A global gambit

Upgrading an Internet connection in St. Petersburg, Russia, can be complicated, as FutureTrade Technologies can attest.

"From beginning to end it took about a year, and at each step in the process an intermediary saw an opportunity to tax us," says Tom Dilatush, CTO at the Lake Forest, Calif., trading systems company.

FutureTrade's experience reflects issues that face any company looking offshore and outside established Indian centers for IT services: the inconsistent level of urban and communications infrastructure and talent necessary to support offshore IT services.FutureTrade employs about 50 developers in Talinn, Estonia, and St. Petersburg. Upgrading the St. Petersburg Internet link from 256K to 512K bit/sec involved convincing the landlord of FutureTrade's office building to change their contract to let the company deal directly with its ISP. The initial connection, about four years ago, involved laying copper in the street.

"In Estonia, on the other hand, we snapped our fingers and got an E-1 connection; it took us about a week and a half," Dilatush says, adding that in Talinn fiber is already laid out to buildings.

Seeing India's success, countries from Asia to Eastern Europe, Africa and Latin America, as well as Ireland, are promoting themselves as alternatives, and there are various reasons to consider far-flung locations, which don't all involve cost.

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"Companies want to spread their geopolitical risk," notes John McCarthy, a vice president at Forrester Research.

Businesses also look for providers closer to the U.S., specialized expertise and special language requirements.

For FutureTrade, the Internet connection hassle was a glitch outweighed by talent. "The level of education is superb, even relative to the U.S. The University of St. Petersburg offers a computer science degree, and there are thousands of people without jobs," making it easier to retain talent than in India, Dilatush says.

Technology education is known to be high throughout major cities in Eastern Europe.

Minsk, Belarus, for example, is a city of about 2 million with more than 20 schools at the college or university level, says Arkadiy Dobkin, co-founder and CEO of Epam Systems, a services provider in Lawrenceville, N.J., with about 600 programmers deployed in Moscow, Budapest and Belarus.

First Index in Whippany, N.J., which uses Web-based RFQ automation to match buyers and suppliers of manufacturing components, saved application development funds by replacing its own development team with Epam.

"We went from spending $55,000 to $30,000 a month," says First Index CEO Russ White, who also considered Indian providers.

Minsk is also closer to New Jersey than Bangalore, notes Bill Burke, company president. "I was surprised at how vibrant it is. Urban infrastructure is good - there's a nice underground, and I was impressed by the Epam facilities; they have the top six floors of a 12-story building, all re-done."

While Minsk and other former Soviet-bloc cities rate high in terms of available talent pool, and generally solid infrastructure, companies with massive IT requirements need to be especially careful when looking elsewhere.