Will Ukraine-Russia’s Political Turmoil Boost the Region’s Outsourcing Economics?

By Bianca Wright

Nearshore Americas discusses the impact of political turmoil on the economics of Russia and Ukraine as outsourcing destinations, and offers insight from Alexei Miller, Managing Director at DataArt.

“Alexei Miller, Managing Director at DataArt, a custom software development partner with locations in the U.S and Europe, cautioned that it has always been important, especially during times of political turmoil, regional conflict and asymmetric media coverage, to separate perception from reality.

“News coming from Russia and Ukraine does not look good. Yet for those operating tech-focused businesses in the region, the reality is largely business as usual,” he said. “The technology services industry has operated for years in a sort of ‘parallel universe’ – it is not subsidized by the governments – unlike IT providers in India used to be, it invests in core infrastructure on its own and receives a large portion of its revenue from abroad.”

He explained that many of the export-focused service providers have little to no exposure to individuals and companies under sanctions, nor are they dependent on medium and long-term financing instruments that have been curbed. “They have been building resilient infrastructure, including backup satellite Internet links and back-up staff, for years. Short of outright travel bans or severing fundamental financial links with the outside world, there is virtually nothing that would impact their day-to-day operations,” Miller said.

Miller said that perception is something different: “What we at DataArt – and I’m sure many other providers – have found in the last few months, is that while a few potential clients have reviewed or slowed down their purchasing decisions, virtually none of the existing clients have walked away or decreased their business with us.”

He added: “An old saying has it that people get married for one reason but stay married for another; in the same way clients hire technology service providers from Eastern Europe for one reason – cost, diversification from India, R&D skills – but keep them engaged for others, such as superb customer care, proactive investment in clients’ future needs and true innovation through smart engineering. A few percentage points of cost savings are not worth the headline risk, but a true partnership most definitely is. Thus, those vendors which invest in the intangible aspects of their service will continue to thrive throughout the ongoing turmoil, while those who operate on pure cost or skill bases will likely see clients flee at the first sign of trouble.”

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