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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Excellent NearShoring Choice – Ukraine

The long-established popular offshoring location India is steadily yielding to more attractive NearShore hubs like Russia and Ukraine. Why is NearShoring becoming a preferred choice of outsourcing customers? Why does Central and Eastern Europe lure more IT projects and thrive on the global arena?

In our today’s article we’ll take a good look at Ukraine and scrutinize its outsourcing potential as an advantageous NearShoring option.

First and foremost, in terms of the growing volume of offshore software development, Ukraine’s outsourcing potential is rooted in its deep skilled talent pool. Due to its technical expertise, the country gets a serious competitive advantage on the global arena attracting more mission-critical software implementation projects and complex consulting engagements. Figures from the Ukrainian Hi-Tech Initiative, the country's outsourcing software development alliance, reveal Ukraine's outsourcing industry is estimated to have grown by 20% in 2010.

However, growing technical expertise and demand for developers has led to increasing labor costs. According to the European Business Association (EBA), the monthly earnings of IT specialists in Ukraine have risen by $300 to $1,500 since 2010. In 2005, a monthly pay was just $500. Although even considering the significant pay rise, Ukraine still remains far cheaper than most countries in Western Europe. The country's biggest asset remains in its educated young people, who are not easy to find elsewhere even for real big money. "Many speak English and are internet literate. Companies employ these youngsters, and that's why they thrive," noted Michael Borg-Hansen, who has worked as Danish Ambassador in Ukraine since 2009. "You have to be really resilient in business to make it here, but it's the same case in a lot of emerging economies."

Source: ComputerWeekly

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Collaborative Sourcing As a New Transformational Approach

Is outsourcing outdated? Yes, collaborative sourcing is currently on the rise.

Application collaborative sourcing is a delivery framework that provides ongoing development and maintenance of an enterprise's full application portfolio. The framework model provides a platform to drive innovation and focuses on time-to-value while introducing working collaborative practices to get critical business functionality into production at a fast rate.

A core theme of collaborative sourcing is improving the business's capability to compete on time. The collaborative sourcing argument is that if we wish to accelerate time-to-value, we need to measure factors of time at the lowest levels of granularity possible.

Collaborative sourcing accelerates time-to-value. Through a set of Web 2.0 technologies and an integrated set of processes, collaborative sourcing focuses on cycle time (elapsed time) and speed (hours vs estimate) as the principal metrics for measuring performance.

Staff behaviors are directed toward competitive, time-based outcomes when not only development methods, but also the talent model and recognition systems, are calibrated on time-based measures.

Collaborative sourcing is a true transformational approach to an enterprise's applications development and maintenance strategy. In addition to providing the mechanism to realize the benefits of global delivery and continue significant cost reductions, collaborative sourcing creates the engine to accelerate time-to-value. Rather than focusing almost exclusively on cost takeout, collaborative sourcing refocuses a CIO's capabilities and resources toward adding value to the business through accelerated time-to-value and outcomes-based measurement processes.

Source: Global Services

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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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Tips for Successful Re-sourcing of IT Deals (Part II)

In our today’s post we continue to give tips for successful re-sourcing of IT deals:

6. Prepare for People Problems. The outsourcing deal you signed may limit your right to solicit and re-hire provider personnel or make it difficult for the new provider's employees to shadow or conduct other knowledge transfer work with the incumbent's people, says Andrews of Thompson & Knight.

7. Select the Right Silo. "Towers where an incumbent outsource provider has included labor, hardware and software as part of the service offering will be much more complex to transition to another service provider than that same tower being provided under a labor-only model," says Pace Harmon's Martin.

8. Calculate the Cost of Disruption. There will be a price to pay for moving the work to a new provider so figure out what it is before first. "Do your homework," Lepeak says. "Understand the risks, costs and the level and nature of the likely disruption, and weigh that against the benefits of the transition."

9. Master Multisourcing. Most of today's resourcing work involves a partial transfer of outsourced functions resulting in a multi-provider environment, says Andrews. Coordinating multiple providers takes time and effort. Andrews advises that new contracts address some of those challenges including cooperation among providers, customer consent and approval requirements, and common access or usage rights to software or other proprietary materials.

10. Make it Easier on Yourself Next Time. You've consulted the contract, calculated the costs, and made the decision to recomplete. When it comes time to sign on the dotted line with the new provider, apply what you've learned. "The outcome of a re-sourcing often depends on leverage," says Andrews. "Make sure you have some in the new contract."

Source: CIO

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Tips for Successful Re-sourcing of IT Deals (Part I)

Re-sourcing might seem a complicated process at first sight for most IT services customers, although it is not, unless you follow the expert advice provided by the best outsourcing consultants and outsourcing experts that we highlight in today’s post.

Re-sourcing – the process also known as "recompeting" a deal – means switching outsourcing providers or bringing work back in-house, and it’s quite a usual practice in business world, and businesses shouldn’t be afraid to switch providers if they feel unsatisfied with their current services.

A successful transition from one vendor to another requires cooperation between the two, and both sides should consider the following tips in order to succeed at the recompete:

1. Go Back In Time. "Remember why you outsourced in the first place," says Edward J. Hansen, partner in law firm Baker & McKenzie. "If the reasons to outsource are still relevant, then you should consider changing providers rather than abandoning the strategy."

2. Consider The Deal Lifecycle. "Contractually it is often easier – though not easy – to shift work from one provider to another at the end of a contract term rather than in mid-term when various penalties may be incurred," says Stan Lepeak, Director of Research in KPMG's Shared Services and Outsourcing Advisory group.

3. Consult Your Contract. "Your contract could include exclusivity provisions, minimum spend commitments, or rights of first offer or first refusal for the provider that contractually limit or prohibit resourcing," says Steve Martin, partner in outsourcing consultancy Pace Harmon.

4. Question Your Motivations. "I recommend spending the time to determine what is motivating the customer to pursue this path, and whether it may be possible to make the current relationship work," says Hansen of Baker & McKenzie. "It may be possible to reset the relationship, renegotiate the contract and avoid the operational risk of moving."

5. Question Your Outsourcer's Motivations. "If the service is bad, it may be an indication of an unprofitable deal for the supplier and they may be motivated to move away from it," Hansen says. "On the other hand, if you can have a good honest conversation about this, you may be able to renegotiate the deal and leave the services where they currently sit."

To be continued...

Source: CIO

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Success Drivers in an Outsourcing Relationship

Managing a long-term outsourcing relationship is no easy task and establishing an outsourcing relationship that is both efficient and mutually beneficial may sometimes seem unattainable. Missed deadlines, fixed expenses, work or finished products that don't meet expectations are just a few of the problems that business owners can imagine when they think of outsourcing IT services to an independent contractor. Is that how many of you think of outsourcing? The answer is “no”, if you just take note of the following tips for how to get an outsourcing relationship on the right track.

In order to minimize problems and get better results from outsourced IT projects, here are four things you should do to make the outsourcing relationship work for you:

• Identify which tasks are appropriate to outsource. Make a list of tasks that are routinely performed by you and your employees. Review the list to see which activities might be outsourced: tasks that make good candidates for outsourcing include activities you or your key personnel are doing that are routine and repetitive and taking time away from more important work and tasks that you and your staff don't really have the expertise to do, but aren't needed on a regular basis.

• Systematize repetitive tasks. To get good results when a repetitive task is outsourced, you need to be able to provide the contractor with details about how the work should be done. Take the time to write down the steps you take to complete the work you want done, including enough detail about the steps that need to be completed, methods to be used, recordkeeping that needs to be done, etc. so that a contractor can perform the work the way it would be done in your company.

• Research needs for projects that are beyond your area of expertise before you outsource the work. You won't be able to choose the right contractor for a job and the contractor won't be able to meet your expectations if your expectations aren't reasonable and clear up front. What do you want done? What's your budget? What results do you expect? How do you want the results achieved? What's the time line? What deliverables will you require? Make sure you have clear answers to these questions before the tasks are outsourced.

• Locate and get to know companies and people you might want to use – ahead of time. Check out their websites, check their references, and where appropriate, give them small jobs first. If those are completed satisfactorily, then assign the contractor bigger or more important tasks.

Source: NASDAQ

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