7 December 2007

Is Russia the next outsourcing destination?

While India has worn the crown, for some time now, of being the number one software development and outsourcing destination, it appears an unlikely contender is emerging - Russia - which is now being increasingly seen as an alternative to India's sustained dominance.

This is according to Karen Geldenhuys, newly-appointed managing director of IT recruitment company, Abacus Recruitment.

Geldenhuys said companies unwilling to invest all their IT outsourcing resources in one country, or who are simply looking for an alternative, are starting to turn to Russia. "This is also possibly a new competition threat to South Africa, which is certainly consistently ranked among the top 10 countries, worldwide, as a preferred outsourcing destination. In 2003 we were ranked number six, for instance."

According to latest reports, the former communist capital now boasts a growing number of IT outsourcers, offering anywhere between US$8,000 – US$14,000 for a programming job.

Geldenhuys said Russia is now parading its IT industry as a strong alternative in the outsourcing environment. "They are offering what they claim is top quality, cut-price programming, with the renowned Russian efficiency and a big pool of highly educated programmers."

Adding credence to this claim, income generated by exported Russian IT services have ballooned to twice their original rates over the years, rising to a not too unimpressive US $450 million by 2004. Not big in global terms - and certainly a drop in the proverbial ocean compared to India’s US$20 billion industry - but it is certainly a definite trend upwards, reckons Geldenhuys.

She said SA companies should “sell themselves better”, especially since the South African government has recognised BPO (business process outsourcing) - and software development - as major export industries for the future. In fact the government has set aside a sum of R1 billion to invest in appropriate incentive schemes over the next five years in order to attract direct foreign investment and boost employment.

“The local BPO industry - and the software development industry – perhaps needs to be more proactive in how it works with government and how it sells its services to overseas businesses. Despite the fact that our telecommunications costs are too high – this is a well-worn fact – we are certainly still in a position to offer good services at very affordable prices. We should stop selling ourselves short.”

Commenting further on Russia as a ‘new’ outsourcing hub, Geldenhuys said: "Russia is not a sleepy hollow. It has emerged from communism - or is certainly in the progress of doing so from an economically point of view - and boasts expertise in a number of hi-tech areas, including aerospace. Additionally, the country’s programmer population presents a strong front as well, currently boasting a 250,000-strong software engineering force - more scientists per capita than Britain, Germany, India, and France.

US companies seem to have taken note and have established R&D centres in Russia. Those making the move include Motorola, Siemens, Sun Microsystems, and Intel.