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The Real Deal: Arkadiy Dobkin on E. European Technology Services

Deal Architect – by Vinnie Mirchandani

This continues a series of guest columns from practitioners and bloggers I respect. The category - The Real Deal describes them well.

In recent months, I have written about buyers starting to look beyond India for global delivery resources. I have invited executives from firms in E. Europe, S. America, China to write about their value proposition over the next few months.

Arkadiy Dobkin is CEO of EPAM, which focuses on offshore software development. Ukraine, Belarus, Russia and Hungary base EPAM’s major technology centers and delivery operations. Arkadiy was recently named one of the "25 most influential consultants" by Consulting Magazine. Scott Schwartzman, SVP of N. America (and formerly with SAP) contributed to this POV on why E. Europe looks more and more attractive.

"With the extraordinary growth and overall acceptance of offshore outsourcing, companies have flocked to India for many years now.. and there seems to be no end in sight. The downside of this trend has been the unavoidable dilution of talent, competition for resources amongst the outsourcing firms and project team instability due to high turnover. Naturally, companies are now looking outside of India and many are choosing Eastern Europe.

What makes Eastern Europe an attractive alternative to India and other prominent outsourcing regions? Thanks to the "soviet heritage" and the strong emphasis on advanced education in math and the sciences, this region produces thousands of the world's best software engineers each year. In fact, many multi-national and leading edge technology companies have already discovered and leveraged this highly skilled pool of talent. Eastern European countries, including the former Soviet Union, have seen the IT industry export reach $1 billion in 2005, with 30 percent growth expected in 2006.

The availability of aforementioned talented resources has been a major factor in fueling the growth of this region - but there are many other factors. The region is still in the "early" stages of the growth .and can offer stable teams of people; turnover is relatively low - usually single digit percentage versus double digits in most other regions.

Proximity to the clients is another key factor driving the growth. Eastern European countries are easily accessible to their Western European neighbors...and several countries, including Hungary, are now members of the European Union. This offers Western European companies a "near-shore" alternative - addressing issues around time zones and flexibility to travel on a moments notice. Even for North America clients, there is "only" a 6-7 hour time zone difference with east coast states, providing for some overlap in the working day.

Lastly, the region has clearly benefited from the outsourcing pioneers from other regions. India and other regions have blazed the trail for outsourcing. And they discovered many pot holes along the way. Leveraging these lessons learned, the Eastern European region has fast tracked into a premier destination for software application outsourcing."