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News Release

Oct 30, 2009

Top outsourcing destinations of the near future: Russia, especially Nizhny Novgorod

As a recent Global Services-Tholons Study shows, Russia continues to strengthen its positions as IT and R&D outsourcing destination, and Russian cities consistently appear in the list of the best outsourcing locations for various branches of software development.

A report, issued in October 2009 by Global Services-Tholons research team, features 3 Russian cities - Moscow, Saint Petersburg and Nizhny Novgorod - in several categories of outsourcing locations, and Russia as No. 2 in the independent Next 5 Offshore Nations list.

Let us start with the least known of the three locations – Nizhny Novgorod, the fourth-largest Russian city, featured at the first place of the Top 10 Aspirant - a category containing cities that have potential to enter into the main list in the coming years and are being supported by their governments to develop and facilitate outsourcing sectors. Nizhny Novgorod, which was mentioned among new Tier-2 cities in the Tholons survey of 2008, is known for its engineering R&D and software development capabilities. The city’s IT industry is one of the largest in Russia, and many major software development companies, for example Intel, already have offices in Nizhny Novgorod. Nizhny’s educational structure helped building world-class engineers and technical experts. Nizhny has top-level higher educational institutes, such as Nizhny Novgorod State University, Nizhny Novgorod Technical University, and Nizhny Novgorod Institute of Information Technologies that provide a wide range of educational programs in computer science. The city, about 400 kilometers to the east from Moscow, is a good nearshore location for European countries.

It is no coincidence that Auriga has been operating a software development center in Nizhny Novgorod since 2006. Auriga specialists in Nizhny Novgorod that graduated from top-level technical universities are capable of performing the most complex engineering tasks and developing cutting-edge products.

Moscow and Saint Petersburg are included in the list of Top 50 Emerging Global Outsourcing Cities, as No 32 and No 38 respectively. In previous years both cities appeared in the list, with Moscow moving up, and Saint Petersburg steadily occupying the same position in years 2007-2008. In the focused ranking of Top global outsourcing cities by functions St Petersburg is mentioned as one of the best established locations for Engineering Services, and Moscow – as one of the best emerging locations for Engineering Services and Animation / Game Development.

Next 5 Offshore Nations is a new category that includes countries, - great alternatives for specific types of processes, - and which are considered as outsourcing destinations with prominent near-term potential (compared to the traditional Top 5 Offshore Nations category that lists mature outsourcing locations). It is noted in the report that division between these two categories is based on the customer perception, which may change with years.

Russia, which has been named as No 2 in the Next 5 Offshore Nations list, has great potential to become a global leader for high tech R&D outsourcing. Russia is known for its excellent software development skills and vast resource pool, and top organizations like Intel, IBM, Motorola, Samsung and Google have their software R&D centers in Russia. The authors of the Global Services-Tholons study emphasize that Russia, while sharing the niche service characteristic for the offshoring and outsourcing industry with other Eastern European countries, stands out in the region for its capacity to deliver large-scale, high value services.

Some believe that orientation on software R&D is a limitation of Russia in the competition with the global IT outsourcing superpowers, such as India. But in my opinion, this naturally focused strength is rather a good seed for growth, since it would be hard to take this niche away from Russia, and further development can be based on this firm base. The question is how to use this strength properly.

First, the national industry clearly needs a more aggressive and systematic approach to distributing the knowledge about the huge experience and potential of the country in its niche.

Another important thing is exploiting some secondary strong points of the Russian industry - a number of "soft skills" that make it a good destination for offshore outsourcing. Service providers look beyond the technological experience, concentrating on flexibility in engagement and delivery approaches, integrity, cultural proximity, orientation on customer business goals rather than blindly following the specs, and other similar things. If played wisely, these "soft skills" may become the winning card for the Russian software services industry,”

Andrei Pronin, General Manager


About Top 50 Emerging Global Outsourcing Cities study

The Global Services-Tholons Top 50 Emerging Global Outsourcing Cities 2009 study provides a weighted ranking of specific locations in relation to their respective capacities as global outsourcing destinations. Global Services and Tholons have been conducting this study for the fourth year in a row. The first study, which was conducted in 2006, provided a non-ranked list of 50 emerging global outsourcing cities were identified. This year, the research process for the 2009 study included surveys and interviews with tier-1 and tier-2 global service providers and customer, collecting historical data from governments, global institutions and agencies, and quantitative and qualitative analysis.


About Tholons

Tholons (http://www.tholons.com) is a leading full-service Strategic Advisory firm for Global Outsourcing and Investments. Tholons offers the full range of service from developing globalization strategies, execution of outsourcing strategies and monitoring and tracking of outsourcing outcomes in order to meet client’s business objectives. In 1999, members of the advisory team founded the first advisory firm focused exclusively on Offshore advisory – neoIT. In 2006, they decided to expand the canvas of neoIT and started Tholons. Today, Tholons is a full fledged advisory firm focused on the unique needs of large and small clients.


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