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Burgeoning Russia IT blasts government policies

By Michael Mainville
October 30, 2003 12:00 PM ET

IDG News Service - With Russia facing stiff competition from other countries' emerging economies for a piece of the global high-tech market -- especially offshore outsourcing contracts -- corporate leaders in Moscow are complaining that the Russian government is not doing enough to support the industry.
In comparison with moves taken by the Indian and Chinese governments, Russian efforts leave much to be desired, they say.
"Government support is an important part of the industry, and the Russian government is not doing very much, to say the least," said Alexis Sukharev, president of Auriga Inc., an IT consultancy and offshore outsourcing firm with offices in Moscow and New Hampshire. "Compared to India, Russia is doing nothing at all. It's laughable."
Russia's high-tech industry has been growing at an impressive pace -- about 10% a year over the past four years, according to RusSoft, the national software developers association.
But despite aggressive marketing campaigns, such as a road show of Russian software developers touring Germany from Oct. 21 to 29, Russian firms have had little success beating out Indian companies for lucrative outsourcing contracts. And with China increasingly touted as the next major outsourcing hub, many here fear Russia will be left behind. Much of the blame, they say, rests with the Russian government.
"Look at the Indians and the Chinese. Why can't we do what they're doing? Why doesn't the Russian government seem to care?" asked Dmitry Loschinin, CEO of Moscow-based Luxoft, one of Russia's leading offshore outsourcing firms.
Experts say much of the success of India's IT industry can be traced to government initiatives, such as establishing software technology parks, creating zones where companies are given generous tax advantages for developing exports, significantly reducing technology import duties to promote research and development funding, using offset programs to support local industry and reducing a variety of other taxes.
Beginning in 1995, China started pursuing the same kind of policies, creating high-tech zones where companies enjoy significant tax breaks and providing seed money to IT-related projects. Last year, the Beijing city government passed up software giant Microsoft Corp. in favor of six indigenous companies supplying the Linux operating system.
But Russia, critics say, has done nothing comparable. The government has yet to devise a concrete, long-term development plan for the high-tech sector, let alone take initiatives such as setting up tax-free zones or offset programs.
"The Russian government is doing more than it used to, but it still is not doing enough," Loschinin said.
The only major government high-tech initiative has been the Electronic Russia program, under which government and private partners are spending $2.4

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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