outsourcing center - October 1, 2007 - Beth Ellyn Rosenthal
Five years ago, India was synonymous with IT offshoring. Today, that is not the case. IT buyers can find IT developers and engineers in every corner of the world.
Two areas are seriously challenging India's supremacy: China (position No. 2) and Russia (No. 3). Today, many IT outsourcing buyers are experienced offshore customers. They are going outside of India for specific skills they can't find there, in the US, or in Western Europe. And they want to mitigate risk by sending work to more than one locale. China and Russia have been the big beneficiaries.
According to the Russian Software Developers Association (RUSSOFT), Russian outsourcers have enjoyed 40 percent annual growth since 2003; 2007 is on par to equal that growth spurt. EU and US-based IT outsourcing buyers are sending work to Russia because its suppliers have distinct advantages over both China and India. They include:
- The ability to handle complex tasks. Anyone who grew up in the Sputnik era knows the former Soviet Union's emphasis on math and science. Today's for-export IT companies are enjoying that vaunted legacy. That's why Russian IT suppliers specialize in embedded software, mission-critical, complex applications, system engineering, multi-platform projects, and algorithmic work. Russian workers can tackle non-standard tasks essential for troubleshooting and new product development.
- An educated labor force. Half of Russian students major in science and math. That's 20 percent more than in China and at least twice the amount in India, Japan, or the US.
- A deep talent pool. Today 1.3 million Russians have degrees in computer science or engineering, yet only 70,000 work in IT-related jobs. The deep pool will keep wages steady in the next 24 months. Compare this to India, where wages are going up by as much as 10 percent a year.
- A stable workforce. Attrition rates in India routinely stay in the high 20s. The IT industry average in Russia is eight percent. A March 2007 IDC white paper entitled "Russia As Offshore Software Development Location: Should You Consider This Your Next Move?" found respondents discovered "price alone is a poor decision criterion which must be balanced by other considerations, not the least of which is the stability of the relationship, i.e. the rate of staff turnover." Labor stability means there is no need to overstaff projects to protect against high attrition. This saves money in the long run.
- Speed-to-market for new product development. In today's intense global marketplace, companies have to stay agile if they are going to remain competitive. They have to feed the revenue cycle by thinking up and then bringing to market new products. The Russian's ability to handle complex projects has helped its outsourcing buyers reduce time-to-market of critical new products, which has helped their bottom lines more than the initial cost savings, according to the IDC study.
- Cost. Russian salaries remain much lower than their counterparts in the mainstream ITO destinations, let alone in Western Europe or the US.
- Geographic proximity. Russian's major IT centers, the ones whose residents have the greatest scientific knowledge, are three hours or less by air to any Western European capital, making Russian suppliers the natural choice for nearshoring opportunities. The time zone difference is more convenient for both EU and US buyers than India or China.
- Cultural affinity. The Russian culture, business ethics, and mindset are closer to the EU/US than their Asian competitors.
The benefits of working with EPAM, CEE's and Russia's ITO leader
Currently there are dozens of players in the rapidly maturing ITO market. EPAM Systems, which was established in 1993, is the leader for many reasons:
- Size, stability and scalability. Currently, EPAM is the largest software services supplier in Central and Eastern Europe by both revenue (estimated US $100 million in 2007) and head count (3,000 plus employees). Also, the company is one of the fastest growing firms in technology world and has been recognized among the Deloitte Fast 500 for six years in a row and by Software Magazine among the Top 10 fastest-growing software product and services companies in $30 and $100M revenue range category for 2007.
- Efficiency and Quality. EPAM demonstrates sustained excellence in software engineering outsourcing following the latest development and technology standards. It uses a proprietary SDLC management tool designed specifically for distributed development using such methodologies as RUP and Agile. Russia, Hungary, Belarus, and Ukraine, where EPAM has its major development centers, leverage the unique tech skills of the CEE region. EPAM customers rely on its extensive outsourcing experience of 20+ million hours of successfully completed projects gained since its foundation in 1993.
- Software vendor partnerships. One of the unique aspects of EPAM's delivery model is its close partnerships with major software vendors including Microsoft, SAP, BEA Systems, and Hyperion which EPAM serves as clients as well. "Such relationships are a sound competitive advantage which helps us bring cutting edge expertise to our corporate clients and help them to build complex, mission-critical applications based on the new, advanced technologies," says Arkadiy Dobkin, EPAM CEO and President. "Participation in actual new product development for the top software vendors in the world is an unbeatable, unique experience that prepares our teams ahead of the market."
- US headquarters. EPAM is a US corporation based in New Jersey, which means it is subject to western corporate and intellectual laws; this is important because it simplifies the contracting stage and provides the highest level of comfort to US and EU clients.
- Multiple jurisdictions. EPAM's buyers benefit from the company's global delivery offices in the US, UK, Germany, Hungary, Russia, Belarus, and Ukraine. Multiple locations also mitigate geopolitical risk. The company routes the work to the most appropriate spot based on technology skills and vertical industry expertise.
- Strong onsite presence. EPAM currently has about 80 employees in the US and 200+ within the EU who provide strong interface to the company's development offices in Eastern Europe.
- Marquee client roster. Some of the biggest names globally outsource to EPAM. They include Reuters, London Stock Exchange, Colgate-Palmolive, British Telecom William Hill, Empire and CareFirst BlueCross BlueShield, Schlumberger, Halliburton, SAP, BEA Systems, Microsoft, and Hyperion, to name a few.
Today, IT buyers are developing a more sophisticated offshoring strategy. That's why they are turning to Russia in general and EPAM in particular to help them stay competitive in our global village.
Lessons from the Outsourcing Journal:
India is no longer synonymous with offshoring. While other countries still have not challenged India's hegemony, buyers today are sending work to other places to search for specific skills and to mitigate geopolitical risk. They are selecting Russian suppliers for the following reasons:
- The ability to handle complex tasks
- An educated workforce
- A deep talent pool
- A stable work force
- Geographic proximity
- Cultural affinity
Buyers chose EPAM because of its:
- Size, stability, and scalability
- Efficiency and quality
- Software vendor partnerships
- US headquarters
- Multiple jurisdictions
- Strong onsite presence
- Marquee clients
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