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News Release

Jan 30, 2009

The prospects of Russian outsourcing IT industry in 2009

During the current economic recession, Russia’s international reserves (478.76 billion USD as of January 1, 2008–RiA Novosti) are used by the government for a package of anti-crisis measures to stabilize its economy. As Russia’s Finance Minister Aleksei Kudrin stated at the Asian Financial Forum in Hong Kong, the government assumes that the budget deficit “should begin to decrease from 2011,” (Itar-Tass).

As indicated by PricewaterhouseCoopers (PwC), the Russian economy will continue to grow despite recession, although at a moderate rate. For example, in 2007 the Russia’s share in the global economy was 3,2%, and the forecast for 2014 is 3,5%. The forecasts and estimates vary depending on the Auditing body, but the experts agree that Russia is taking timely and appropriate measures.

It is natural that Russia cannot rely heavily on oil export, and has to develop alternative economic strategies. In this context, the prospects of Russian IT industry remain quite optimistic. According to the interview of Auriga President Alexis Sukharev to “Rossiiskaya Gazeta” (a Russian government newspaper), building an innovative economy is the only way “to turn the present raw material Russia into new high-tech, innovative Russia”, and this is understood by Russian authorities. President Dmitry Medvedev has declared that a new so called “knowledge economy” is among country’s top priorities. That is why a state funding of over 600 billion USD is allocated for hi-tech initiatives. One of the exemplary projects, supported by the government, is the technology parks initiative launched by former Russian President Vladimir Putin in 2005, based on the India development model. If this program proves to be effective, Russia will reinforce its position as a reliable outsourcing destination for complicated and knowledge-intensive tasks.

Russia has an excellent opportunity of becoming a global center of attraction for R&D outsourcing. This ICT sector, along with product development, has long been regarded as a major differentiator of Russian outsourcing industry. This advantage is undoubtedly rooted in the Russia's competitive education system focused on fundamental engineering and science. The knowledge of physics and mathematics serves as a good basis for SW development.

Despite proverbial engineering talent and problem solving flexibility, at the moment Russian IT services export industry is too fragmented and small to achieve a real breakthrough in this field. Mr. Sukharev believes that there is a lot to learn from India, with its impressive technopark infrastructure and IT companies, enjoying tax and customs benefits. Indian IT owes this success to the government who launched IT industry development programs, started as early as 1984, and introduced technology parks in 1990s.

Indian companies expressed intentions to enter the Russian Market. Interestingly, Mr. Sukharev supposes that if this market penetration will happen in 2009, that would be a start of collaboration rather than confrontation:

“Cooperation in the area of IT should be beneficial for Russia and India alike, both sides have a lot to learn from each other. At the very least, Indian companies need qualified partners who can support their products and developments in Russia”,—believes Alexis Sukharev, Auriga CEO and founder. “All of the above shows that there are undoubted synergies between the two industries: the big and mature Indian IT industry, searching for global talent, and Russia, a historic ally of India, with its rich scientific heritage and strong momentum. A wealth of opportunities starts springing to mind, doesn’t it?”.

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