Some History, The Current Environment, Intellectual Property and Employment issues

I. Introduction to The Russia Project

Economic development in Russia slowed in 2000 and did not improve in 2001.  There is, however, one relatively unnoticed sector of foreign investment, which has, for the last year or so, quietly attracted foreign investors to Russia.  This new investment comes in the area of high technology.  Some of these technology-related investments fall within the realm of defense conversion or genetic engineering.  The key to success in most such investments, however, is to utilize the relatively low cost of Russia’s well-educated work force for the development of software code, which will later be sold to private clients in the West.

A decade ago, such ‘offshore software developers’ set up their practices in Ireland.  As Ireland began to attract greater quantities of foreign investment, the compensation needed to employ quality programmers increased to a point where Ireland was no longer a viable jurisdiction for offshore software development.  In their continued quest for inexpensive, but well-educated labor, these high-tech entrepreneurs moved their sphere of operations to India and Pakistan.  This too was a viable option for ten or fifteen years.

The dissolution of the Soviet Union and the development of faster e-mail and Internet connections, however, brought new opportunities to this group of entrepreneurial software developers.  Russia and Ukraine have a wealth of highly skilled programmers, eager to supplement their meager incomes.  In the early days of the game, it was possible to hire good programmers for mere hundreds of dollars per month.  Now, of course, the wages demanded by all individuals with high-tech expertise have risen significantly in both Russia and Ukraine.  Still, this region and sector hold numerous opportunities for the savvy entrepreneur.

Before launching such a venture, however, International Council Education and Software (ICES) has endeavored to be well versed in the legislation and regulations that govern high-technology transactions.  In Eastern European countries, an invaluable resource for this has been Frishberg & Partners, 10 Gorky Street, Suite 8, 01004, Kiev, Ukraine, Tel: (380 44) 220-4952 from whom we liberally quote with permission.

II. The Intellectual Property and Information Technology Environment

As the internet is becoming more and more available to the average Russian and Ukrainian citizens, foreign-based internet surfers are coming into contact with the offers and propositions of local entrepreneurs looking to sell their technology to the highest bidders.  The typical situation is quite simple: a Russian or Ukrainian company offers to conclude a sale-purchase agreement for its product with a foreign company willing to pay for the product to an offshore account.  Sometimes, the foreign company even wishes to hire some of the local company’s employees.  As this scenario is increasingly becoming in vogue, ICES needs to be aware of the Russian and Ukrainian laws regulating such technology transfers.  With the help of Frishberg & Partners, this research is ongoing.  It has become clear that in local country offers such as this, it is extremely important that you "know your partner."  This is a primary consideration and ICES believes that it has a significant advantage with 25 years of trusted service to United States industrial and information technology customers.

III. Employment Issues

The Russian and Ukrainian employment markets have hardly been tapped for highly qualified technology experts, who usually come at an almost insultingly inexpensive rate.  However, many countries, including the United States, have placed minimum salary limits for such experts if they are to be transferred out of Russia and Ukraine to the U.S.  Therefore, companies have started to hire Russians and Ukrainians for certain tasks, such as software development, without requiring them to leave home.  Considerable work is currently proceeding to research the employment laws and regulations of these countries and their western customers.

IV. Business Ethics

A primary stumbling block for many US and other western companies is dealing with the different business practices and business ethics of Russia and Ukraine.  For many years the key executives of ICES have been active in The Russian Ethics Center and the promulgation of improved business practices and ethics in Eastern Europe and elsewhere.  In recognition of the need to promote these principles carefully, ICES has launched a special scholarship program in conjunction with The Weise Foundation, a notable contributor to education in general and improvement in business ethics in specific.

V. The ICES/Weise Foundation Scholarship Program (IntScholarship.com)

The purpose of this ICES Scholarship is to provide education and training to Russian and Ukraine computer science students to improve their English skills and give them a firm grounding in US computer science, US business practices and US business ethics.  It is expected that Russian computer science students might well complete their undergraduate work in America and perhaps launch graduate degrees, while learning about US business practices and learning how to serve the US market effectively.  After their education is completed, ICES expects to employ such scholarship students – beginning in software design and also utilizing their English skills as manual writers and translators. Eventually, ICES looks to this group to fill important roles in personnel recruitment, increasing management responsibility and ultimate promotion to regional management in their home countries and elsewhere.