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Press about Auriga

May 14, 2001

America's Loss, Russia's I.T. Gain?

The Moscow Times Business Review,
Gabi Mocatta

The situation on the local I.T. labor market isn't as bad as world-news watchers may expect.

Late last year, all the news seemed to be good on the I.T. job market. Moscow staffing agencies were reporting strong and growing demand for information technology and telecommunications specialists; high-tech firms in Europe and the United States had a seemingly insatiable demand for Russian latent; and new recruitment firms were opening up, confidently announcing an I.T. specialization.

So much has changed in just a few months.

U.S. technology stocks have received a blow this year, with announcements of mass layoffs, slower growth, lower earnings and even losses. In April, there were gloomy conclusions to a recent study by the Technology Association of America: Demand for I.T. workers had dropped 44 percent in the past year. The Washington Post quoted agencies saying companies had slashed their payrolls by more than 75,000 employees in the past 16 months, and that 96 foreign-born, visa-holding consultants were listed as "waiting on the bench" for work.

What does the U.S. slowdown mean for the Russian I.T. and telecommunications sector - and how has it affected the job prospects available for local high-tech professionals?

"There are two dynamics at work here," said Matthew Igel, general manager of Kelly Services CIS. "Venture capital has become harder to find and harder to hold on to. Since October 2000, a lot of corporate players whose profits were not what was expected have initiated hiring or spending freezes in Russia."

However, other countries' losses can be Russia's gain: as U.S. companies look to cost cutting, some domestic activities can be replaced with offshore operations such as programming in places such as Russia where labor is cheaper.

These two trends have tended to balance each other, Igel said, so demand for tech specialists has not decreased greatly.

"Twenty percent of our business is still in I.T. and at any one time we have openings for 15 to 20 programmers in Moscow and St. Petersburg," Igel said. "As I see it, the U.S. downturn has simply meant a lull in growth. There have been no layoffs here - just business that hasn't happened. This is just a temporary slowdown in the scheme of things."

However, the online staffing agency Global Geeks said it has been affected.

"Demand is unsteady," said Jamison Firestone, managing director and one of the founders of Global Geeks, which opened in December with plans to specialize in placing Russian programmers in the United States.

"There are pockets where people are still needed, but there are also many people who are not hiring. They're waiting to see which way the economy is going to go."

Like Igel, Jamison Firestone expects to see the growth rate quicken again towards the third or fourth quarter. Meanwhile, Global Geeks is expanding into other geographical areas, placing I.T. workers in Eastern and Western Europe, and diversifying by using its I.T. hiring platform to answer the demand for medical workers in the United States and Canada.

At Protek Flagship, the Russian branch of Protek U.K., things have been a little different. From offices on Leningradsky Prospekt, Russian programmers produce tailor-made software for telecom companies from "Malta to Mauritania, Iceland to Bolivia," as finance director Jeff Minsky put it.

"Regardless of how the U.S. downturn has affected things, telecoms are still popping up everywhere, and they will always need software," Minsky said. "We are not growing as fast this year as we were last year, but then we were growing at such aggressive rates, it's just not possible." Since October 1998, the company's staff has increased from 40 to 420 employees.

"We have Russians working in Uganda, Yemen, Ghana, Ivory Coast, Slovenia, Ireland and Liechtenstein," he said. "They go for between several weeks and several months and are mostly field engineers who are working on specific projects. The fact that we're supported in Russia sometimes raises eyebrows in places like Nigeria, but we are very concerned with matching world standards, and with all this wonderful talent here, we do."

If offshore programming were only about affordable labor, Minsky said, it would be missing the point: It's here because of Russia's technical excellence, just as much as for cost saving.

Valentin Makarov, the head of Fort Ross IT Services, a St. Petersburg-based consortium of 15 IT companies, agrees. "We in Russia have always been working in the high quality, R&D consumer software development sector," Makarov said. "In this area, the market is unsaturated and will remain so. As far as we know, the recession in the U.S. has affected primarily lower-quality personnel: people with six-month training courses are out of work. During the last two months we've come to understand that the software R&D sector sill needs our skills as strongly as ever."

Fresh from a one-day conference in Boston called "Software Development in Russia - Opportunity for U.S. Business," Aleksei Sukharev, president and founder of software firm Auriga, concurs.

"Many speakers stressed that the current state of the economy gives extra incentives for I.T. companies to outsource their software development and maintenance projects overseas," Sukharev said.

He added that while some of Auriga's U.S. customers have recently announced layoffs, so far none have decreased the amount of work outsourced to Auriga. Orders from some companies had even increased.

"On April 7, two of our engineers, Timur Shaporev and Alexei Johnson, returned from a visit to a customer in the Boston area with a few new projects to be done in Moscow. That very customer laid off 325 people on April 2," Sukharev said.

"We are certainly concerned with what is going on with the U.S. economy but we also see this as an opportunity."

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