The US IT industry is tapping into the technological prowess of the former Soviet Union, which is emerging as a research and development centre for software and telecoms firms, says a new report by Aberdeen Group.
But the country's software development skills, which can be accessed at a cost well below US rates, is also appealing to managers of non-IT firms. Craig Maccubbin, vice-president of technology at online travel service LasVegas.com, is one of them.
"Many [Russian developers] are ex-Soviet military technologists and programmers, and because of that, they have had classical training in software development," Maccubbin said. "They are so disciplined that there is almost a level of inflexibility to their approach," he said. But that level of discipline also "helps the process of working with them immensely".
The research by Boston-based Aberdeen found that nearly three-quarters of the offshore work in Russia is undertaken by IT companies, said Stephen Lane, the analyst who authored the report. IT companies are setting up development centres in Russia to help build a market there, as well as to use Russian talent for high-end development.
"What they do have is a culture that is focused on problem-solving and focused on using technology in an innovative fashion," Lane said. But "there is not a Russian company out there that can compete with an Indian company in terms of scale or scope".
Maccubbin uses Epam Systems, a New Jersey-based service provider with operations in Moscow and Minsk, Belarus. Major Las Vegas resort operators established LasVegas.com to give consumers the ability to book flights, entertainment tickets and even golf course tee times from one site.
Maccubbin relies on the development workers at Epam's Minsk facility to build and maintain most of the website's back-end functions. But the customer-facing aspects, such as graphic design work and other critical "defining characteristics" are handled in the US. "You can't outsource that to anybody," he said.
According to Maccubbin, developers in the US cost about $38 per hour, while the Russian per-hour rate is as much as $20 less.
Bob Pryor, who heads New York-based Cap Gemini Ernst & Young's outsourcing services, agreed that Russia has some very advanced technological skills. But he believes the country will remain a relatively small part of the offshore outsourcing market because the government isn't developing the industry and may be living off the legacy of its past.
"I don't see any significant investment for new skills and capabilities," he said.
Marc Herbet, executive vice-president of Sierra Atlantic, a California-based application management company that runs an offshore centre in India, said Russia may well take off as an offshore outsourcing centre if Europeans begin embracing offshore work, particularly because of the proximity.
While various countries offer certain advantages in offshore development, personal relationships sometimes drive the choice of location.
Matt Greer, CEO of Zeeo Interactive, a web development firm in Boston, said his introduction to Russia came via a Russian emigre working at his company. Outsourcing offshore became a necessity in order to compete, Greer said, particularly when client IT budgets were cut.
"It was prohibitively expensive for us to bring on domestic resources to get the work done," he said.
Patrick Thibodeau writes for IDG.