RUSSIA:
Overview of the IT Sector in
Nizhny Novgorod region
December 31, 2007
Author: Roman Vvedensky, BISNIS representative in Nizhny Novgorod, Russia
INTERNATIONAL
COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE,
2007. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.
The current report provides with a brief overview of major players of the local IT market, primarily, in its software development and research sector. Since 90 percent of the local software is produced under the contracts with U.S. or multinational companies, headquartered in the U.S.A., the IT sector of Nizhny Novgorod region has developed a good experience of cooperation with U.S. customers and partners. Currently, the Russian market demonstrates a growing demand in IT products and services. The localization of IT production in hi-tech centers like Nizhny Novgorod is a good chance for U.S. companies to increase sales of its IT products in the domestic market.
IT community in Nizhny Novgorod region
Known as the fourth largest city in Russia (after Moscow, St-Petersburg, and Novosibirsk). Nizhny Novgorod (NiNo) metropolitan area is populated by over two million people. Located 260 miles to the east of Moscow, NiNo has concentrated a reasonable business, industrial, and scientific potential to retain local qualified labor and to attract HR from adjacent areas. A solid R&D platform was set in NiNo region in 1940s-1950s with deployment of leading national military enterprises and research labs during World War II, and, afterwards, during the Cold War. The closed status of the city and the region, which hosted the ‘Russian Los Alamos’ and a number of other military complex leaders, encouraged the development of fundamental studies at local universities and at over 100 research institutions. The lift of the Iron Curtain in late 1980s has accelerated integration of local scientists and research workers to international projects, including offshore software development.
Currently, the local research labs employ approximately 50,000 experts, including over 4,000 PhDs and ScDs. According to an independent study of Moscow and at NiNo researchers, Nizhny Novgorod concentrates approximately seven percent of an overall scientific potential of the Russian Federation, which designates the profile of its strategic development in the next decades.
There are over 40 universities and colleges in NiNo region, embracing branches of national public and private institutions of higher education. They accommodate 180,000 students with 120,000 people studying day-time. According to the report of the local Governor, delivered in 2006, the local universities graduate over 1,000 students in computer science, applied physics, mathematics, and related subjects annually. The graduates get employed in IT, Telecommunications, and R&D industries (automotive, petrochemical, aerospace, and some others), banking and trade sectors in NiNo and outside (i.e. the capital cities of Moscow and St-Petersburg). The growth of the local IT sector and the increase in demand for IT specialists set a challenge for major NiNo universities, which have jointly developed a program with the local government to triple the amount of graduates in computer science and related subjects by 2010.
Moreover, the local government has adopted a program to support development of a techno-park network in NiNO region. The local program is part of the national incentive, which provides funding and legislative support to major techno-park projects in the Moscow region, St-Pete, Kaluga region (the city of Obninsk), Kazan, Novosibirsk, Tyumen and NiNo. The national program determines for techno-park Ankudinovka in NiNo as the largest IT techno-park set with the federal support in this country. It will be located on a 150 acre land site in NiNo and will be equipped with all modern facilities for R&D, software development and IT production. Ankudinovka will have all the required social infrastructure and convenient location in the proximity to local university campuses and to downtown NiNo. The project provides for allocation of $110 million of government funding, mainly for engineering and infrastructure works, and US$ 445 million of private investment. The federal and the local governments have already allocated US$ 25 million to the project this year. The techno-park Ankudinovka should be launched in 2010. The local government considers it as an anchor site for 8,150 professional IT jobs in NiNo region by this time. According to an official forecast, the IT sector of NiNo will generate US$ 130 million annual revenues from its exports by 2011. Annual revenues from sales of IT products in the domestic market may total US$ 300 million in four years.
The Nizhny Novgorod State University (NSU) and the Nizhny Novgorod Technical University (NTU) are traditional suppliers of HR to local IT companies. Both universities were set in Nizhny Novgorod over 90 years ago (actually, the Technical University was moved to NiNo from Warsaw during World War I), and they have been always strong in mathematics and physics studies. Now, there are 49,000 students at NSU, and over 18,000 students at NTU. Their schools for computer mathematics, cybernetics, physics (including radio physics), and communication technologies work closely with major local IT companies, which monitor and select future employees among students, starting from their first and second year of education. It is a common practice in NiNo for students in their second, third, and fourth year of study to work part- and full-time in companies such as Telma Soft, MERA, Nizhny Novgorod center of MATRA Datavision (now, Open CASCADE), and Tecom. For example, Intel Nizhny Novgorod Lab provides internships to students before their graduation. The local IT companies award scholarships to promising students and arrange various competitions and screening exams at local universities. Intel Nizhny Novgorod Lab also runs Intel Summer Camps for its future potential employees.
It is widely acknowledged that the current system of university education in NiNo and other centers of IT studies in Russia have, both advantages and short-comings. One disadvantage is that the system lags behind demands of the business sector and the new business realities. Some local experts observed that ‘there is an existing and growing gap between the qualification of students, graduated in IT related subjects, and the qualification of experts, demanded by SD companies, especially those, which are focused on international/foreign customers. The challenge is partly compensated with optional courses for graduates of NiNo public universities, and with a number of private training centers in NiNo, where the Nizhny Novgorod Institute for IT (NIIT) is the largest one. Set by MERA Company, NIIT has graduated its first group of students in IT subjects in 2004. Courses are run by local IT experts with a 15-year experience in SD for leading international IT and telecom companies. NIIT also delivers authorized courses of Cisco Systems, Oracle, and Microsoft to its students. The list of popular courses, launched by NIIT last year, includes Software Development, Software Testing, and System Administration. According to the survey, run among over a thousand of IT workers in NiNo last year, the most demanded programming languages in NiNo is Java and C. There is also a good demand in .NET and J2EE expertise as well as skills with ERP-systems, SAP and Oracle in the region.
Local IT Market
Leaders
Currently, there are over 30 companies in NiNo region, which are engaged in offshore software development (SD). Last year, the CEO of Telma Soft estimated total revenues of local companies from SD at approx. US$ 100 million, where the share of three major local SD companies totaled 90 percent. The names of three whales of the local offshore programming are Telma Soft (over 1,100 employees in NiNo), MERA (over 950 employees), and Intel Nizhny Novgorod Lab (over 440 employees). The latter was established in 2000 on a basis of the local IT company – NSTL (Nizhny Novgorod Software Technology Lab). The list of pioneers of local offshore programming should be supplemented with Tecom (approx. 100 employees) and the Nizhny Novgorod center of MATRA Datavision /Open CASCADE (approx. 150 employees). All of the above companies were established in late 1980s and early 1990s with an active involvement of professors of local public universities (NSU and NTU). In 1992 – 1993 they started their activities with completing and implementing orders of international IT companies. Since then the cooperation with multi-nationals has been successfully developing and the list of active customers of local SD firms has extended to Motorola, Microsoft, Esmertec, McAfee, Freescale Semiconductor, Flextronics, Teleca (all – Telma Soft, over 500 completed projects with foreign customers); Nortel Networks, Ericsson, Siemens, Cisco Systems, TietoEnator (all – MERA); Intel Corp. (Intel Nizhny Novgorod Lab); Harris (Tecom). Two local SD companies opened their offices in North America to increase efficiency of their sales and marketing policy: MERA – in Toronto, Canada, and Tecom – in Melbourne, FL, USA.
In 2000, Intel officially entered the local market, which contributed to the growth of income of IT engineers and managers and the increase in their active migration domestically and internationally. Success of Intel R&D center in NiNo encouraged other international and national IT companies to seriously consider opportunities of NiNo in early and mid-2000s. The new-comers aimed at recruiting and hiring the top local IT professionals, developers and senior developers with more than five years of specialized and project management experience. These companies offered highly competitive compensation packages, fringe benefits and other incentives. Often the companies’ goals were to concentrate on intensive growth, instead of on extensive growth, a strategy inherent to large local SD companies. This process resulted in a formation of compact groups, organized in representative offices and staffed with highly skilled developers and researchers in NiNo, who have been carrying out projects for their overseas counterparts. On average company offices in NiNo are staffed with 20-40 professionals. Below is a list of some smaller SD companies, which have been working successfully in NiNo market for the last few years.
StarSoft
Development Labs
Corporate Headquarters
313 Congress Street, Suite 175 Boston, MA 02210 USA
Tel: + (800) 708 88 09; (617) 577 94 97;
Fax: + (617) 577 94 96
Email: usa@exigenservices.com
Nizhny
Novgorod office
32,
Varvarskaya str., Nizhny Novgorod, 603006, Russia
Tel/fax: +7 (831) 419 56 78
E-mail: nnov@exigenservices.com
The company’s office in NiNo employs 17 people. After StarSoft entered the alliance with Exigen Services (http://www.exigenservices.com) in February 2007, the staff moved to NiNo office of Exigen Services, which was officially opened in late September 2007. The company plans to increase its staff to 40 employees by early 2008 and to almost 100 employees by late 2008. Exigen Services has three more offices in Russia: in St-Petersburg, Dubna (Moscow region), and Kazan.
JLC Technologies
Tel.: + 1 (732) 310 7919
Fax : + 1 (732) 918 1646
E-mail: Info@JLCTech.com
General manager of Nizhny Novgorod
office of JLC Technologies:
Igor O.
Romanov
Tel.: +7 (831) 412-23-41
The NiNo office of JLC Technologies employs 35 specialists, who have a good professional reputation in the local IT market.
Capvidia BVBA
E-mail: tl@capvidia.be
Nizhny Novgorod office
26, Rodionova str., Nizhny Novgorod, 603093, Russia
Tel.: +7 (831) 478-09-85
Fax: +7 (831) 478-09-86
The company’s team possesses all levels of programming skills from object oriented C++ to driver development and assembler programming. The company has a partner firm in NiNo – TECIS, which develops various projects, including 3D graphics. TECIS staff is estimated at 30-35 specialists.
DataNaut Incorporated
4400 MacArthur Blvd. Suite 102a Washington, DC 20007
Tel.: + (202)-333-0505
Fax: + (202)-318-5992
E-mail: info@datanaut.com, careers@datanaut.com, press@datanaut.com
The company focuses on three core competencies: Project Management, Domain Expertise, and a cost effective Hybrid Onshore/Offshore development process. It has an offshore center in NiNo.
Five9, Inc.
7901 Stoneridge Drive, Suite 200 Pleasanton, CA 94588
Tel.: + (925) 201-2000
Fax: + (925) 469-0172
E-mail: info@five9.com, pr@five9.com
Nizhny Novgorod office
6, Nartova str.(business centre “Orbita”), Nizhny Novgorod, 603000, Russia
The company, headquartered in CA, USA, provides Hosted Call
Center services, based on its own software and hardware solutions. The company
opened an offshore center in NiNo in September 2006.
Zultys Technologies
(US Headquarters)
771 Vaqueros Avenue, Sunnyvale, California 94085 USA
Tel.: +1 (408) 328-0450
Fax: +1 (408) 328-0451
E-mail: zultys@zultys.com
The company, headquartered in CA, USA, is specialized in VO-IP developments. In 2006, it opened an office in Moscow and a research and technical support center (for the EMEA region) in NiNo. The local center employs 37 engineers and programmers, and it has announced plans to increase staff to 70 people.
MFI Soft
Bld.1, 27, Tverskaya str., Moscow, 125009, Russia
Tel.: +7 (495) 739 23 38
Fax: +7 (495) 699 08 06
E-mail: info@www.mfisoft.ru
The Moscow-based company is specialized in software development for telecommunications and internet. It has recently opened a SD center in NiNo, which plans to employ over 50 specialists.
Smaller SD companies managed to concentrate several hundreds of skillful and creative professionals in NiNo, but they still give up in business volume to local heavy establishments, such as Intel Nizhny Novgorod Lab, Telma Soft, and MERA. The big three companies personnel in total is 2,500 people. These companies gained status of national leaders in offshore software development and research for the telecom sector. Improvements in the global IT market in early 2000s encouraged the development and business differentiation of the local large and heavily structured establishments.
Telma Soft and Mera, as independent companies, separated some departments not directly involved in offshore programming. Organized as separate companies, they were later sold to external investors. Accumulated funds and resources were streamlined to further growth of software development and research as well as to improvement of corporate management and quality standards. The highest grades in CMMi and ISO certification are a sign of achievements of Telma Soft and MERA. Although both companies carry out SD projects for telecommunications, they concentrate on different segments, where they have accumulated maximum expertise: Telma Soft – on total cycle SD for terminal hardware, MERA - on total cycle SD for network infrastructure. More information on the companies is available at http://www.telma.ru/ and http://www.mera-systems.com/en/index.html.
Intel Nizhny Novgorod Lab employs over a third of Intel’s staff in Russia, operating in Moscow, St-Petersburg, Novosibirsk, NiNo, and Sarov (located in the south of NiNO region). The main areas of Intel’s R&D in Russia include microprocessor architecture, software solutions (e.g. WiFi/WiMax) and development of new hi-tech products for microprocessor enhancements.
One may hardly predict setting of another large SD company in NiNo in the nearest future due to a limited supply of labor to the local IT sector. However, globalization of the market, competition, growing domestic costs vs. reducing profit margin, and some other factors may rearrange the IT landscape in NiNo. Earlier this year, Teleca, Sweden, signed an agreement with major shareholders of Telma Soft to acquire a major stake in the company. The Swedish corporation has transferred Obigo production (the cellular phones software) to the Telma site in NiNo. The company has confirmed its interest to increase the amount of local staff involved in the project. Representatives of Telma Soft have reported that the company plans to increase its staff in 300-400 people in the next 1.5 years. The company plans to hire new employees in Nizhny Novgorod and to open near offices in some other cities of the Volga valley (i.e. Cheboksary).
According to local IT experts, the SD sector employs approximately 5,000 people in NiNo. Roughly, professional software developers and researchers make 50-60 percent of the total number of employees (the remaining part are students/interns with low skills, actively involved in testing projects, marketing, sales, administrative, technical support, and management).
Conclusion
All major local companies take part in key IT conferences and exhibitions in Russia, traditionally run in St-Petersburg and in Moscow. A representative of a U.S. company may approach local companies’ representatives at these events or arrange a meeting in Nizhny Novgorod at local companies’ headquarters. Good command of the English language is a must for the local staff, so direct communication is not a problem. All major companies have departments for international cooperation, which will arrange meetings with potential partners from the U.S.A. Meetings with local IT leaders may be important for a U.S. company in, at least, two aspects: to get acquainted with the capacity of the local IT market and to collect general data on current demands of the IT market in Russia. Targeting points of mutual business interest at one-on-one meetings in NiNo may definitely accelerate joint projects between U.S. companies and local IT companies in the Russian market.
For more information on Upper Volga region, Russia, visit
BISNIS online at http://www.bisnis.doc.gov/bisnis/country/volga.cfm
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is part of the U.S. Commercial Service (www.export.gov).