Software Development in Russia

Aberdeen surveyed 50 companies that maintain software development centers in Russia and/or contract with Russian or hybrid services providers. The survey results, along with comments made by corporate buyers during individual interviews, presents a picture of a Russian industry that is part of the offshore industry mainstream and, at the same time, also operates outside of the conventional definitions of “offshore outsourcing.”

On one hand, companies use Russian resources primarily to reduce software development and management costs, to utilize internal resources more effectively, and to shorten development cycles to achieve faster time-to-implementation or faster time-to-market. In addition, business and IT decision makers tend to use the same criteria to select Russian software services suppliers as they do for other companies, regardless of country. On the supply side, Russian companies offer many of the same core development language, platform, and database technology expertise as their counterparts in other countries. Moreover, a number of Russian companies also offer dedicated ODC provisioning services that incorporate both contract resource and build-to-transfer models, both of which represent a growing sector of the offshore industry.

On the other hand, Russian software service provides do not feature prominently in offshore sectors such as large-scale development and legacy application support. These activities, which often involve the wholesale transfer of day-to-day internal IT responsibilities to offshore suppliers, tend to be too large for most Russian service suppliers to take on. However, size is not the primary differentiator in this case. In fact, many Russian companies offer mainstream offshore application migration, consolidation, and maintenance services. The typical application management engagement profile involves small, dedicated teams that focus on third-level support activities. Another characteristic of the Russian industry is that independent software vendors (ISVs) and other IT companies represent more than half of its market by vertical sector. In addition, the predominant service delivered by Russian companies is custom application development (CAD). This last point touches on a commonly held view of the Russian software development and services industry, which is characterized by small niche service providers that are focused on scientific other highly specialized applications based on complex algorithms.

Certainly, Russia’s reputation for scientific, mathematics, engineering, and IT excellence have attracted the interest of enterprise technology suppliers and IT-intensive companies looking to tap into the country’s rich technology labor pool, universities, and research and development (R&D) centers. Indeed, many small Russian companies specialize in what might be called “niche” technologies, such as speech, character, and facial recognition; bio-informatics; modeling, embedded engineering, and neural networks. However, to characterize the entire Russian contract software development and services industry as being somehow outside of the offshore mainstream is to ignore its diversity of services, business models, and companies. This diversity is illustrated not only by the survey and interview results but also by the profiles of the suppliers that sponsored this Buyer’s Guide. In short, Aberdeen’s research reveals an industry that is engaged in custom development and high-end software services for clients that require low-cost but highly skilled technology resources. At the same time, there is an emerging sector of the Russian software services industry with go-to-market strategies and experience based on vertical industry expertise, end-to-end service delivery, and balanced on-site/offshore delivery models. Considering that the offshore industry is growing and evolving at a rapid pace, it is fair to say that the picture of Russian software development and services industry is yet to be finished.