Russia poised to benefit from outsourcing

Russia poised to benefit from outsourcing

The IT offshore outsourcing market is far from saturated and Russia is poised to become a major market player if it can overcome Western prejudices, speakers at the opening of Eastern Europe's largest outsourcing conference said on Wednesday.

Research director at Gartner Research's European headquarters, Ian Marriott, said that though outsourcing has been a growing trend, Western companies had only started to fully accept that outsourcing can be a reliable way of doing business.

"We're seeing a drift toward the idea that while companies need IT infrastructure, they don't necessarily need to own it," he said.

Marriott said that offshore outsourcing had resisted the global IT downturn and continued to record strong growth figures. He said, for example, that while the value of the IT services market in Western Europe fell marginally in 2002, spending on outsourcing by Western European companies grew 6.3 percent.

Indian companies had been the main beneficiaries, he said. Last year outsourcing deals in India were worth $US10 billion, or 85 per cent of the entire outsourcing market.

But Indian companies were already reaching the limit of how much outsourcing they could take on, he said. Some had already started subcontracting work to other countries, especially to China. That provided an opening for companies in other developing countries.

"Until now, all we've heard about is India, but now people are talking more and more about Russia, China and others," Marriott said. "We expect that over the next decade the Indian cut of the total outsourcing market will decline."

Russian companies were chomping at the bit to take some of that market share, but whether they succeeded remained to be seen, said another speaker at the conference, Vladimir Kroa from IDC's Moscow office.

"People no longer have any qualms about outsourcing, but the hard part for the Russians will be to convince Western companies that they are reliable enough to handle the job," Kroa said.

Russia has several advantages as an offshore outsourcing site, Kroa said. It has a highly educated workforce, especially in the high-tech sector, the needed IT infrastructure is in place in major cities such as Moscow and St Petersburg and the country has enjoyed political and economic stability over the last few years.

"And the prices here are still competitive, even compared with India and China," he said.

But its greatest disadvantage remained lingering negative perceptions of Russia among Western executives, Kroa said.

Some, such as the belief that Russian companies did not have the English-language skills of their Indian counterparts, had some basis in fact, he said. Others, he said, were simply remnants of Cold War attitudes.

"The idea that Russians can't do a job on time and are sloppy remains, unfortunately," he said.

Dozens of Russian companies will be vying for Western attention at the conference, which is now in its third year.

The Software Outsourcing Summit brings together representatives of more than 500 companies and participation has grown by 50 per cent a year since the conference was first organised.

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