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Inc. 500 Interview: EPAM Systems

Outsourcing is a tired buzzword -- but that's because all attention has been focused on Asia. EPAM has a few words for small businesses considering IT outsourcing to Eastern Europe and Russia.
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EPAM Systems (Effective Programming for America) is an outsourcer that develops software and IT systems for U.S. companies but competes on price by offshoring development to technology workers in Eastern Europe and Russia. Most other IT outsourcing is done to workers in India. But EPAM, founded in 1993, has facilities in Budapest, Minsk, and Moscow. It ranked as #31 on the Inc. 500 in 2005. In the past year, the firm has nearly doubled revenues from $39 million to close to $70 million. Inc. Technology spoke with EPAM CEO and President Arkadiy Dobkin.

Inc. Technology: What businesses are best suited to IT outsourcing? Which are not?

Arkadiy Dobkin: As you can see in today's world, practically any business can be and is outsourced today. And if some are not outsourced yet, we do not know what is going to happen tomorrow but it [probably] can be outsourced as well -- we just might have not realized it yet.

We also need to remember that it is not necessary to outsource to India or Russia. It could be just another company in the same town or in another state.

Speaking about businesses not suited for outsourcing, I can say that there used to be an opinion about traditional face-to-face businesses being not suitable for outsourcing, like consulting, for example. But as outsourcing consulting services is becoming a regular practice nowadays it is really difficult to say for sure what business is best suited for outsourcing and what is not. It looks like you can outsource anything as long as the operations to be outsourced are not your core business and as long as there is an outsourcing provider capable of doing this better and more cost-effectively than your in-house staff would.

Inc. Technology: If someone wants to investigate out-sourcing, what are the things they should consider?

Dobkin: The first thing to be considered is what exactly you want to achieve through outsourcing, i.e. the benefits and results of your cooperation with a vendor you will choose. If you have clear answers to these questions, then half the job is done -- you know what you want, you know the main criteria for the vendor selection. Another very important thing is that you should realize that outsourcing inevitably involves certain risk, and you should be ready to take it and to be prepared to minimize it. Of course, the amount of risk depends largely on the vendor you want to work with but in many aspects on you as well. The vendor cannot do the job alone. Be ready for on-going management and close contact to enable the necessary transparency into the outsourcing process.

Inc. Technology: What's the genesis of the company? How did it evolve?

Dobkin: Early in the 1990s I got enthusiastic about the business model deployed by India-based software companies who successfully delivered various projects for U.S. businesses. I thought about trying this model but instead to rely on the skilled and cost competitive Eastern European software engineers. I did my best to build relationships with technology executives in the U.S., and persuade them to try software development in Eastern Europe while my partner, Leo Lozner, was in charge of our operations in Minsk.

There were a number of obstacles: in the early 1990s the business relations between the U.S. and Russia as well as other post-Soviet countries were not developed at all and the acceptance level of cooperation with those countries was low. And India-based software companies had taken the early start, had a large amount of English-speaking population and were supported with proactive governmental programs, which enabled them to dominate the market.

Our first major success came when EPAM started to work on a sales force automation project for Colgate-Palmolive. The project was noticed by SAP AG and EPAM participated in early stages on prototyping of their CRM applications. The success of the project made us confident of our skills and proud of our work. Since 1997, SAP has been a repeat client of EPAM Systems.

Inc. Technology: What do business owners need to know about outsourcing to Eastern Europe as opposed to outsourcing to India?

Dobkin: I would just mention that in general Eastern Europe, including Russia and several other regions in the former Soviet Union are good sources of programming talent. In the Soviet Union the educational system was built and tuned around engineering disciplines for a long time. It created a strong base for producing a scalable enough pool of high quality people for the software engineering field. As a result, the Central and Eastern European IT specialists are known for their proactive and, often, alternative approach to meeting the client's IT project needs demonstrating greater flexibility and deeper expertise in specific domains.

The rest should be attributed to the companies and their cultures and experiences. There are very good companies in U.S., the EU, India, Russia, and other countries and there are many very sloppy ones in the same regions.




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