Page Two

By Paula Musich  |  Posted 2002-09-23 Print this article Print

: Much Work to Do"> Despite the low-cost labor and talent advantages Russian outsourcers offer, Russia still has work to do to lead the countries looking to challenge Indias dominance. "They have to emulate India in one respect ... sell Russia," said Stephen Lane, an analyst at Aberdeen Group Inc., in Boston. "NASSCom [National Association of Software Services Companies] in India is an extremely effective lobbying organization that speaks on behalf and provides information on the Indian software industry."

Russia has yet to develop such an effective industry group, although a Moscow-based group called Russoft, Russian shorthand for the National Software Development Association of Russia, is working to get there. Russoft last week held its first conference, in Moscow, and said it represents some 50 companies, 6,000 programmers and 40 percent of the Russian IT development and export industry.

NASSCom, of Bangalore, India, was instrumental in lobbying Indias government to create favorable tax laws and regulations that protect intellectual property, fund education with an emphasis on IT, and create a business atmosphere attractive to international companies.

Russoft and the Russian government have not made similar strides. "Business transparency in Russia has some ways to go," said Lane. "Is the central government trying to make changes in those directions? They are. But they have a long way to go."

Surprisingly, one country that appears to have strong backing from the government is China, according to Gordon Brooks, president and CEO of application maintenance outsourcing startup E5 Systems Inc., in Waltham, Mass.

"Government support is tremendous. Chinas cracked down on copyright violations," said Brooks, following a recent visit there to look at the labor pool.

China, too, has a top-notch educational system, with a heavy focus on IT, Brooks said. And no one graduates from college without being able to read and write English as a second language, he said. "They are very pro-business, pro-America and very focused on outsourcing," Brooks said.

Also lacking among Russian outsourcers is process maturity for software development, said Gartners Marriott. "The majority of Russian vendors are now striving for CMM [Capability Maturity Level] 3. Many Indian companies are at CMM Level 5," he said. Luxoft is certified at CMM Level 4.

Still, with the global offshore outsourcing market growing at a healthy pace and uncertainty over the stability of India in its conflict with Pakistan, opportunities abound for Russia and other upstart countries. Last year, software exports in India totaled $6.2 billion, a 19 percent jump over the previous year.

"[Russian vendors] perceive their job is to beat the Indian offshore development market, but offshore software development is growing as an overall market," said NewspaperDirects Horvat. "There is plenty of space to grow the market, and Russian companies will have unique opportunities to pry open doors that would otherwise be closed to other offshore development countries."

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