A Coming Russian Information Technology Boom?

As I mentioned in my blog entry of February 23, 2006, Russia’s economy is booming. This is largely due to increasing revenues from its oil and gas industries. So high-profile are these industries that foreign investors and energy companies are aggressively getting in on the action. ConocoPhillips, for example, owns a 17.1 % stake in Russian oil giant Lukoil and Royal Dutch Shell has a prominent stake in Russian oil and gas. But the Russian companies themselves are on the march: Gazprom recently bought Sibneft to become the world’s second largest oil company in its sector after Exxon Mobil.

President Putin certainly understands the value of his country’s natural resources for Russia’s advance into the modern global economy. So it is interesting to speculate about whether or not Putin understands the potential value of the cadres of Russian Information Technology (IT) specialists living within his country. IT is still a minority portion of the Russian economy, and one of its only non-natural resource contributors. But it is loaded with human talent. In fact, historically, Russia and some other parts of the former Soviet Union boasted many of the world’s most talented computer programmers, engineers, and hardware architects. Sergei Lebedev was among the first of these, designing the first stored-program computer in continental Europe in Kiev by the early 1950s – independent of western efforts.

Fast forward several decades and indigenous Soviet hardware included the famous BESM (Bistrodeistvuyshaya Electronaya Shetnaya Mashina) computer and others. And although Soviet hardware languished under Brezhnev and the protracted collapse of the USSR’s economy throughout the 1980s, its computer specialists made up for this lag by innovating with algorithms and programming techniques that the West did not pursue.

Everyone under age 50 remembers the terribly addictive game Tetris, developed in Russia in the 1980s by a couple of clever young computer engineers. There are more of these kinds of people in Russia’s universities today. Unconstrained by the anti-commercial communist doctrine, Russian entrepreneurs are currently trying to develop software companies and services. But they do not have the unfailing, outright support of Russia’s government, which is viewed as a hindrance and an interfering entity (internet traffic is reportedly scanned by the Russian government) by many software entrepreneurs – thus a number of Russian startup software companies’ servers and people are physically located in Western Europe and America.

US computing companies are well aware of the talent in Russia. IBM is opening a software research and development laboratory in Moscow. Intel Corporation employs around 1000 computer engineers in Russia. Motorola has around 600 employees in the Nizhni-Novgorod region. Google announced this year that it will open a research and development center in Moscow. Dell and others are present in Moscow and elsewhere in Russia.

Is President Putin on board here? He did play host to a delegation of US and German business leaders back in June 2005, including Samuel J. Palmisano, CEO of IBM. And in that same year Putin backed a Russian Technopark initiative, where IT business growth could be fostered. What happens next is uncertain. Some watchers have posed the question: “Will Russia become the next India in terms of software outsourcing?” This is unlikely, in part because Russia sports a more evenly educated population than India, and because it has its own computing legacy to follow on if it chooses. The slowly emerging IT industry in Russia is a unique phenomenon politically, socially, and economically, and its evolution will be “Russian” in nature.

It is promising that the Russian IT industry is getting attention from western businesses and the press. Businessweek featured a noteworthy article on the topic in January: http://www.businessweek.com/magazine/content/06_05/b3969420.htm. Russian IT specialists are reaching out to their western colleagues, too. To do this, they are organizing the first ever international conference on “Perspectives on Russian and Soviet Computing,” in Petrozavodsk, July 3-7, 2006: http://sorucom.karelia.ru/en/. Such small steps are critical in the globalization process and for encouraging commercial, private software – and perhaps the resurgence of hardware – industries in Russia and some of the former Soviet states. International business cooperation generally may promote global security – think of columnist and author Thomas Friedman’s “Dell Theory,” which argues that no two countries that are part of the same global supply chain will fight a war as long as they are each part of that supply chain. Friedman’s example is based on the IT industry in China and Taiwan. But it may also hold true in Russia and the FSU in time. By collaborating on many science, technology, and industry efforts with our former Cold War adversary, trust and overall greater global security can result. An IT boom in Russia and the former Soviet Union could play a pivotal role in this.

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