By bne IntelliNews February 23, 2010

Ben Aris in Minsk -

Belarus is emerging as a European software powerhouse as leading international software developer EPAM moves more and more of its production to Minsk.

Better known as a Stalinist holdover from the Soviet-era, the Belarusian capital seems like an odd place for a high-tech industry to spring up. But that is not the experience of EPAM, which has sought out talented programmers across Eastern Europe; the Soviets were bad at making tellies and dresses, but they were (and still are) a global force in the hard sciences. "We were surprised by the quality of programmers in Belarus and have been moving most of our work to Minsk," says Karl Robb, president of EPAM's European business.

Founded in 1993, EPAM maintains North American headquarters in Newtown, Pennsylvania, and chose Minsk as the home for its first software production centres in Eastern Europe. Offices in Hungary, Russia and Ukraine followed. A combination of the highest per-capita rate of IT graduates, stable economy, strong government support for IT exports and a loyal workforce with low attrition rates has meant the Belarus offices have maintained their size and momentum, now employing 2,000-plus people, compared with EPAM's staff of 1,000-plus in Russia, 900 in Ukraine and 400 in Hungary. "As the business developed over time, we thought that the growth in Ukraine and Russia would lead to a significant relative decrease in the percentage of EPAM's work being delivered to our Belarus office. However, Belarus continues to perform very well and grow at a rate very disproportionate to the country's population, and it still accounts for just under half our staff and remains the largest centre we have in Central and Eastern Europe," says Robb.

Belarus has been trying to ditch its strongman image in the last two years as fast economic growth begins to bang up against the ceiling of limited capacity. Belarusian Deputy Prime Minister Igor Sechin told bne in 2008 that the republic had used up all the spare capacity left over from communist days and needs foreign investment if it is to keep up the 6%-plus rate of economic growth of recent years.

Minsk became an even more attractive location after the government built the Belarus Hi-Tech Park a few years ago in the northeast suburbs of Minsk (and EPAM invested $15m into its own building). With all the modcons any western company could want -- as well as significant tax breaks -- the park is already home to 72 companies and a second park is in the works. But the country's most valuable asset remains its people. "We have operations in Russia and the Ukraine," says Robb. "The Muscovites are good, but they keep jumping job, while the Ukrainians are also technically good, but there are national level problems with economic uncertainty and complete lack of government support are problems. The regional gene pool for intelligence and IT talent, and quality of basic education systems of Belarus, Ukraine and Russia are the same, but the advantages of Belarus are the most favourable taxation, most (or only) government support for IT exports, most competitive labour and infrastructure costs, and the most stable work force in the region. There is complete stability and transparency, as the situation never really changes."

State support

Robb says state support is a key addition to the attractiveness of the country; the government has singled out IT services as a key sector and provided it with incentive programmes, whereas in Ukraine, Hungary or Russia IT is just seen as just another business. The Belarusian state has built a university to train more programmers, which EPAM has supported with grants. Plans to build a second Hi-Tech Park were also submitted in November.

Customers are quickly catching on to the killer combination of high-quality work and lower prices. EPAM has customers from both sides of the fence: leading Russian investment bank Renaissance Capital in the east; and European news and data provider Reuters Group in the west, amongst others. And while wages in Minsk are not as low as in, say, India, Robb says the quality of the code makes up for the difference. "Belarus will never be able to compete with India on price alone, or on size, but the difference is in the quality of the product and service delivered; a large percentage of the last few years' incoming Indian programmers are not trained in IT at university and learn on the job, but everyone in Belarus has a higher education in software engineering. You can't compare the quality, productivity and ultimately the [return on investment/value] of the two," says Robb.

IT-services outsourcing in CEE is still in its infancy, accounting for not more than 1% of the nearly $386bn global outsourcing market in 2007, but software exports are already becoming a major contribution to Belarus' external trade balance - which helps in garnering the political support to keep developing the business. Despite the crisis, the residents of the Belarus High Technologies Park managed to increase the revenue from selling their services by just over half in 2009 to $248m, with 80% of the production going for export.


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