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Offshore Outsourcing Readiness/ Conclusion

In 2003, Russia exported more than US$475 million dollars worth of software products and is listed internationally as second in IT outsourcing behind India7.1. Despite restrictions, regulations, policies, and lack of infrastructure, Russia has become a major player in the outsourcing industry. Certain regions within Russia have been the leading centers for producing IT programmers. St. Petersburg has been credited with turning out 1500 IT engineers per year and is responsible for 30-35% of outsourced business in Russia7.1.
India has seen a rapid growth rate in salaries that cannot be maintained. The monetary gains that American and European companies expect for outsourcing are a minimum of 40-50%. India has proven to meet that expectation in the past, but has recently failed to meet that expectation due to increasing wages. Businesses are looking for extremely cheap labor without sacrificing quality. The recent wages for a salaried programmer from a Russian specialty school would be roughly $6,500 a year7.2. Since most students in Russia are literate and have been trained in other languages, they make excellent candidates for outsourcing1.1. Russia also outnumbers the number of graduates in IT from India by almost double. In 2003, the former Soviet Union had 226,000 IT graduates while India had 165,0007.3.
Russia’s tendency to invest heavily in the sciences, a remnant from the Soviet Union days, has paid off for producing some of the world’s best programmers. The Russian political system is the major obstacle that prevents the nation from being the leading country in software development and offshore marketing7.3. Excessive amounts of red tape, restrictive policies, unpaid tax breaks for IT companies, and regulation of telecommunications has been the greatest political hurdles (as stated earlier in network policy).
The areas of network readiness were discussed and evaluated to show the position of this paper. The recommendations were made at each level of readiness. Russia has been determined by this group to be “ready, but not attractive,” according to the Offshore Outsourcing Readiness vs. Attractiveness Framework. Russia has a large contingent of programmers that are capable of meeting the needs of the world. The education system has previously focused mainly on sciences, which has most IT professionals with advanced degrees currently looking for employment. The lack of attraction has been indicated in the poor state of infrastructure, the policies and regulations that limit access to the Internet, and the lack of funding for the present schooling system. Russia has a large potential market for offshore outsourcing (and maybe complete dominance), but may never attain that position due to their current state.

 

References:
Russia Summary
1.1 A Country Study: Russia, Found at: http://geography.about.com/gi/dynamic/offsite.htm?site=http://lcweb2.loc.gov/frd/cs/rutoc.html
1.2 Business Information Service for the Newly Independent States, Found at: http://www.bisnis.doc.gov/bisnis/bisdoc/2002RSFactsheet.htm
1.3 CIA: The World Factbook, Found at: http://www.cia.gov/cia/publications/factbook/

Network Access
2.1 A Country Study Russia, Found at: http://geography.about.com/gi/dynamic/offsite.htm?site=http://lcweb2.loc.gov/frd/cs/rutoc.html
2.2 Masmi Research Group, Found at: http://www.masmi.com/corp_040701.htm
2.3 Rostelecom, Found at: http://eng.rt.ru/home_e.shtml
2.4 The World Bank Database
2.5 CIA: The World Factbook, Found at: http://www.cia.gov/cia/publications/factbook/
2.6 Internet World Stats, Found at: http://www.internetworldstats.com
2.7 The Russian Software Industry, Andrey Terekhov, Found at: http://www.iti.spbu.ru/publications/eng/pdf/RusSoft.pdf
2.8 Trends in the Russian Telecommunications Market, http://www.tiaonline.org/policy/regional/nis/041902NISTrend.pdf

Networked Learning
3.1 The World Bank. Found at: http://www.worldbank.org.ru/ECA/Russia.nsf/ECADocByUnid/97E7A9C494AA5E8EC3256E27002773F9/$FILE/elearning_policy_eng.pdf
3.2 The World Bank. Found at: http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20171404~menuPK:34463~pagePK:34370~piPK:34426~theSitePK:4607,00.html
3.3 Litvinovich, Dmitry. “Russian Education System Declines in Comparison with Soviet era.” Prada.ru. October 21, 2004. Found at: http://english.pravda.ru/printed.html?news_id=14475

Networked Society
4.1 Ebusinessforum.com. Found at: http://www.ebusinessforum.com/index.asp?layout=newdebi&country_id=RU&country=Russia&channelid=6&title=Doing+e-business+in+Russia
4.2 The International Telecommunication Union. Found at: http://www.itu.int/ITU-D/ict/statistics/at_glance/Internet03.pdf
4.3 The Public Opinion Foundation Database. “Polls ‘The Internet in Russia’.” Winter 2003-2004. Found at: http://bd.english.fom.ru/report/map/eo040601
4.4 The MASMI Research Group. Found at: http://www.masmi.com/corp_030618.htm
4.5 Department of Slavonic Studies International Russian Resources. Found at: http://www2.arts.gla.ac.uk/Slavonic/Russian_res.html
4.6 The Free dictionary.com. “Communications in Russia.” Found at: http://encyclopedia.thefreedictionary.com/Communications%20in%20Russia
4.7 Galena, Kan. “The Internet in Russia.” Working paper, Vanderbilt University. Found at: http://elab.vanderbilt.edu/research/papers/html/student_projects/internet_in_russia_files/internet_in_russia.htm.
4.8 Library of Congress Country Studies. July 1996. Found at: http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field(DOCID+ru0141)
4.9 Alexander, Marcus. “The Internet in Putins Russia: Reinventing a Technology of Authoritarianism.” April 2003. Found at: http://www.psa.ac.uk/cps/2003/Marcus%20Alexander.pdf
4.10 The Transnational Institute. “Russia on the Web.” Found at: http://members.valley.net/~transnat/russinfo.html#Sites%20in%20Russia

Networked Economy
5.1 Helque, Eric. “E-commerce’s potential for Russia’s economy.” The Russia Journal.Com. May 29, 2000. Found at: http://therussiajournal.com/index.htm?obj=2939
5.2 The AmCham E-Commerce Taskforce. March 2000. Found at: http://www.amcham.ru/upload/354040945520281_Final%20English%20e-com%20paper.doc?PHPSESSID=bb432999991246364aa33f414b72ff2a
5.3 Information Technologies Group: Center For International Development. Harvard University. “Readiness For The Networked World: Assessment: Russia.” Found at: http://www.cid.harvard.edu/ciditg/research/Final%20RussiaReadinessAssessment.doc
5.4 Russian Conference on Electronic Commerce. November 1-2, 2001. Found at: http://www.admin.spb.ru/eng/conferences/ecom1.html
5.5 President of Russia.com. Found at: http://president.kremlin.ru/eng/

Network Policy

6.1 Chirkin, Dmitry. “Internet-Censorship Russian style.” Pravada.ru. April 8, 2004. Found at: http://english.pravda.ru/main/18/88/351/12450_censorship.html
6.2 Alexander, Marcus. “The Internet in Putins Russia: Reinventing a Technology of Authoritarianism.” April 2003. Found at: http://www.psa.ac.uk/cps/2003/Marcus%20Alexander.pdf
6.3 Waylett, Sarah. “IT in the Russian Federation.” Found at: http://www.american.edu/initeb/sw5840a/liberalization.htm
6.4 IREX. “Russia in the Internet Age: Balancing freedom and Regulation.” 2002. Found at: http://www.irex.org/pubs/policy/mosnetconference.PDF
6.5 Hertzfeld, Jeffrey, M. “Foreign Direct Investment in Russia: Battling Against the Odds.” International Chamber of Commerce The World Business Organization. 3-5 May 2000. Found at: http://www.iccwbo.org/home/conferences/reports/budapest/book_articles/hertzfeld.asp

Offshore Opportunity

7.1 Bittner, Vanessa. “City Seeks Software Action.” The St. Petersburg Times. February 10, 2004. Found at: http://www.sptimesrussia.com/archive/times/942/news/b_11654.htm
7.2 Yamamoto, Mike. “Will India price itself out of offshore market?” ZDNet.com. March 29,2004. Found at: http://www.sptimesrussia.com/archive/times/942/news/b_11654.htm
7.3 Kozhuharov, Simone. “IT Companies' Plea for Government Support.” The St. Petersburg Times. June 18, 2004. Found at: http://www.sptimesrussia.com/archive/times/978/news/b_12759.htm