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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Analysts Found Haven for Custom Application Development

Russia has become a haven for custom software development across the full range of application types, as well as custom R&D and design work, embedded systems development, specialized testing, software package integration and translation services. These particular skills, Gartner Group says, are highly available due to Russia's unique strengths, which it lists as follows: an elite university system; a highly skilled and ample workforce; an array of specialized expertise capable of solving large-scale, complex technical problems; and cost of labor advantage compared with the US and Western Europe.

As a result, Russia has expanded steadily over the last few years and is rapidly becoming a major destination for offshore software development and software testing. Belarus, Ukraine and Poland are among other emerging destinations in the CEE region that have been recently often cited as lucrative software outsourcing locations primarily due to strong government support of the IT sector and multiple tax incentives. Analysts predict that the region will have captured a 7 percent share of North American and Western European offshore services revenue by the end of 2007.

RUSSOFT, the nation's trade association of software development and IT services companies, lists companies such as Boeing, Alcatel, Reuters, London Stock Exchange and Siemens as examples of more than 250 global corporations active in Russia-based offshore software development.

"We are moving from the era of cheaper coding towards outsourcing of more complicated solutions related to core business," says President of RUSSOFT Valentin Makarov. "That's why Russia's acknowledged strong points such as high educational level and creativity are finding so many new opportunities."

According to RUSSOFT, Russia is ranked number three in the number of scientists and engineers per capita worldwide. That translates into a talent pool of over 4.7 million students, 50 percent of which are majoring in science, math, and computer sciences. And these students regularly win international programming contests. In the world's most prestigious competition, the Association of Computing Machinery (ACM) International Collegiate Programming Contest, for example, the country boasts several gold medals in the last few years.

"Russia is of great interest to American high-tech because of the superiority of its software engineers," says Dr. Deborah A. Palmieri, president of the Russian American Chamber of Commerce based in Denver, CO. "They have exceptional theoretical ability, which when coupled with American know-how, provides a dynamic combination."

Source: Tech-2008

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Hungary on the Offshore IT Services World Map: EPAM’s presence

Russia isn't the only game in Eastern Europe, though. Countries such as Poland, Romania, Bulgaria, Czech Republic and Hungary are all growing technology hubs. Like Russia, they are reaping the benefits of one of the few positive legacies from the Soviet era - a well-established education system.

EPAM Systems, for example, is a leading provider of outsourcing services in software development, technology reengineering and application testing. Belarus, Russia, Ukraine, and Hungary locate EPAM’s large-scale software development centers, while the USA and UK house the company’s client support and delivery units. EPAM’s Hungarian customer base includes London Stock Exchange and British Telecom (BT).

It helped BT Group, one of the largest telecom providers in Europe, for example, develop a massive customer portal. BT Global Services, a subsidiary of BT Group, is a service provider helping organizations master the complexity of business communication. The company has coverage in more than 200 countries across five continents, 20,000 skilled professionals and one of Europe's most extensive IP-enabled networks. Its old online B2B system was inhibiting growth.

"It was too tightly coupled with the backend systems," says Andy Pennington, senior product manager within the Virtual Business Center (VBC) BT Global Services. "Changes were complex owing to over-engineering and we were relying on a hybrid set of technologies."

EPAM helped BT Global Services deploy VBC using BEA WebLogic Portal 8.1. It is an online B2B resource area used by more than 1,500 multi-site corporate customers. It enables real-time Web-based access to a suite of service management and collaborative applications. It supports the company's virtual IP VPN network solution. Customers can raise and review orders, as well as access interactive tickets and service requests. They can also manage their inventory and configuration changes.

To accomplish this EPAM opened the BEA WebLogic NearSourcing Center (WNC), headquartered in Budapest. It comprises more than 700 experienced BEA WebLogic and AquaLogic engineers.

"We estimate that using the WebLogic NearSourcing Center was a quarter of the cost due to the expertise and efficiency of the team as well as the relative price advantage of near-shore resource," said Pennington.

EPAM CEO Arkadiy Dobkin lists similar advantages in Hungary to those mentioned earlier about Russia. Mark Minevich, an analyst at consulting firm Going Global Ventures, takes that a stage further. He ranked Hungary fifth as an ITO outsourcing destination behind India, China, Costa Rica and Czech Republic.

Source: Tech-2008

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