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December 19, 2007

Skills, Local Growth Shift IT


Russian IT Sector Experiencing Upturn

One of the main pillars of the Kremlin’s “national project” program is supporting the growth of the high tech industry. Much of this strategy focuses on long-term goals and complicated science. Nonetheless, one particular area — the provision of IT support and software — is already starting to witness something of boom.

The most recent figures available from the government suggest that the volume of this market grew by 20 percent in the last year, reaching a capitalization of some 1,162 trillion rubles (approximately $48 billion). Indeed, RUSSOFT, the software industry’s representative, suggest that software exports alone account for a 54 percent increase since last year.

No less significantly, there has been movement to resolve many of the issues that previously hindered foreign collaboration — weak infrastructure, lack of knowledge of English, management and intellectual property rights. Just last year, the number of companies with international ISO or CMM/CMMI standard management systems increased from 18% to 28%.

According to Alexis Sukharev, founder of Auriga, a software research and design company incorporated in the U.S., what this has meant is an exponential growth in the demand for Russian IT skills abroad. “The Russian engineering labor pool now has a lot to offer to companies who need specific R&D skills and comprehensive approaches to complex projects,” he said. One of the main areas of growth has been outsourcing, with Russian companies increasingly able to become reliable strategic partners for Western high-tech and software companies.

In terms of the outsourcing market, India remains the indisputable leader in the field. But its superiority at the top end of this sector is no longer quite as assured as it once was. Steve Chase, president of Intel Russia, believes global leaders are increasingly turning to Russia with the most complex problems: “The policy we have at Intel is simple. If we can, we commit difficult problems to engineers in the USA. If the task is very labor-intensive, we assign it to the Indian specialists. If the problem cannot be solved, we offer it to the Russians.”

Uncommonly, Russia is not only experiencing accelerated growth in the export of IT products, but also consolidated growth in the local market. Indeed, global IT conglomerates are finding that a focus on the Russian consumer is now as profitable commercially as their export dimensions. Valentin Makarov, president of RUSSOFT, is particularly enthusiastic about the combination of strong export and import potential, as it encourages foreign clients to approach Russian companies “not only as outsourcing partners, but also as local promotion and marketing partners.”

Makarov was also keen to emphasize how rapidly the economic situation in Russia is changing. In broad terms, the volume of direct investment in Russia is now growing by 100% annually. Specifically in the area of IT, there have been radical changes in federal government policy, including the provision of tax breaks and investment capital to high-tech companies. The RUSSOFT survey showed 76 percent of market-leading companies consider government support to have improved significantly over the last two years.

Companies' opinionson the main trends in the Russian software development msrket
Source: Russoft
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