For many years, India has been the poster child of the offshore software development industry…But a serious rival now is emerging, one with the resources and determination to take on India — Russia.
The technology sector in Russia achieved $3 billion in revenue last year, up 19% from the previous year. Offshore software development now is a large slice of that total, growing at an estimated rate of 50% a year.
”Our research shows that Russian development resources have stronger math skills and are often used to develop algorithms and complex formulas,” said analyst Laura Carrillo of Boston-based AMR Research.
Carrillo pinpoints the Russian education system as offering high-tech workers there a competitive advantage. In Indian universities, students learn generic development and mass-produced coding for Java and C++.
”Russia takes a higher-level approach, picking individuals more carefully in a similar manner to MIT,” said Carrillo. ”As a result, Russian programmers and developers are more schooled on advanced math and computing techniques than their Indian counterparts.”
Must look at visiting Russia sometime soon!
An interesting article in the Economist concludes that in the wired world, physical presence is becoming even more important:
Tony Venables, an economist at the London School of Economics, believes that businesses that thrive on face-to-face communications — or what some call F2F — now account for a growing share of economic activity.
Michael Storper of the University of California, Los Angeles, has written a paper with Mr Venables on Buzz: The Economic Force of the City. They argue that cities are where information and ideas are developed and swapped. But not all information is equal. Some (a bank statement, say, or a booking) is easily codified and electronically swapped; while some (I have a deal for you, why don’t we do it this way?) requires context and trust to be meaningful. It is the second kind of information that requires F2F.
Writes Economist: “Companies are not only spending much less on IT now, but they are also spending differently. Software vendors, in particular, can no longer depend on quick multi-million-dollar deals, but must work harder to win contracts that tend to be much smaller. More importantly, customer priorities have changed. Rather than buying e-business software or new computers, companies want gear that helps to cut costs, improve security and integrate existing software applications.”
The article goes on:
Being forced to do more with less, IT managers are coming to like Linux, the free operating system. Linux and the universe of open-source businesses that surround it are one of the few areas of the technology business that is actually growing. Almost a fifth of server computers sold by Dell now have Linux installed rather than Windows. Sun Microsystems has begun offering Linux servers, and might soon add a Linux PC to its product line.
If this trend towards openness continues, the IT industry will probably have to live with lower profit margins than in the past. Either way, argues Steven Milunovich, an analyst with Merrill Lynch, profits will shift away from hardware, which is becoming more and more commoditised, to software, services and consulting. IBM forecasts that these last three will account for 58% of industry profits in 2005, up from 42% in 2000.