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6/28/02 - Russia looms as software service successor to India
By Margaret Quan
When one American company tells other American companies that
it can meet their software needs with Russian programmers, the
language of American programmers may well move beyond ones and
zeros. Indeed, John Miano's language goes gloomy, predicting
the impending decline of the U.S. software industry if
companies continue to send programming jobs overseas.
As founder of the
1,300-member Programmers Guild, Miano reacts angrily when
companies like PWI Inc. (Red Bank, N.J.) offer to ship U.S.
programming tasks to their Russian labor pool. "The way
things are going," Miano warns, "it's likely that in
20 years, the U.S. will no longer be the leader in software
development it is today."
But PWI promotes Russia as a
"second-generation outsourcing strategy" for IT
firms. PWI, which uses programmers in Russia to develop
software for U.S. clients, suggests companies create a network
of outsourced IT labor in different regions, rather than a
single country, to protect a company in the event of war or
disaster.
Like Miano, U.S. software
developers, programmers and engineers are troubled by PWI's
thrusts, including what they see as "cheerleading"
the movement of high-tech positions offshore.
They fear that the trend
toward offshore outsourcing could lower hourly rates for U.S.
workers or, worse, that their jobs might disappear altogether.
The concerned professionals liken it to what happened to
American manufacturing jobs, which left the United States for
countries with lower labor costs.
Worried about the fate of
U.S. programming jobs, Miano founded the Programmers Guild in
1998. He hopes to convince the nation's 3 million programmers
that they need to organize.
But Steve Kane, PWI's senior
vice president and chief marketing officer, defends his
company's actions, noting that it does not advise clients to
choose offshore software talent based on rates alone but
rather on "skills and capabilities."
He called offshore software
development a way for companies to offload noncore application
development to places where a plentiful supply of programmers
and lower labor rates let companies save money.
U.S. companies already use
firms in India, a major center for software outsourcing that
did more than $6 billion a year in business in 2000 and 2001,
according to an Indian trade association.
Like India, Russia has drawn
attention in the past 18 months as a source of high-quality,
low-cost software, said Ian Marriott, research director at
Gartner Group U.K. "Russia is beginning to challenge
India's dominance in providing offshore services [such as
application development, business processes outsourcing and
even call centers]," he said in a report this year.
Technical talent pool
One reason is Russia's large per capita population of
mathematicians, scientists and engineers. With 3,500 of these
professionals per million inhabitants, Russia joins Japan and
the United States as the world's most densely populated
technical nations.
In addition to Russia's large
pool of programmers, Western companies are attracted by cheap
labor. PWI said the average programmer's salary is $700 to
$800 a month in Moscow and $500 to $600 outside the capital.
PWI calls Russia the next
"untapped potential" source of software development.
"We see Russia as a competitive advantage for software
development," said Gregory J. Salvato, PWI's chairman and
chief executive officer.
No one knows what the impact
of all this promotion of offshore labor will be on programmers
and engineers in the United States.
Once companies get a taste
for cheap labor, professionals like Miano believe, the trend
may be hard to reverse. "A typical offshore software
project might employ 100 people, with 10 to 20 in the U.S. to
perform direct customer support and 80 to 90 offshore to do
behind-the-scenes development so that a company can make a
higher profit," he said.
Russia's software industry is
still small, and its labor costs, while low by U.S. standards,
are higher than those of India and China. That could keep
Russia from becoming a center of offshore software talent.
Indeed, with IT outsourcing
decisions increasingly being made on the basis of cost alone,
Russia could be at a disadvantage, said Stephen Lane, research
director for information technology services at the Aberdeen
Group (Boston).
Bang for the buck
Multinationals like Boeing, Motorola, Microsoft and Sun
Microsystems already employ Russian and Eastern European
software developers, either by establishing their own centers
in those areas or hiring outside firms.
In addition, smaller firms
such as Easic Corp. (Santa Clara, Calif.), which develops
embedded ASIC cores for system-on-chip designs, said using
offshore labor gets them more, in number and quality, than
they could in the United States. Easic employs hardware and
software developers in Iasi and Brasov, Romania.
Easic's founder, president
and CEO, Zvi Orbach, would not say what it pays its
Romanian-based developers but called it more than the $200 per
month the average Romanian worker takes home.
PWI has software development
centers at Moscow State University and in a commercial
district managed by company president and chief technology
officer Konstantin Malkov. A former Moscow State professor,
Malkov oversees a network of professors and others who write
software for PWI clients.
While PWI contends that its
only interest in promoting Russia is to provide outsourced
skills to companies that need them, Miano does not believe
those skills can't be found anywhere else.
In the 1980s, he noted, Japan
was the big competitor. "Japanese technical skill is
right up at the top. So why is Japan not an untapped source of
talent? Why is no one outsourcing to Japan?"
The answer is simple, he
said. "We're not after technical skills, only cheap
bodies."
The trend so alarms Miano
that he is making plans to study law. "I am . . .
thinking of becoming a lawyer because it's the only profession
that seems to have a future in this country," Miano said.
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