With the end of 2012 in sight and the Russian tech industry preparing for its annual New Year break, Software Russia asked some of its frequent contributors from the past 12 months to look forward to what 2013 may bring.
With economic uncertainties surrounding the European and US economies five years on from the start of the global economic crisis, 2013 looks set to continue much in the same way as 2012.

Add to that the possibility of new legislation following the US elections and Europe’s ongoing restructuring, and uncertainties remain about the way forward for outsourcing and the software development industry.

One thing that is certain is that clients will be looking more closely at whether to outsource or near-shore in 2013, and this question is sure to continue to inform large and small business both in Russia and abroad.

In 2012, the Russian government showed greater interest than ever in its nascent hi-tech sector, and a veritable VC feeding frenzy consumed much of 2012 with a record number of new investments in start-ups and tech clusters. We asked several thought leaders for their predictions about the coming year and what they see as the most important trends on the horizon for 2013.

Alexander Egorov, CEO of Reksoft, said, “I would say that 2012 was a moderate year in the IT outsourcing market with nothing particularly revolutionary happening.

“The process of looking beyond labor arbitrage continued and more customers were inclined to seek integral business outcomes and a fundamental value proposition from outsourcing contracts beyond simply trying to reduce costs. This process will continue if IT services vendors can deliver process improvements and innovation.

“Another trend that has been evolving over the past few years is the expansion of outsourcing providers across numerous international locations. So much so that it is now considered to be a best practice, with more and more smaller companies seeking support outside of Asia. Providers who can offer clients a variety of geographic locations with a robust telecommunications network that seamlessly integrates the delivery centers, will definitely prosper in 2013.

“This also leads to the growing challenge of vendor governance and team integration issues that mature IT services buyers will be facing.

“A ‘new’ old trend revived during the presidential elections in 2012 was the shift from offshore resources allocation towards onshore domestic center developments. I believe that although onshore capability in the U.S. has become somewhat of a differentiator in the eyes of prospective clients, smart buyers will seek key outsourcing advantages first of all – labor costs and access to necessary skills – only then looking to the ease of integrating offshore and onshore talent.”

Arkady Khotin, a Russian software entrepreneur with multiple businesses in Russia and abroad, said: “We don’t expect any radical changes in the business. If the economy grows, there’ll be more projects, and, taking into account the demographic decline and overall aging of IT specialists, the demand for outsourcing will grow.

“If the depressed economy continues, our clients will cut their budgets and we will expand to fill the budget at a lower cost.”

Pavel Adylin, CEO of Artezio and the chairman of Russia’s major IT association RUSSOFT, is positive about a general upward trend for the IT industry and the international market.  He predicts a slowdown in the traditional outsourcing locations such as India and China because of the increasing salaries of programmers in these regions despite the relatively low quality of their work.

As a result, “Russian service companies will be in a good position to expand their presence on the Western European and American markets. From my observations, however, Russian outsourcing, despite being highly professional and boasting quite a few IT companies, has not been chosen over other Eastern European service providers.

“So next year we need to work closely with the Russian government to actively promote the Russian software industry abroad. To this end Russoft will conduct and participate in brand-building events in Russia as well as internationally. But that will be explored by the opening of permanent outposts in Western Europe, the U.S. and Singapore.

“The Russian software development market will continue to grow at a faster rate than the rest of the world. This despite the fact that the Russian industry is still in need of state support – primarily tax breaks. In addition it is important to maintain the increased share that small and medium enterprises occupy in the local IT industry. Small companies tend to outperform their larger and less active competitors with more frequent launches of innovative high-tech products, but they are also the companies most affected by the current economic environment and market conditions.

“Another important trend in 2013 will be an increase of skills shortages in Russia. It is no secret that the Russian system used to train IT professionals, at least in the way in which it exists now, cannot meet the demand for industry specialists. Therefore, in 2013 an important task for us will be the education and retraining of IT professionals, both through existing institutions, and in new forms, one of which is the St. Petersburg IT Academy, which is part of the city’s IT cluster.

“In terms of technology 2013 will be, in my opinion, the most active in terms of developments related to storage and the processing of large data sets (Big Data), which is due to the rapid growth of social networks.”

Finally Grigoriy Labzovsky, Director of Oracle’s St. Petersburg Development Center, is sanguine, “The trends are all pretty obvious – increased mobility and increased utilization of large amounts of data. From that one could draw the conclusion that the big players will be acquiring companies in those sectors. The number of users is growing just as the IT sector in general is growing too, despite the negative economic situation. I’m personally rather optimistic about Russian prospects as regards the government’s commitment to increase the share of GDP provided by IT.”