The Prospects for Russian Outsourcing

The NYT has a story on the prospects for outsourcing in Russia, and the hopes of entrepreneurs in that country of emulating the Indian example. The story mentions all the obstacles to the attainment of this hope one might expect - the lack of fluent English speakers, the absence of a commercial-minded culture amongst Russian academics, and the poor state of Russian telecoms infrastructure by comparison to India, especially to areas like the Bangalore region - but I think it overlooks the most important difficulty of all, and one which a few entrepreneurs are ill-placed to do much about: the absence of rule of law in the Russian Republic.

India's courts may be slow, and the country's bureaucracy legendarily cumbersome, but if I were a businessman looking for somewhere to sign a contract, I know that I'd prefer a democratic state where laws actually mean something to a high-risk setup like Putin's Russia, as it is doubtful that any gains to be obtained by tapping Russian IT expertise would suffice to compensate for the likelihood that some siloviki thug one day decides to break my business partner for being too successful, or has the programmers writing my software rounded up for "betraying national secrets." As long as Russia is run by a lawless clique whose corruption makes the Yeltsin era seem like a poster child for clean government, the only sorts of businesses the country will be good for are those of the low-value-added, extractive variety, or those which require very little by way of commitment.

Comments

[AdamSmithee]

I wonder --doesn't the lawlessness just mean they should go for a particular sort of outsourcing? Betting on US college football, phone scams, that kind of thing... they should play to their comparative advantage.

[Abiola Lapite]

Oh, I think the Russians are already well ahead of the game on the sort of outsourcing you're talking about ... Russia is a nerve centre of hacking, phishin, virus-writing and confidence tricks of all kinds, and Russian companies have been doing solid business with American spammers for several years now.

[Phil Hunt]

Russia should look to Ukraine's example.

And probably will, some time in the next 20 years.