A Russian application outsourcing provider has chosen Vancouver as its first Canadian location and as an expansion of its North American presence.

Luxoft, based in Moscow, has been in BC since late November and intends to employ abut 15 people by April. The company’s Canadian operation is being led by Michael Vax, a Russian native who originally formed a relationship with Luxoft when he designed some software for IBS Group, one of the country’s biggest IT companies. Luxoft is IBS’s development arm.

Vax, who came to Luxoft from WebCT, said the Canadian office is already deploying some of its staff to work on projects at locations in Seattle (near to Boeing, one of its biggest customers) and Paris, France. Luxoft has not signed any Canadian customers to date, though Vax said there were several interesting prospects and that he would be concentrating on west coast companies initially.

“This is a near-shore component of a global delivery system,” he said. “We speak American . . . the business culture, intellectual property laws, language, how business is done – it really is very close to the United States.”

Vax said he estimated application outsourcing in Canada was about 20 to 30 per cent cheaper than it would be in the United States, and Vancouver in particular offers an attractive lifestyle to the kinds of talent it is recruiting. In Russia, Luxoft boasts a 94 per cent retention rate, which he said is far better than the high turnover at outsourcing firms based in India and China.

“The market is much tougher now than it was about three years ago,” he admitted. “The main way to attract good people is to create an environment where they enjoy working – challenging technology, challenging projects, and a good atmosphere. So far we’re doing okay (in terms of recruiting).”

Luxoft specializes in application outsourcing – the development of software programs and tools that are normally done in-house by a corporate enterprise. While still a large portion of the total outsourcing market, its growth is nowhere near that of business process outsourcing, according to a study from IDC and CapGemini released Tuesday.

“They’re all growing,” said IDC analyst Bob Welch. “In part what you end up with is one form of outsourcing leads to another – they start by farming out their infrastructure or their applications, then the back-end processes like HR or customer care.”

Besides handling software development, Luxoft offers services around application testing and performance optimization, Vax said.

“Smart companies outsource not because they want to save money because they want to do more,” he said. “It’s a way to find expertise where I don’t have it, or where it’s too expensive to try and attract such expertise.”

Other Luxoft clients include IBM, Dell, Deutsche Bank and T-Mobile.

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