CIOL:Russia plans to become IT superpower

Russia plans to become IT superpower

Russia intends to invest around $650 million in the IT sector over the next five years to be among the world's top 10 countries in IT by 2010.

Tuesday, February 08, 2005

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BANGALORE: When Russian President Vladimir Putin visited Bangalore in December last year, many old-timers wondered at the reversal of roles between India and Russia. In the past, India looked up to the Soviet Union for defense and space technology. In circa 2004, it was Russia's turn to look up to India's IT and software prowess and borrow a few pages from her success and also woo Indian companies for partnerships in Russia. Putin's visit to Bangalore was precisely for these very reasons.

Part of the oft quoted, growing BRIC market that includes Brazil, Russia, India and China is moving slowly to compete with India in IT. Industry experts estimate that Russia is at present, 10 years behind India in IT, the language barrier being the major constraint.

Currently, Russia ranks number three in the number of scientists and engineers per capita worldwide. When it comes to IT, there are more than 250 Russia-based companies that are active in offshore software development. Boeing has the largest development center outside of US in Russia. Companies like Motorola, Dell, Intel, Siemens and Sun Microsystems have their R&D centers in the country.

The telecom space in Russia is seeing a tremendous boom, while mobile phone subscriber base-jumped from 36.5 million in 2003 to 60 million in September 2004. Recently, Russian conglomerate AFK Sistema signed an agreement to buy 49 percent of Indian telecom player Aircel Televentures for $450 million.

Opening up

Ever since the Russian economy was thrown open to investment, the IT industry there has seen tremendous growth. The main areas of growth have been in security, shareware, telemedicine, and engineering. The IT market has grown 40 percent in the last three years. According to the Outsourcing-Russia.com website, the country's software exports sales stood at $600 million last year.

The government on its part, has taken on the task of encouraging investment and also deploying IT internally with programs such as Electronics Russia. A law of special economic zones would be enacted soon. Modeled on the Indian software parks, the government recently gave the go- ahead for the setting up of 10 techno-parks with tax breaks and reduced customs on imported equipment for companies operating from there.

While the abundance in software talent is to India's advantage, Russia's strong point is in its specialists. According to a World Bank report, Russia has one million specialists who are capable of joining its IT sector. Russian computer programmers are famed for their strength in mathematical skills and strong computer science and engineering backgrounds.

With so much in its favor, one would expect Russia to play a stronger role in the world market. However, its growth has not been prolific due to the small size of Russian firms and under-exposure due to low-key sales and marketing initiatives. The government is working on changing this by participating in world forums.

Russian IT and communications Minister Leonid Reiman announced recently that Russia would invest around $650 million in the IT sector over the next five years. He hopes that this would enable Russia to be among the world's top 10 countries in IT by 2010.

i-flex takes the first step

Recognizing the business potential in Russia, banking software major i-flex solutions set up a marketing presence in the country in December 2004. "We see this as a high growth market. Russia ended 2003 with its fifth straight year of growth, averaging at 6.5 percent and it is now the sixth fastest growing economy in the Commonwealth of Independent States (CIS) region," said V Senthil Kumar, CEO of i-flex Solutions b.v, the European subsidiary of i-flex.

With banks and FIs leading the economic growth, i-flex is witnessing a strong demand for solutions and hopes to increase its customer base in Russia. Though a development center there is not on the agenda, the company plans to have a multi-purpose-sourcing center for development, support and implementation of products and services.

Elaborating on the expansion plans, Kumar said, "We have a three pronged approach for the region. Firstly we have developed local relationships with indigenous IT companies to promote our product and services. Secondly, we intend to deliver the product using local talent, who will be trained by us and thirdly we plan to create a local support and implementation capability led by i-flex but managed and staffed with local talent."

Will other Indian companies follow suit?

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