Outsourcing: The Russian Revelation

By Stan Gibson  |  Posted 06-12-2006
When Daniel Marovitz sought an offshore partner, he scanned the globe. "We talked about Canada, Ireland and low-cost locations in the United Kingdom. But it really came down to India and Russia," said Marovitz, chief technology officer for global banking at Deutsche Bank's investment banking unit, in London.

Marovitz soon found the approaches of companies in those two countries could not be more different—and that a Russian outsourcing provider would best satisfy Deutsche Bank's needs in maintaining and enhancing its 5,000-user "client-first" CRM (customer relationship management) system for investment bankers.

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As Marovitz learned, the thing to remember is that you're not in India, where you may become accustomed to seeing hundreds of workers assigned to a project that they will dutifully attempt to execute according to instructions, cheerfully saying "yes," even when they have doubts about the methodology or the deadlines.

In Russia, it's the opposite: You won't find big companies with big teams willing to say "yes" to your every whim.

Instead, you're likely to find a small team of experts ready to grill you with tough questions. It may be jarring at first, but for certain projects, it can be just what the doctor ordered.

That cultural difference is one of the larger take-aways from the Russoft Association's Russian Outsourcing & Software Summit, a conference in which outsourcing companies from Russia, Belarus and Ukraine met to promote their services here from May 31 to June 2.

"In Russia, the good news is that you have very creative and strong-willed people. And the bad news is that you have very creative and strong-willed people," said Marovitz.

"In India, people want to say 'yes' to please and to follow instructions. That can create problems sometimes. In Russia, people aren't afraid to tell you that you have a silly idea that makes no sense whatsoever. But that's what you need.

"Sometimes you have to stand up and explain why you want something done a certain way. It's easier to have a relationship where the line between employee and vendor gets blurry because people are active members of the team and not just following orders."

However, apparently not all outsourcing customers are used to hearing "nyet." The Russian software outsourcing industry, with about $1 billion in annual sales, is dwarfed by that of India, which boasts $24 billion in annual revenue, according to Forrester Research.

Click here to read more about the state of the software industry in Russia.

For comparison, IBM on March 6 said its spending in India would be twice as large as the entire Russian market during 2007. Overall, IBM said it will invest $6 billion in India over the next three years. Indians have a nearly limitless skilled labor force, widely speak English and are expert at understanding Western business culture. Those attributes have propelled Indian providers to a steep growth trajectory and global prominence in the past decade.

Russian providers, while they might be a decade behind the Indian companies in maturity, boast some advantages nonetheless.

For example, in the case of Deutsche Bank, the world did not appear as flat as some might believe. The cost of maintaining a relationship between the bank's London offices and India loomed much higher than one with Russia in terms of travel, time zone differences and management costs.

Knowing that work on the bank's CRM applications would require frequent travel back and forth, Marovitz signed a deal with Russian software outsourcing firm Luxoft to handle maintenance and enhancement of the applications. Beginning with about 24 programmers in December 2002, Luxoft now has about 200 working on the Deutsche Bank applications.

"In India, there is a high infrastructure cost to make things work. Even a small team can cost a lot of money to work with," Marovitz said. "With Russia, it's just 3 and one-half hours from London and a 3-hour time change. It's easy to do a two-day trip. For those reasons, it seemed like a good fit for us."

Read the full story on eWEEK.com: Outsourcing: The Russian Revelation