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Funny Economics

Some wry observations from me  on the world on economics-

1) 150 years after humiliating their country in the Opium Wars, Chinese mandarins have somehow convinced their leaders and military to park 2 trillion assets in Anglo Saxon debt. If Greece geting a 50% discount on its loan is the new precedent, when will the USA force its lendors to the negotiation table.

2) Income inequality and protests are something the Arabs and Israelis have in common. Besides being the sons of Abraham of course. Note the Persians are not considered the same as Arabs.

3) Advance knowledge of geo-political events can and ensures Western financial dealers have an edge on the sovereign funds in the other hemisphere.  What used to be the playgrounds of Eton has now shifted to the pubs of Boston and So Cal.

4) After spending 1 trillion USD on arms in the past one decade (funded by guys in item 1), the United States military forces is in a much better more advanced position to wage simultaneous war.

5) Can a war in Korean peninsula affect war in the Persian sphere of influence. Just follow the money , baby.

6) Saudi Wahabis continue to fund terror despite losing a lot of money in the economic meltdown in past few years. For every 1 $ increase in Saudi oil revenue, western oil companies ,traders, financiers make more, much more.

7) Demographics is an important key to economics. An aging Japan, and stagnant West is one cause to shift from manpower intensive warfare to cyber warfare. Plus Cyber warfare is good business . Underpopulated Russia and Arabs continue to lack true economic potential.

8) There are new economic incentives to develop tools to disseminate as well as distort information flow in real time in a hyper connected digital world.

 

The Great Game- How social media changes the Intelligence Industry

Since time immemorial, countries and corporations have used spies to displace existing equilibriums in balance of power or market share dynamics. An integral part of that was technology. From the pox infested rugs given to natives, to the plague rats, to the smuggling of the secret of silk and gunpowder from China to the West to the latest research in cloud seeding by China and Glaciars melting by India- technology espionage has been an integral part in keeping up with each other.

For the first time in history, technology has evolved to the point where tools for communicating securely , storing data has become cheap to the point of just having a small iPhone 3GS with applications for secure transmission. From an analytical purpose the need for analyzing signal from noise and the criticality in mapping chatter with events (like Major Hasan’s online activities)  has also created an opportunity for social media as well as an headache for the people involved. With Citizen Journalism, foreign relations office, and ambassadors with their bully pulpits have been brought down to defending news leaked by Twitter ( Iran) You Tube ( Thailand/Burma/Tibet) and Blogs ( Russia/Georgia). The rise of bot nets, dark clouds to create disruptions as well as hack into accounts for enhancing favourable noise and reducing unfavourable signals has only increased. Blogs have potential to influence customer behavior as they are seen more credible than public relations which is mostly public and rarely on relations.

Techniques like sentiment analysis , social network analysis, text mining and co relation of keywords to triggers remain active research points.

The United States remains a leader as you can only think creatively out of a box if you are permitted to behave accordingly out of the box. The remaining countries are torn between a  mix of admiration , envy and plain old copy cat techniques. The rising importance of communities that act more tribal than hitherto loyal technology user lists is the reason almost all major corporates actively seek to cultivate social media communities. The market for blogs and twitter in China or Iran or Russia will have impacts on those government’s efforts to manage their growth as per their national strategic interests. Just like the title of an old and quaint novel- “The Brave New World” of social media and it’s convergence with increasing amounts of text data generated on customers, or citizens is evolving into creating new boundaries and space for itself.A fascinating Great Game in itself.

Interview- Endre Domiczi

imageHere is an interview with a client and partner of mine, Mr. Endre Domiczi of Sevana Oy (www.sevana.fi) .

Sevana is a Finland based company which creates excellent software and analytics  products and their latest release is their automated audio quality product. Existing releases have been a shopping cart analyzer which does wonderful automated market basket analysis.

Ajay – What has been your career journey so far ? What advice would you
give to a fresh science graduate entering the market in today’s
recession .

Endre - About my career journey 

After receiving an MSc in Electronic Engineering my first job was maintenance of the Soviet "clone" of an IBM/360 computer (I still remember some of the Russian language terminology).While doing post graduate studies (got something that would be called today Tech.Lic. in Data Communication) I was offered a job by one of the professors in a research institute. Through the research institute I got a chance to work on a nuclear powerplant simulator in Finland as a Hungarian ex-pat (important, because Tsernobyl happened in the meanwhile).

I specified and implemented the mainframe side of the communication between a VAX/VMS mainframe and several PDP’s  (I’m still proud that later on someone who saw my part of the system, written in 1986, said that it was object-oriented, but the language was Fortran :-)

One of the jobs enjoyed most was at Fiskars Power electronics. I could design the Hardware and write all software for a microcontroller-based intelligent display of a UPS (uninterruptable (or unpredictable?) power supply), which communicated with the UPS via the power line (around 1988-89).

Then 6 years at Nokia and 5 years at Nokia Research Center, where I got more familiar with object-orientation.A brief stop at Rational, followed by lecturing at the Helsinki Technical University for about 3 years (concurrent programming; UML-related topics). Somewhere in the meantime a (or rather THE) company has been founded, where I still work.

Here is the answer to the "advice" part

My advice would be – if we were speaking of a bright graduate – that his decision to start establishing contacts with potential employers during his studies and to lay down the foundations of his professional network was very wise, and now he should start using his contacts.

Finding a good position on the labor market, or a place on the IT market with a product or idea involves a certain amount of luck but also planning and conscious self management, the sooner career starters realize this the better.

Ajay - What are the key things that you have worked with in terms of technologies.

Endre- To my opinion it’s always a matter of people rather than anything else,
because people create technologies and people use technologies.

I believe that the key technologies we worked with are the way our company is organized and managed, the way our employees treat working with us and of course that state-of-the-art products (no matter what actual technology we have in mind: C, .NET, Delphi, PHP, Java etc), which our employees develop for our customers.

Two major examples are existing product providing automated audio quality measurement and analysis and the tool to mine and manage association rules in high data volumes that we expect to release QI 2009. Both are unique on the market as technology/science wise as well as functionality wise.

Ajay- What is the most creative product that has been released or is going to be released by your company.

Endre- I would mention the same two analytical products:

Automated audio/voice quality estimation is already released and we are searching and negotiating with companies to partner on its dissemination and integration to voice quality and quality of service test solutions.

All information about scientific approach, technology, tests and benefits is available from our web site (www.sevana.fi) partly freely and partly under NDA.We also put big hopes for the association rules mining system, which we develop trying to take into account needs of statisticians and marketing/sales analysts as well as typical demands in various industries: retail, wholesale, maintenance. I would like to give special thanks to Mr. Ajay Ohri whom we were consulting with about the features of such product and its market applications and demand. ( Ajay- Pleasure is mine)

Ajay-  Outsourcing has taken off really well in Poland and Romania. What
are the best known success stories of outsourcing that you can tell
of.What are the best known success stories of outsourcing that you can tell of.

Endre- Well, outsourcing may have different faces – it can be a big success and a
big failure or even a failure with a face of success. I believe that success story for software outsourcing is any company that has established a well operating and profitable company in any country, where doing software outsourcing makes sense.

I also believe that we have a good concept for software outsourcing projects as well, providing onshore software development at offshore prices in Finland.

We have our own know-how in order to make it possible.

Ajay- What do you think about the open source versus proprietary software debate. What is scenario in your local market ( across parts of the country ) regarding this.

Endre- Open source gives the freedom to the evolution of applications and services.

It can spare you from reinventing the wheel. I forgot the source, but some famous computer scientist said something like: if programmers read more they would have to write less (code)One can argue that in case of open source one doesn’t easily find a bug-fix if her/his problem is not "mainstream".

However, even in proprietary software the vendor has priorities (often market-driven) and if your wallet is not thick enough and you are at the end of the list you’ll have to wait. And fixing, making a workaround, on your own is much more difficult.

Ajay – What are the intellectual property rights conditions as well as language facilities for Russian software companies ? What is the best way to contact local Russian companies for a software contract.

Endre- Protecting intellectual property rights is a reasonable issue in Russia and a lot of effort is put to improve the situation by the government and business, however I believe that the same challenges can be found in any other country: if your IPRs are broken for instance by your outsourcing company, would you really be able to afford court trial? I am sure not every company would be able to afford it no matter where we have IPR violation: in Russia, Romania, Poland or India.

I think the best way is to try to contact individuals first, because in Russia for instance there are a lot of highly qualified people who would rather try to establish their own
business than trying to be highly recognized by local outsourcing companies. We’ll be happy to assist in providing connections to the Russian software compan
ies and individuals.

 

Disclaimer- Ajay- I advise Sevana on Web 2.0 initiatives .See more on their products at http://wordpress.sevana.fi/ and http://sevana.fi

A Russian Perspective on Outsourcing

Here is an talk with an experienced  Russian software programmer M Sitnikov, who talks of his experiences in European software outsourcing. It is a raw account of the industry from a non Indian perspective on how things are in the trenches.

    Software outsourcing- A look from inside By M Sitnikov

    It’s been a long while I was thinking to present some thoughts, facts from my software outsourcing experience both as a service provider and as an employee of a software outsourcing company.

    The attitude here will be more negative, because I saw how one can make 1000% profit on a customer project and this article is more like a small discussion, so please don’t judge the text, its layout and my English language skills too strictly.

    Software outsourcing in brief

  • There is an opinion, a company should make approximately 3000 euros/USD on each developer per month. But of course this varies from country to country depending on the flat rate price for local resources and at least number of hours in a working week.

  • Average yearly budget for 10 people team is usually estimated about 360 thousand euros (could be also 90000 dollars, it’s not the point)

    • Typical ways of cooperation:

      • Fixed time

      • Fixed cost (Offshore Development Center)

      • The fact is that in well developed regions, where there are lots of universities and qualified resources there are also lots of big players like Intel, EMC, HP, Alcatel-Lucent, Siemens, Motorola, Google: you name it. I seriously doubt that any software outsourcing company can compete with salaries/conditions offered to top level professionals by any of the giants when they come to the local market.

        Conclusion #1: It’s quite rare that a software outsourcing company can provide top resources:

          • no giant companies locally, but then it means the place doesn’t have top education facilities in the relevant (IT in this case) industry

          • if it’s a well developed region then the giants are there

              More facts/thoughts

            • To be competitive IT-outsourcing company’s personnel should grow by 25-30% annually: how else can company that produces nothing grow? The only chance to grow is to get more projects to set up more Offshore Development Centers (ODCs) and naturally increase personnel and revenue "per head", but achieving that is not easy – see Conclusion #1

              • Companies hire students, developers from other cities and regions: take into consideration Conclusion #1 and you will see that this is a natural development for solving HR problems in software outsourcing company, but:

                • Do students hired have enough education? – not always

                • Do students work full time? – not always

                • Do students provide high quality software development? – no, that takes time

                • Do students provide end customer with the quality he paid for? – no, he didn’t pay for students, but for software professionals

              • Software outsourcing is not a very profitable business: really, if you don’t produce anything you can market, sell and expand your sales then your business cannot be very profitable, well, unless you have one big customer, or you are a major software outsourcing company in the region, but anyway, your profit is a matter of personnel growth.

                • Merges and acquisitions are typical trends: if you are a business owner of a software outsourcing company, would you sell your company for a good lump sum of money? – hell yes! One cannot increase company operations by increasing amount of personnel permanently and the business owner cares about money, not only progress of its company, but:

                  • What happens if a software company is sold? – the buyer may loose some employees, the customers may loose some key software developers, architects and even project managers (they are supporting a reliable communication and mutual understanding between the customer and the team)

                • Venture capitals are not invested into low-innovative companies: why would a venture capital be interested to invest in an outsourcing company that has no value in terms of future development, in terms of innovation or new products? – could be for some internal reasons, but unlikely:

                  • Business owners are not interested in company development, but in company profitability: outsourcing companies in many cases use their "partner" companies registered in offshore zones or their mother companies. It’s obvious – that helps to avoid paying local taxes, but:

                    • If all the income comes to an offshore company would the owner be interested to develop its local company? – no, why? This company should be working to make money and it’s not the object for investments. The key is to press the company top management: bring more clients, make more projects, increase turnover, increase amount of personnel, show me better figures next year!

                      Conclusion #2: Software outsourcing business is not a very profitable business with lots of competitors. Companies tend to increase their turnover. Owners tend to make more money out of their outsourcing company no matter whether they sell it or get projects for another 10 people. Offshore companies do not care much about their onshore offices, where actual teams are situated, the goal is to drive as much money to offshore accounts as possible.

                        What’s inside a software outsourcing company

                          • In fact your software outsourcing partner is more sales oriented than customer oriented: every company has sales director and sales managers, their income partly (in many cases it’s the main part) depends on the commission. Sales guys try to sell: they maybe doing it very hard (and sometimes horribly annoying) – they need to make money. And their typical attitude towards their technical colleagues maybe: I did my job, now you do yours! I don’t have time, because I am the manager and you are (just) a technical guy: Of course, a company may have account managers, those who would take the customer afterwards, but:

                            • Why to spend money on hiring additionally account managers? Let the sales people do the job!

                            • Why to spend money on hiring additionally account managers? Let the project managers do the job!

                            • We have account managers, but why to spend so much money on them – they should take care of several accounts at once! What? They say that 4 accounts is the total maximum to do the work good? Hell no, take 8 and if at least one can handle that we’ll have a case, give him some bonus and nail the others!

                          • Sales people may have a significant lack of technical knowledge: who is your sales person? What education does it have? In many cases technical people don’t have fluent English to communicate with the customer appropriately and the sales person lacks real technical knowledge (of course, that person is more humanitarian, that’s why the language knowledge is better). And this leads to internal conflicts that you may sni
                            ff only by some side effects: have you ever got a mail from your business contact in a software outsourcing company stating something like, "we’ll develop your warehouse management system in Assembler, because it will be the fastest ever!", or something like, "no, we suggest C# instead of using .NET", or anything else: really strange and even funny. This may be the first ring to you – be prepared there is a conflict between the sales guy and the development team. Programmers have a good sense of humor, so they were joking and the sales person didn’t understand that, because it knows nothing about IT and (what is even worse) doesn’t want to learn, because "that’s your job, not mine!".

                            • Eager of making super revenues by hiring students and cheaper labor: here we refer to companies hiring students and developers from other regions for your projects. A good example: so, a monthly salary for a professional software developer is let’s say 1000$, this is a person with at least 2-3 years of relevant experience, having extensive knowledge in technology etc etc (let’s not put a very high demands here), and a student is not a person who can demand such big money while still studying in his university: Well, a student has no experience in software development, no experience working in business environment, no knowledge what professional coding or SVN is: and so on and so on, but:

                              • A student would work for 100$/month, because he needs experience and 100$/month is better than nothing especially comparing to student’s scholarship

                                • The company knows what to do too (get 1000% profit!):

                                  • Get a strong project manager to work with the customer

                                  • Get a strong software architect to train the student

                                  • Press all in the team to provide deliveries on time

                                • The Customer is also happy though: he knows that top company professionals will be working for his project, he can see highly qualified project manager and software architect and he doesn’t know that other 5-10 members of the team are students: The Customer will learn about that after the first release, but the project manager will find answers and will make the Customer feel good again:

                                  Conclusion #3: Quoting Amanda Laire, "Don’t trust a pretty face:", whether it’s a company image or nice shapes of a cute and "intelligent" sales manager. There is always a way for a software outsourcing company to make 1000% profit on you, you won’t even mention that.

                                  • High stuff circulation: imagine you are a software developer, or a project manager, or a software architect working in such conditions:

                                    • Sales guys pretend they rule the World

                                    • You have to work under pressure and utilize low all resources that you receive (also low quality, because high qualify resources circulate between new customers)

                                    • You work overtime and don’t get real bonuses (see Conclusion #2)

                                    • At a certain point you realize that a project ends and another starts and it’s pretty much the same like before:

                                    • You are young, you know you can do more, you know you can earn more

                                      What would you do? – you will leave the company. How much this circulation can be? Sometimes it’s up to 30-40 or even more percent!. And in many case 70% of company employees are willing to change there job, but 10% of them are scare, because they are used to the community and environment, 20% demand more than they cost, 20% change it to a similar company or don’t know exactly what they want and 10% do leave the company and find a job in a World leading brand company or in some other, really better place.

                                      • Low level of working conditions for personnel

                                        • How can you decrease expenses on personnel, which your main asset? – you rent a cheap office space and place 15 people in a 30 sq. meters room (it’s real: 11 people around perimeter and 4 people in the center of the room)

                                        • You are liberal to your employees and let them come late and leave late, have a couple of days off on sick leave, but you don’t want to spend money for extra medical insurance for all 200 people in your company – it’s too much.

                                        • What happens to those who can find another job (that highly qualified people the company promised will be working for you!) – they leave to a better place, and they do right.

                                      • Lack of motivation for technical personnel: sales guys get a certain percentage from the project they get or a customer they sell resources to, but what would the others get? Well, they may get bonuses or may not, after all they can’t see perspectives of their growth, whether professional or administrative: developer can grow to architect, but if it’s a good architect then top management would rather increase his salary than makes him a project manager, and salary of an architect cannot be much higher than salary of a project manager etc etc: And of course even if salaries in the company is a big secret people will get know everything one day.

                                        • Tendency that employees turn into free lancers when possible:

                                          • You are a highly qualified professional that grew up from a developer to a software architect

                                          • You can communicate to customers and manage projects, but you are not promoted to a project manager

                                          • You know you can handle many projects at once

                                          • You know that your work is sold for 20-30 euros/hour and your salary is 5-8 euros/hour, but you don’t know why

                                          • Your customer tells you in emails that he would not mind working with you in the future also

                                          • You start visiting freelancers web sites and found your own customer

                                          • You are tired of sitting back to back of your colleague

                                          • You are tired to pay for medical services every time you need to visit a doctor

                                            • You are making 50% of your salary doing freelance projects, you are young, you believe in yourself:

                                              • What would you do? – you will leave the company and start working as a freelancer developing your own customer network charging them 10-15 euros/hour instead of 20-25 – everybody is happy.

                                          • Very strong social connections between employees: people working in IT companies are usually people with higher education, people who learnt a lot, know a lot and are able to do a lot. In software outsourcing companies you can find 50, 100, 200 and even more people working in the same premises. And thus people form their own unique community, they share their thoughts, hobbies, views, they form smaller and larger groups of friends and sometimes this is something that keeps that 10%+20%+20% of personnel continue working in the same company for years: But this can’t last long either.

                                            Conclusion #4: If you are willing to outsource software development, the best case for you would be to use personal connections, to kno
                                            w for sure what is happening in the company of your outsourcing partner, maybe even to own shares of that company. Otherwise try to build your own outsourcing team via freelancers if your business conditions allow that. This doesn’t mean you can’t use services of high profile or low profile software outsourcing companies, but: read all above – it’s there in a bigger or smaller amount, in one way or other as it’s part of the modern outsourcing business: or maybe it’s not as this text is nothing, but my personal opinion.

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