IT outsourcing goes east

Unlike the Village People

Could Oymyakon in eastern Siberia - named the world's coldest inhabited village according to Guinness World Records - ever be the Silicon Valley of the future? It's not as unlikely as it sounds.

Analysts see the early signs of an eastward migration of white-collar jobs in IT services. Polish company ComArch, the country's third-largest IT integrator, is considering moving most of its operations to Ukraine "within one to three years," according to the Warsaw Business Journal. The Polish company, based in Kraków, has already established a subsidiary there.

Like so many former eastern bloc countries, Poland has greatly benefited from European firms looking for cheap IT labour. More and more Western companies rely on skilled coders in the Baltic states, Bulgaria or even Romania. Russia's current revenue from IT outsourcing alone is between $150m and $200m annually.

But now that some of these countries have joined the EU, benefits such as low labor costs are likely to disappear. Hungarian companies have already outsourced their production to China, Taiwan and Vietnam. There are 4,000 Hungarian-owned companies in Romania alone and a third of them are totally dedicated to outsourcing.

Ukraine in particular is becoming popular. Bill Gates, whose wealth exceeds the gross domestic product of that country, described the area as the fourth most important source of innovation in computer programming. He is not joking: Ukrainian engineers reliably developed software for Boeing space and military programmes.

The Ukrainian IT industry grew by a staggering 24 per cent last year, and now represents 6.5 per cent of GDP. This is more than three times the ratio in Poland, even though only three per cent of Ukrainians can afford a PC.

Of course, eventually even Ukraine will lose its appeal and it is only a matter of time before companies will have to migrate even further. Maybe even to Siberia’s polar regions. Arctic coders get ready for business. ®

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