Igor Kravchenko (Russia): How e-Government is Making Russian IT Companies More Competitive

The way Russian outsourcing companies make their money from overseas markets – their export income structure – has undergone nothing short of a paradigm shift.

Last year, custom software development projects made up an overwhelming proportion of their revenue – 72%. Such projects are generally outsourced by Western companies to resolve a single specific non-core-business issue and are typically extremely narrowly defined. What used to be known as offshore programming was essentially software development to order, like a takeaway pizza with particular toppings stipulated by the client, and it seemed like it was a comfortable and undisputed leader-for-life.

But 2011 has not been kind to leaders-for-life, and this year, the share in revenues of custom software development plunged by almost a quarter, to 49%. Taking its place meanwhile, the share of software solutions development and adoption considerably increased, from 11% to 30%.

One important reason that lies behind the transition from custom programming to client specifications to more difficult projects based on program engineering is the improved positions of Russian service companies in international rankings. Western companies see them as global market leaders and are confident in entrusting their complex systems to them for enhancement.

But perhaps most significant of all is the Russian e-government state initiative, begun in 2009 and now coming of age as it moves into its mature phase. Quite simply, those companies invited to become involved in this huge and lucrative project have made great strides in strengthening their capability to build complex systems. This is hardly surprising, as systems don’t come much more complex than the notorious and awe-inspiring mountain of Russian bureaucracy.

I believe it’s no exaggeration to say that what we’re building now is a unique project, not just in Russia but on a worldwide scale. It has huge export potential, and not just for a developing country, because no one has done anything like this in the same way before. Perhaps it’s because as a country we started the e-government experience a little later that we were fortunate to be able to use the very best global practices from the beginning, rather than trial and error.

As befitting such a huge country, even the pilot projects were vast: nine million people in five different Russian regions were the first beneficiaries of Reksoft’s Territory project for the Federal Migration Service, which entailed the development of a mechanism for providing public services online after first standardizing them in an electronic format.

In Russia today, e-government touches just as many people as gas and oil. More than 300 services provided by 56 federal agencies, including the pension, tax and migration agencies, have been made accessible to the population via online portals in a little over three years. For those companies that have worked to make this possible, the shift from custom software development to more complex program engineering has proven exciting, profitable – and irreversible.

By Igor Kravchenko, Managing Director, Services for Public Sector, Reksoft.


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