Silver lining in the downturn: cheaper tech talent
Good news is hard to come by these days, so here's a nugget about a business that's found a silver lining in the economic clouds.
I grabbed breakfast this morning with Serguei Sofinski, CEO of Intermedia, a privately held software-as-a-service company that sells a browser-based version of Microsoft (MSFT) Exchange e-mail that customers use for a pay-as-you-go monthly fee. Sofinski's business isn't immune to the economic climate – he didn't see much growth last year, and December was rough – but he says things have been looking up in January. (Intermedia is cash flow positive, according to Sofinski, so it doesn't have to worry about hitting up investors for funding during the downturn. )
In particular, Sofinski is seeing an uptick in business from individuals signing up with the service. He's guessing it's recently laid off workers who are striking out on their own and want the type of e-mail they're used to from the office.
But that's not the shiniest part of the silver lining. It turns out that Intermedia, which has about 200 employees, has a team of 25 engineers in St. Petersburg, Russia, who do a lot of the nitty-gritty software coding. The Russian economy and its currency, the ruble, have taken a dive lately with the steep drop in oil prices. But what's bad for Russia isn't so bad for tech companies.
The ruble's troubles do a couple of things that help Intermedia. For starters, it makes those engineers less expensive, since many of Intermedia's customers pay in dollars and the engineers get paid in cheaper rubles. More important, Sofinski said, it makes it easier to hire and retain top talent. "It's nice to pay 10 percent less for an engineer, but that's not my big concern," he said. "I can get a quality engineer who gets the work done faster."
That's not great news for American engineers who are looking for work and have to compete with sale-priced Russian coders. But for tech companies that are pinching pennies, a ruble saved is a ruble earned.
A POSTSCRIPT: Some commenters have suggested that if companies are going to look overseas for programmers, they should do the same for management. It so happens that Sofinski, the Intermedia CEO, is Russian himself, and graduated from a school in St. Petersburg where his software team is now based. He works out of New York now, so he doesn't qualify as outsourced labor – but he's not your typical U.S. executive, either. (INTC) (AAPL) (CRM) (DELL) (EMC)
Paradox is that even when outsourced job is done terribly and the result could be predicted from the get go, the companies would still do it to show shareholders that they "save" money. After that they hire a local contractor to redo the work done by Indian subcontractors and the project looks a success. Local contractor never gets publicized and the big myth of benefits of off-shoring to India grows.
Wake up folks… that's the mentality of executive level America these days. If you aren't in their club and you are one of those poor pathetic people "beneath" them who actually performs a service for a living you are not worthy of their consideration, nor do you deserve the ability to provide for your family. I say let the class wars begin! It won't be long now before the only ones they have to steal from is each other anyway.
As a five-year Intermedia customer (and SMB network admin) I can tell you that Intermedia fulfills its corporate objective very well:
"Founded in 1995, Intermedia is the leading provider of business email including Microsoft Exchange to the small and medium business market. Intermedia specializes in providing enterprise-grade solutions through its world class infrastructure and service to small and medium businesses at a price they can afford."
It's unfortunate that domestically based companies were unable to meet my requirements for full MS Exchange functionality at an affordable cost (I looked at several). If they could, I would have considered them more seriously. But Intermedia does the job admirably, and has retained my business as a result.
Yes. Some silver lining. Farming out more jobs. You fools. What are you saying. That's the WORST thing that could be happening to America.
This article is a joke right? Please say it is.
AMERICAN jobs must be protected for American companies to American's wages so American can buy goods and services.
Matt, if outsourcing is so great what happens if your company outsorces your job? What if your entire profession is outsourced? Then NO job, no food, no house…you and your family starve and die. Come on! Please don't be foolish and think that outsourcing has any merit for Americans.
Another great example why our economy is broken sending more high tech jobs off shore. Hope those property values are workin' out for those tech company execs………. oh wait they make so much money they don't care about the piss poor economy. The only way for them to understand is for them to be monetarily hurt somehow.
If everything gets outsourced, then where will companies find the customers in US? All will be standing infront of Social Security office. May be, the companies needs to shift outside to do business too.
Wow, what a great idea! Let's teach people in other countries how to build products and services this year, so they can steal the technologies, and compete with us and steal our customers next year. Don't worry, it's OK, as long as our short-term thinking executives get a big bonus this quarter.
Not sure who this article is aimed at. As an IT guy, it doesn't make me feel warm and fuzzy. In this economy, I want to see stories about good jobs being created in this country. Not how companies can save by using Russian programmers.
All the anti-outsourcing whiners don't know what they are talking about. IT'S A GOOD THING, PEOPLE! It brings competition, more efficiency and better results, for a lower total cost.
China may have introduced occasional toxic products, but in general it has lowered the costs of goods and given people in the US (and China) a better quality of life.
The same goes for IT: if Intermedia can lower its costs for the same quality of programming abroad, US customers will benefit from those lower costs.
Absolutely, outsource, outsource, outsource, and don't worry, none of your IP will show up anywhere else and certainly not at any new offshore competitors. Uh huh…
Next thing you know you've just outsourced your customers and they don't pay so well.
That's great news!! As an investor in tech, I expect CEO's to also be outsourced to Russia. They have run the economy into the ground here, and I demand return on my investment. Let's start with Ballmer, Jobs, and all these other overrated, overpaid CEO's.
Isn't that always the rule? Never hear of any managemenet being outsourced, no no. How insulting to those countries, that they are only smart enough for the "low level jobs".
This sounds like a great deal! Hopefully they can outsource management as I'm sure there are some great Russian managers out there. Heck, just close the company and move it to Russia. That would be great news for investors!
Soviet Block tried to stop free market with building walls (virtual and real). Where is the Soviet Block now? It wasn't crashed with a war power, its economy collapsed.
People who wrote comments below remind me of a typical communist propaganda and their search for internal and external enemies. Get real. I know a lot of engineers – the smart and hard working ones were never afraid of being outsourced. It was a free country and it should stay so. If you feel like Russians or Chinese get a better deal than you, go move to China, like some of your ancestors moved to States. Barriers are not the answer, they will collapse the economy. Read some history or an economics book. Or some books on the top notch developments in your field, so you don't get outsourced.