IT Outsourcing in Contemporary Russia

The current state of IT and outsourcing industry in Russia is on the uprise. Just consider the following fact: the average rate of growth of Russia's economy is significantly lower than the rate of growth of IT.

The financial crisis, which occurred over two years ago, forced clients to reconsider their attitude to "the impossibility of outsourcing critical functions of IT". Most businesses took another look at the age-old practice of outsourcing and had to acknowledge that the last decade significantly changed the IT industry. The heads of IT departments stopped fearing losing company value by outsourcing some functions. Outsourcing has progressed to a level that would have been reached otherwise in three to five years, had the financial crisis not occurred.

The main difference between Russian and Western IT outsourcing remains in the absence of mutual trust between the outsourcer and the consumer in Russia. Furthermore, the success of the Western service provider is based on the high level of innovations and the originality of the service. Lately the most popular topics for discussion have been cloud technologies and rendering services according to principles SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service). These new approaches, on one hand, will bring a new wave of interest from a growing number of clients, and on the other — a wide range of offers from outsourcing companies. Without a doubt, there will be unique cases in working with each individual model, and every implementation would have to take into account all particular features of the client: specifics of the business, level of infrastructure and quality of personnel. But the commonality of all these cases will be the increase in mutual trust and responsibility of the outsourcing company for the result of the service project.

Today more than a half of clients feel that they must switch to the outsourcing model in the nearest future, and more than one-third already have some level of service agreements and are planning to expand them by implementing new types of services in software development, testing, and maintenance and support. Russia is wide open to all new opportunities in outsourcing.

Source: The Moscow Times

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Why Russia and Ukraine are Hot Sports for Financial Technology Outsourcing

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

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

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

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

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

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

Source: ITO News

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Western Europe’s Outsourcing Trends

Western Europe, the second largest outsourcing market after the US, is characterized by a pretty diverse behavior in terms of software development outsourcing habits. The latest trends and key similarities and differences in ITO engagement were recently highlighted in a report by an independent IT outsourcing (ITO) research and advisory company IT Sourcing Europe. The report is based on a comparison analysis of corporate outsourcing behaviors in the United Kingdom, Denmark, Germany, Switzerland, Netherlands, and Austria.

Below are some thought-provoking findings for nearshore and offshore software vendors:

1. Regarding the most popular outsourcing destinations in 2010, the majority of the UK and Dutch companies (23% and 29% respectively) outsource their software/web development offshore (i.e. India, China, Philippines, Pakistan, etc.), while most of Danish (34%), German (37%), Swiss (41%), and Austrian (32%) companies prefer nearshoring when it comes to outsourcing software development (Eastern Europe and the Baltic states are among the most popular destinations).

2. Regarding the future outsourcing destinations, the equal number of the UK outsourcers (28% and 28% respectively) will place their software development function nearshore and offshore; the majority of Dutch companies will be sourcing nearshore (27%), while Danish, German, Swiss, and Austrian companies will continue outsourcing nearshore (25%, 31%, 32%, and 30% respectively).

3. Regarding the actual savings from the outsourced development, most of the UK (36%) and Danish (27%) companies save 40% to 59% of their operating costs, while majority of Swiss (35%), German (38%), Dutch (28%), and Austrian (31%) companies manage to save 10% to 24% from their outsourced development.

More interesting findings will be available in the European ITO Intelligence Report 2010 to be released in December 2010.

Source: IT Sourcing Europe

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Europe Embarks On the Outsourcing Spree

According tо the recent report by Gartner, world’s leading information technology research and advisory company, IT outsourcing is strongly gaining momentum in Western Europe, the second largest market after the US. The survey results show, that more than half, exactly 53%, of organizations in Europe plan to increase outsourcing initiatives in 2010, and 40% anticipate to surge spending on external IT services. The online survey was conducted among 206 organizations in Europe during in the first quarter of 2010.

At the same time, the analyst firm does not see it all in bright colors and warns service providers of potential constraints. With IT budgets still tight, European organizations expect their vendors to deliver tangible cost reductions. The market opportunities are large, but the customer expectations are also high. European organizations are looking for outsourcers to provide more than “my mess for less”, says the report.

Outsourcing upside creates excellent opportunities for nearshore service providers. Nearshoring has a row of advantages, such as time and cultural proximity, cutting travel costs, etc. In such situation, established Central and Eastern European vendors, which bring about the whole bunch of nearshoring advantages, come as a natural choice for many Western European clients.

Source: V3.co.uk

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European IT Outsourcing Trends: CEE Gains Momentum

IT Sourcing Europe, a European company specializing in nearshore IT outsourcing consultancy as well as market research and analysis, has announced the completion of its “European IT Outsourcing (ITO) Intelligence Report 2010: Central and Eastern Europe”. This is a comprehensive study of the European IT outsourcing demand and market trends. The Report targets at all types of Western European companies who either outsource or plan to outsource their IT functions nearshore.

The IT Sourcing Europe’s Report shows that:

• Outsourcing to Central and Eastern Europe is expected to grow over the next 10 years;

• Investors and management anticipate 30% revenue growth in 2010;

• CEE, above all regions, is expected to leverage its competitive advantage in the high-growth areas of offshoring and nearshoring and possibly move ahead as the most attractive labour arbitrage alternative for Western European clients;

• Low labour costs are not the only grounds for outsourcing. The human capital of the CEE region is one of the primary reasons why Western companies choose to outsource there.

Regarding the major ITO trends, 2010 anticipates a significant change in the European IT Outsourcing landscape:

• More small and mid-sized organizations are expected to outsource their software/web development nearshore, compared to pre-crisis times.

• Additionally, buyers become more demanding and challenge their ITO partners to differentiate their position and value.

• Today’s Western European companies are seeking a combination of speed, cost management and growth supported by business agility and technological innovation.


Source: IT Sourcing Europe

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Central and Eastern European Software Engineering Conference Gains Momentum

The 5th Central and Eastern European Software Engineering Conference in Russia (CEE-SECR 2009), the key software event in CEE region, was held in Moscow at the end of October. What initially was positioned as a Russia focused event back in 2005, gradually evolved into a large-scale regional software developers’ conference attended by over 500 software experts from 15+ countries.

The conference is an excellent meeting point for software professionals from Central and Eastern Europe and Russia providing them with an opportunity to share valuable experience and best practices, discuss challenges and innovations, to communicate with colleagues, find partners and clients.

This year the agenda, to say the least, was full. Keynote speakers from Google, IBM, Microsoft, Tibco and other companies covered such hot topics as the synergistic effect of Agile-CMMI combination, Enterprise Security Assessment Sharing system, best practices in software architecture, including Total Architecture approach, new content-based communication services, and testing software. Russia and Eastern Europe at large are nowadays listed among the most favorable and fastest growing software outsourcing spots gaining increasing attention of Western clients.

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