi-Hillary, director of the National Outsourcing Association, the main reason for such outsourcing boost is the global credit crisis, which is illustrated by the companies’ desire to save money in the first turn rather than to build strategic partnerships.

All these seem to facilitate nearshoring and multisourcing trends. IT buyers from Western Europe are quite likely to find providers from Eastern Europe the most convenient partners due to their proximity, both cultural and geographical, let alone their renowned expertise in complex software engineering. With strong resource pool, stability in terms of employee retention and market position, such companies as EPAM Systems, the largest IT outsourcing services provider with development centers across Central/Eastern Europe and Russia, gather momentum in setting the highest delivery standards.

Source: Computing

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Russian Software Exports to see 7% amplification by 2010

One of the world’s largest nations Russia keeps showing signs of full recovery from 1990-s financial crisis with impressive GDP growth rates in the last couple of years. This is to be accounted to Russia’s mature traditional industries, as well as innovative ones like software development for export (IT outsourcing). A recent report by market researchers at RNCOS entitled “Russia IT and Outsourcing Industry Forecast to 2011” states Russia is to maintain its leading position in the ITO market by surging its market share.

The scrupulous analysis provides all-round overview of the Russian ITO industry, its past and present day, IT spending, custom software development and box software solutions markets, perspectives and challenges for the country’s IT industry.

According to the report Russia has deservedly earned its spot among the most popular ITO destinations. Most important for IT outsourcing are its deep human resource pool and advantageous tax regime. These factors coupled with Russia’s far-famed intellectual potential support ITO industry health.

The Russians renowned globally for their creativity, autonomy, analytical thinking, and ability to solve complex tasks are valuable human capital for such industries as ITO which require huge intellectual investments. Russia in this respect scores high on the international arena and is a favorable offshore location. It attracts both foreign investors and buyers of software development outsourcing services who set up their offshore development centers in the country in cooperation with the local IT services vendors. Consequently, it fuels Russia’s IT industry’s further growth and fosters IT exports increase.

Geographical proximity to both European and Asian countries contribute to Russia’s attractiveness. With such geographic reach, time zones compatibilities resulting in easier communication and better services quality, Russian software vendors are more flexible and convenient partners than many of their competitors.

Stepping aside from oil industry, Russian governments have realized the bright perspectives of the domestic IT industry and have already taken measures to facilitate its growth. Their initiatives in legislation, taxation, and promotion of local companies abroad are fruitful for all parties and will drive to tangible results in the near future.

Forecast from RNCOS: the share of the Russian software exports will reach 10% of the global software outsourcing market by the end of 2010, which is a 7% increase from 2006, cementing the country’s place in the leading ITO trinity.


Source: RNCOS

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India to conquer Russia?

India’s largest software development and IT-consulting services provider Tata Consultancy Services (TCS) announced their plans to open an office in Moscow, Russia in March 2008. It will sell products and services of the company to the customers across the CIS and Russia (the former members of the USSR). According to TCS vice-president, Gabriel Rozman, they can enter the Russian market either by acquiring a local firm or independently.

With TSC entering the Russian IT market, the competition in systems integration, software deployment, IT consulting, and outsourcing, especially that of business processes, will sharpen.
Experts claim that by 2010 TCS may bite up to 10% of Russian IT services market pie.

Despite the boldness of these plans, the major Russian market players, with EPAM Systems among them, do not take them seriously. They believe that the Indians have slight chances of winning large contracts as they will not get the lobby in Russia similar to what they enjoy in the US or UK. Furthermore in order to succeed in this region, the Indians will have to buy a large local company: Until then, few companies will regard TCS as a serious competitor. Unlikely is also that they plan to launch a large development center in Russia. Taking into consideration today’s tough competition for well-qualified IT professionals between the local companies, TSC will perhaps hire a hundred developers at best.

Source: Kommersant (In Russian)

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TrendScan Survey: Spending on ITO “will increase” in 2008

Of the 250 global companies polled in Syntel's TrendScan survey, 52 per cent said that the impact of financial turmoil would prompt them to increase their outsourcing spend.

Bharat Desai, chairman and chief executive officer of Syntel, said: "In a weak or uncertain economy, companies look for technology solutions that will increase productivity, efficiency and savings."

Furthermore, she claimed that Syntel was "not surprised" that over half the respondents in the survey planned to increase their spending in 2008 despite threats of a slow-down in the economy.

"Outsourcing is a hedge against general IT costs and can be a strategic component of research and development," Bharat explained.

The survey also revealed that just 28 per cent of businesses polled would spend less overall to conserve budgets during 2008 while 19 per cent said that their outlay would remain at around the same level as last year.

Syntel is a US-based firm which provides professional information technology consulting and applications management services to companies and government entities.


Source: ihotdesk

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Gartner Predicts Steady Growth for IT Outsourcing Market in 2008

The spending on third-party providers will increase by eight per cent this year both in the United States and in Europe, according to research by analyst Gartner.

The value of publicly-disclosed business process and IT outsourcing contracts dropped by 50 per cent during 2007, says the study. But as the market matures and becomes more commonplace, fewer deals may be reaching the world's press, suggested the analyst. Companies are outsourcing more, but electing to use a multi-provider strategy and so deals are smaller in size and less reported.

Gartner has identified 35 countries where IT directors could consider establishing their own software development and shared services operation, or where local service providers are beginning to sell services beyond their domestic market.

Gartner says Russian locations are providing “credible alternatives”. Others topping the list include Ukraine reconfirming its maturing market positions.

According to Ian Marriott, a research vice-president at Gartner and an expert in IT outsourcing, Belarus has begun carving a niche in application development services.

He also noted end-user businesses were increasingly factoring in proximity of time zones and ease of travel into their outsource requirements.

Sources: Computing ; ComputerWeekly ; Networkworld

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