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Press about Auriga

May 8, 2003

Interview with Mr. Sukharev, President of Auriga

Winne (World Investment News)

Alexis Sukharev, President of Auriga, Inc., shares insights on the opportunities in the Russian IT market for U.S. high-tech companies in an interview to World Investment News among Russia's top political and business personalities

Bearing in mind that the world IT market has experienced some setbacks lately whilst IT in Russia has continued to grow very quickly, do you think that we can characterize Russia as the new India?

Before I answer this question, I would like to say that, even though IT in Russia is growing rapidly, at around 25 % per year compared to the downturn in the global IT industry, I do not think that Russia’s role can be compared to that of India because today India is number one in offshore IT outsourcing. This role is not directly connected with the national market growth; these are different things. Besides, the fact that the markets in developed countries like the US or the UK are falling, and IT is still falling, is not good for outsourcing.

Since the markets and offshore outsourcing are not moving as fast as they used to, it is not the right moment to try and catch up with India. The fact that the Russian domestic market is rapidly growing is not enough in itself to enable Russia to become the new India. Unlike Russia, the Indian domestic market has not been growing rapidly, but India has retained its leading role in offshore IT outsourcing.

However, I think that Russia is going to take a much more visible position in the global IT marketplace and not only because of the rapid growth of its domestic market. I can expand on that but only if you ask me that question…

What would you say will be the reasons for Russia’s more visible position in the global IT market?

The growth of the domestic market is not a reason at all, but there are real reasons why Russia is becoming a prominent player in the IT outsourcing market. The first factor is its human resources. There are two main benefits to Russian IT people: first is the number of these people. There are different data on how many IT professionals graduate each year. Russia’s starting point in this business was very good. In the mid 1990s, Russia had more than one million R&D personnel which was the highest number in the world, followed by the US and Japan. According to Microsoft’s research, over the last seven years about 186,000 people have graduated annually from Russian universities with the skills required to work in the IT industry. According to Forbes, it is 100,000 people every year, but those are only the people majoring in Computer Sciences, Maths and Physics, with a good scientific background. In India, they have 60,000 graduates every year.

Secondly, the demand for IT workers is going to grow very rapidly in the future. In 2005, the demand is expected to exceed one million, compared with 360,000 today. If we look at the numbers from India, we can see that the total number of IT workers today is about 500,000 of which only one third work in the software and IT services export sector. By 2005, there will be around 200,000 people working in this sector, well short of the one million demanded. Thus, a significant amount of those posts will be filled by non-Indians. There is a large market to be opened up. The numbers above show that Russia will be an important player there. Russian education is good: in two out of the last three years, Russian teams have won the ACM programming Olympics. They took 1st and 2nd places in 2000, 1st and 3rd places in 2001 and had a very good performance this year despite the Chinese winning. Russian universities were among the winners and, more importantly, they were regional universities which is very good news. That is where the real potential of Russian IT is coming from. Although we won’t be the next India because India is India and will remain so, we will certainly become a very visible player.

Auriga was founded twelve years ago and soon decided to move to America. Tell us about the history of Auriga. How did you become one of the fifty fastest growing companies in New England, for example?

We founded Auriga in 1990 in Russia to carry out software development for foreign clients like Hewlett-Packard, as well as for domestic customers. I think for the first three years HP was the only client of Auriga; we became their exclusive partner for the Moscow region. The HP initiative was about selecting one business partner within each of the leading IT regions in Russia. HP would train them in California and then they would return to Russia to develop software for HP.

We signed the first people and then, in 1993, with the recession, Hewlett-Packard resized these operations and only kept their Indian partnerships going. So, at that moment, I decided that we had to move to the US because, without building sales and marketing infrastructures closer to the clients, it would have been difficult to be successful. I decided to take us to the US and, in 1993, Auriga was incorporated in the State of New Mexico. In 1995, Auriga’s headquarters moved to Amherst, New Hampshire. Since then I have lived in NH and spend ten days or so here in Moscow every couple of months.

Offshore solutions, IT staffing and software development services are your three cornerstones. How successful have they been?

The good thing now is that all three are merging. We still have purely staffing projects but we are trying to get turn-key projects where, obviously, staffing is the first stage. If you get good people then the job will get done. Doing the same thing offshore is even more challenging. Let’s say we start with getting the potential turn-key project from the client and we sort out the staffing problems by using our people in Amherst, New Hampshire and then the next project is done half offshore and half on-site. All of these three lines of business are merging so as to be able to achieve our goals. We want to position ourselves as a consulting company. It’s not a client’s concern where the job is being done. Wherever labor and production is the most efficient and least expensive is where the job is being done.

In a speech in St. Petersburg last year you said you were always competing with Indian companies. How do you manage to compete in the global marketplace?

We are competing with Indian companies. There are good companies from many countries but it happens that, in our case, we have nearly always bid on the same projects as Indian companies. I have never met any Russians! We are winning projects, obviously. During my IT roundtable talk when President Bush visited Russia, I gave some examples of how it was possible to beat Indian companies. Russian companies still have a major disadvantage which is the sheer size of some of the projects. If we had to have a hundred people working on a new project within a month, we couldn’t do it because we just don’t have the engineers and the infrastructure for large projects. What Russian companies need to do is to grow! Big projects need bigger companies which need more people and more investment.

Your mission is to constantly exceed the expectations of your clients. Who are they and what do they expect from you?

Our clients are mostly American and we work in two vertical markets: software development and telecom. We do have a little bit of work for other clients but these two groups represent 90% of our work. What they expect is really different because it involves a lot of work, like system-level software development, things like writing drivers, etc., i.e. something not typically done offshore. It’s difficult to find this type of skills abroad; we are kind of unique in that respect. Our clients expect us to deliver solutions and we try to exceed their expectations. We are succeeding.

How can a company benefit from using your offshore resources?

Clients usually benefit from offshore work due to a combination of a few factors. Number one is cost saving. A couple of years ago it wasn’t the main issue but, in the current climate, it most certainly is. Secondly, it’s the opportunity to find skills which they themselves do not possess or cannot find. If you need a certain amount of resources for a project and can double the number of people working on that project, then you could halve the time-to-market for your product.

Can you explain what Auriga’s IT Business Incubator is?

This project is about studying how SMEs can use IT. Big companies usually know how to do things for themselves. For SMEs, it’s important to have a partner helping them get to know local markets and help them develop software on their own terms and maintain their own development standards. We try to help them with the infrastructure. The next step would be for the client to become totally independent but, in practice, they keep working with us even though it costs them a little bit more. Having a local partner is really useful.

What can you tell our readers about your close connections with Moscow State University and the level of communication between Moscow and New Hampshire?

Our connection with Moscow State University is very important. I was a professor there for a number of years. Most importantly, this close connection gives us access to top graduate students. They know we are here and we have very good contact with them. (Mr. Sukharev connects to his server in New Hampshire to access the data). 95% of Auriga employees have Master’s degrees, 17% have PhDs, and 65% are graduates of Moscow State University. (Mr. Sukharev phones his voice mail inbox in New Hampshire to see if he has any new messages).

You have built this company using absolutely no start-up capital. How did you manage this?

We’re still not looking for outside financing right now. It might be possible in the future though. Right now, we are self financing. I’m very hopeful we will outgrow ourselves as soon as the markets pick up. My main priority is to establish this company as a very visible player, especially in the US, and we are trying to do a lot to enter the German and British markets. We would like to double and triple the number of engineers so as to be able to compete for big projects, something which can’t be done in a reasonable time frame without outside investments. It depends a little bit on the market but the challenge is to really make the company grow using outside investments.

If we were to meet again in ten years time, where would you like to see Auriga?

First of all, geographically, I would like to see us in Amherst, NH, because I love the place, and in Russia, too. I don’t want to be elsewhere; I love the proximity to the ocean and the markets. In Russia, at some point we will have to go outside Moscow. We have already tried to do it more or less successfully but it has depended on the project so far. Moscow still has good resources but in Russia’s regions there are abundant, very high quality skills available for a lower cost. Therefore, in Russia, we will move into the regions but keep our connections here in Moscow and at Moscow State University. Auriga will become a top-level consulting company using offshore resources. I want to be able to bid on big projects.

What is your final message to those people looking, perhaps, to invest in business in the Russian Federation?

Look at Russia. Russia is different. It’s not like it used to be three or four years ago. It has experienced a lot of growth and there is a lot that still needs to be developed in the Russian IT sector. Some foreign investors’ concerns about Russia are very outdated. Today Russia is one of the best countries to invest in. The window of opportunity is wide open.

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