Will IT be the Next Russian Revolution?

When Russian President 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 defence 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.

Industry experts estimate that Russia is, at present, ten 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 the US in Russia. Companies like Motorola, Dell, Intel,
Siemens and Sun Microsystems have their R&D centers in the country.

Vladimir Putin Russian President

Russian IT exports market $600 mn in 2004 Mobile subscriber base: more than 60 mn Main IT areas: Moscow, St Petersberg and Novosibirsk in Siberia Strong points: specialist skills, strong on basic and engineering sciences Main growth areas: shareware, security, telemedicine

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

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%
in the last three years. According to the Outsourcing-Russia.com website, the
country's software export sales stood at $600 mn 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 for special economic zones would be enacted soon. Modelled on the Indian
software parks, the government recently gave the go-ahead for the setting up of
ten techno-parks with tax breaks and reduced customs on imported equipment, for
companies operating from there.

According to a World Bank report, Russia has one million specialists who are
capable of joining its IT sector. With so much in its favour, 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.

IT and Communications Minister Leonid Reiman announced recently that Russia
would invest around $650 mn 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.

Priya Padmanabhan in
Bangalore