IBM Global Services Exec Offers Glimpse into Russian Market

Russian customers are gradually warming to services pitches, but are not yet to the point of signing up, according to the global services director for IBM East Europe/Asia.

MOSCOW—The rapidly developing Russian economy presents the Moscow office of IBM Global Services with plenty of challenges as executives there seek to convince Russian IT managers that outsourcing has its place in the IT landscape.

"We were missionaries a few years ago," said Sergey Yaskevich, global services director for IBM East Europe/Asia, explaining that at first, Russian companies were averse to outsourcing because they believed it was best to retain control of their IT resources.

"But now theyre interested," said Yaskevich, although he said theyre not yet to the point of signing up.

IBMs On Demand initiative also has been slow to take off in Russia, because high-speed Internet backbones have been scarce.

"IT as a service may start to catch on once the bandwidth is there," said Yaskevich. Those factors mean that in Russia, IBM Global Services generates only one quarter of IBMs total revenue. In contrast, IGS is responsible for a little more than half of IBMs revenues worldwide.

As Russian energy heavyweights Gazprom and Lukoil globalize, they present an opportunity to a global services firm like IGS, said Yaskevich.

But perhaps more important, strong oil and steel industries are generating big tax dollars, which have given rise to several major government initiatives on which IBM hopes to bid.

"Putin just announced several major projects: health care, infrastructure and education," said Yaskevich.

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"Taxation is now working in Russia," he added, contrasting the present with the early years of the Russian Federation, immediately following the collapse of the Soviet Union.

However, he noted that for a multinational company like IBM, some government business is off limits, as the federal department of defense and security services only do business with native Russian integrators.

That means that IGS has an uphill battle in competing with such Russian firms as CROC, IBS and TechnoServe, said Yaskevich.

In other work, IGS in Russia handles outsourcing work for the Russian units of IGS global customers, such as Procter & Gamble, for whom IGS handles human resources work.

Another customer with for whom IGS handles work in Russia as part of a global outsourcing deal is Belgian brewing giant InBev.

IBM became a legal entity in Russia in 1991. Before that, in 1974, the company established a rep office and was known as IBM Soviet Union. IBM now has several hundred people in Moscow, Yaskevich said.

In hardware, Yaskevich said PCs are the most popular hardware sold in Russia, while blades are the fastest growing.

Mainframe sales remain important, and the iSeries does a steady business, he said. The biggest mainframe user in Russia is the Russian Railway system, which has more than 1 million employees and uses 70 mainframes, according to Yaskevich.

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