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Press about Auriga

Feb 12, 2007

IT Co-operation between India and Russia is Booming. A veteran's view.

Russia India—matching towards a common future. A Business Associate Report from the Economic Times

By Alexis Sukharev
President, Auriga, Inc.

Russia and India are two adjacent sides of the square called BRIC, two economic success stories of the early 21st century. The Russian economic boom started paradoxically enough with a financial default of August 1998 and is based on its natural resources wealth; the Indian economic rise has a longer history and is rooted in the IT revolution. I am a long time admirer of the Indian IT accomplishments and even co-authored a book “India: Targeting a Status of the Global IT Superpower” published by Moscow State University Press in 2001 (English translation is available here). My respect of what is being done here was once again substantiated by INDIASOFT 2007 in Hyderabad, from where I’ve just returned with a conviction that the current IT labor shortage will be overcome, and India will remain the undisputable ITeS leader in the years to come. What’s more, I strongly believe that IT sectors of our economies have reached the level at which they can efficiently cooperate to use their mutually complementary strengths. Now it’s only a question of who becomes the first to explore this opportunity.

Recent steps to form IT partnerships in China, the Philippines, and other countries certainly lead in the right direction. Isn’t it time for Russia now? Even a brief look back at the history of the relationships between the two countries strengthens my belief that the answer is positive. Afanasiy Nikitin, a Russian merchant, discovered India for the Russians in the 15th century, three decades earlier than Vasco da Gama for the Europeans. Mahatma Gandhi, Jawaharlal Nehru, Rabindranath Tagore, Indira Gandhi, Rajiv Gandhi are the names widely known and highly respected in Russia. Proximity of the Indian and Russian national characters, historic and current ties and partnerships in education, aviation, space, military, oil and gas, nuclear power, cultural exchanges—all these lay a strong foundation for cooperation in IT, the field of equal importance for both countries. There were a few examples of IT cooperation in the past. I remember speaking about cooperation around Soviet-made Unified Series mainframes at the IT roundtable in December 2004 in Bangalore within the framework of the previous visit of President Putin to India. A few Indian older generation colleagues in the audience enthusiastically commented on their participation in that program even though I’d confess that Unified Series computers were not the best machines we were dealing with even in the 70s. But despite this enthusiasm, very little is going on between India and Russia in the IT field today, to the disappointment of both sides.

It’s the right time to fix that surprising deficiency in our relationships. The Russian economy and its IT sector are ready to make a breakthrough. Simply take a look at some observations of the Russian economic landscape from the Russian Economic Report published by the World Bank in December 2006:

The Russian ICT industry is growing fast and has reached the size of over $30B in 2006, demonstrating a five-year CAGR of 21.8%. Just consider this: the number of mobile phone users in 2005 (top 3 countries): China 375.7M (29% of population of 1.3B), U.S. 206.1M (69% of population of 299M), Russia 125.5M (88% of population of 143M); mobile phone penetration in Moscow—70%, in New York City—54%.

The IT sector is becoming more mature and the growth pace by segments has changed.
IT services are getting more and more important, diminishing the share of hardware: 32.5% and 56.5% of the IT market size, respectively. IT outsourcing export revenue is expected to get close to $1.5B in 2006. Even though the Russian ITeS export industry is still small and highly fragmented, it has some unique features that allowed CRN to rank Russia in its cover story number 2 (after India, of course) among “10 Offshore Powerhouses”. The reason, according to CRN, is “strong engineering talent and programmers who show more flexibility than some other offshore locations”. Engineering talent of the Russian programmers, their creativity and ability to solve complex problems in fuzzy environments became the staples in the studies of the Russian offshore industry. The three main questions are: Is it true? What is the size of the talent pool? and Does it matter much? Let’s try to answer them one by one:

  • Is it true? Check the results of the annual ACM International Collegiate Programming Contest—every IT college kid in the world knows what it is—in 2006: 5,606 teams in regional contests representing 1,737 universities in 84 countries on 6 continents, 83 world finalist teams in San Antonio, Texas. The outcome: 5 out of the first 10 teams including #1 and #3 are from Russia. The same trend has held for the last 7 years: Russia became the world champion 4 times, and out of the remaining 3 years—2 times #2 and #3 in the world. Another indicative event: October 2006, Google’s Global Code Jam Contest: #1 and #3 top world coders are from Russia, as well as 32 out of 100 finalists.
  • What is the size of the talent pool? I’d highly recommend reading our company’s White Paper on Russia’s New IT Resources. It shows that Russia's competitive advantage is its high quality education system that focuses on deeply fundamental engineering knowledge. Our research found that the new IT labor supply was over 244,000 people in the 2005-06 academic year. The total new IT labor figure in Russia is slightly lower than in India—246,000 people in 2005-06, but the gap is considerably smaller than it is perceived.
  • Does it matter much? In the recent study by Booz Allen Hamilton, a leading global consulting firm with more than 18,000 employees, and the U.S. Ivy League Duke University almost 70% of the 537 respondents across Europe and the U.S. stated that offshoring is driven by the need to tap the global talent pool, as opposed to last year’s survey where respondents stated lower costs as the highest incentive to offshore. Offshoring of R&D work grew 65% during 2006 as opposed to 40% during 2005. The findings shatter a long-held myth that low-skilled jobs are most likely to get offshored while high-skilled jobs would remain onshore. On the contrary, experienced customers who have offshored low-end work to leverage labor arbitrage have found that they are not being effectively served from lower-cost countries because of cultural differences.

My company, Auriga, Inc., is a poster child for the Russian IT offshoring industry. It’s the oldest in the industry—I founded it in 1990 after 20 years of teaching and research in math and theoretical computer science at Moscow State University. It’s a small, less than 300 people, boutique shop specializing in system level and embedded systems development, with 94% of the employees having masters’ degrees from the Russian elite universities—47% of them in math (applied math in Russia is often a synonym for computer science) and 20% in physics, serving customers mostly in the U.S.

Now, what are those prospects for India-Russia IT cooperation in the title of this article? Well, all the above shows doubtless synergies between the two industries: the big and mature Indian IT industry in search of the global talent and Russia, a historic ally of India, with its rich scientific heritage and strong momentum today. Add to the picture the Russian fundamental education system with a lack of resources to teach modern information technologies and India with its numerous specialized IT institutes and commercial training providers. The opportunities start abundantly forming up in the mind already, don’t they?

In fact, the first sprouts of cooperation in the education field have started to show up. In June 2006, professors from the International Institute of Information Technology (I2IT) of Pune taught a one-week IT management course at Auriga in Moscow to the delight of our managers. Six months later Auriga’s trainers taught a Linux Kernel course in Pune. Here is what the students said: "I can say he is one of the best trainers I have ever seen" (I2IT), "Explanation of concepts was excellent" (MindTree), "The range was broad, a few insights were good, the strong emphasis on practice was very good" (IBM). Indeed, cooperation is a two way street. So far, such courses taught by Russian IT specialists in India are a rare thing, but with the obvious benefits for both sides, and I foresee cooperation growing. Actually, there’re already plans to continue this program between I2IT and Auriga.

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