Russia – a new destination for offshoring?

Offshoring in globalized world is the natural activity of the company which needs to balance between the need of keeping the prices for the product as low as possible and dealing with raising of living standards and salaries in home country. Offshoring allows to benefit from lower costs for products and services in another country.
However, offshoring is not only the way to cut costs. Sometimes it is a necessary measure due to the nature of the business. Sometimes home market is unable to provide the necessary amount of labor or the needed resources for production.
China and India are known leaders in the field of offshoring. And if China is better known as an offshoring destination for industry, India is popular among companies offshoring services – first of all IT-services.
China and India are still on leading positions as destinations for offshoring, however, last years due to a large concentration of offshoring companies in these countries and economic development of those countries themselves, the prices for offshoring in India and China become more and more expensive. Rapid development of offshoring cluster in both countries lead to the economic growth. And nowadays “Made in Vietnam” and “Made in Cambodia” together with offshoring IT-services to Philippines and Malaysia becomes more and more popular. However, why such a country as Russia is still not very popular for offshoring? Is Russia a hidden treasure for offshoring or indeed a tough political situation is a threat for the ownership of any business within the country? Why cannot be both? We are convinced that Russia is underrated as a destination for offshoring. At the same time a challenging political regime makes the future of the business within the country uncertain. At the same time the construction of offshoring helps to mitigate this risk. With offshoring the company may choose to use the service supplier/agent based in another country who is an independent legal entity from the initial company. With this construction the threats about loosing the ownership stay fully with the supplier/agent. This could be one of the ways to mitigate political risks. A number of other ways are available.
We are convinced that despite of political risks Russia is a great destination for offshoring production and services. Why? Below are some of the reasons:
Geographical location – a part of Russia is in European continent and another part, though is in Asia still well connected with Europe via various means of transport.
Culture – culturally Russia is much more European than, for example, China and India, which makes working process more smooth and makes communication much easier.
Low living standards – despite of few big cities, the rest of Russia displays very low living standards, therefor the expected salaries would be pretty low.
Education – collapse of Soviet Union definitely influenced the educational system, however, last decade it significantly improved and today Russia has a large number of universities providing good specialists, especially in technical fields.
Availability of resources – large variation of resources necessary for production is available in Russia for very low prices.
Language – though the language is still an issue the percentage of young people speaking English is growing rapidly.