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. Last Updated: 07/27/2016

Would-Be IT Giant Left High and Dry

SibIT had high hopes of becoming the biggest Russian player on the international offshore programming market and attracted $22 million in investment. But the money is now gone and the company has little to show -- a warning to businessmen trying to make money off Russian brains.

SibIT opened in Novosibirsk last year to great pomp and ceremony. The founders of the company spoke of the "first offshore programming factory in Russia."

SibIT shareholders included famous software makers like Moscow's Cognitive Technologies, which held 17 percent, while the UniSoft and InetLab companies received small stakes. Small local software companies also participated in founding the company, along with Novosibirsk State University, the local division of the Russian Academy of Sciences and the Novosibirsk regional adminstration.

The main investor and controlling shareholder was businessman Igor Kuznetsov's Faktor group, which works on the ferrous metals market.

Media often refer to Kuznetsov as an old business partner of well-known Aluminum magnate Lev Chyorny.

At the time of SibIT's launch, Chyorny's press service neither confirmed nor denied he was participating in the project.

The $22 million investment shocked the market.

Altogether, the Russian offshore programming market was valued at $100 million last year. At the end of this year, the Software Developers' Association is expected to

announce the IT sector is stagnating.

The biggest players in the sector-- Luxoft and AiTi -- announced annual turnover of no more than $3 million to $5 million.

But this didn't worry the founders of SibIT. They announced that as of their starting date they employed 800 programmers and in a year's time their number would reach 2,000.

Cognitive Technologies president Olga Uskova announced that the Novosibirsk programming center had received orders worth $12 million. Nikolai Nikolsky, the company's marketing director, could not confirm that figure.

Nikolsky did confirm the $22 million investment, and Cognitive Technologies' investment of $3.7 million was proportional to its stake in the company according to the $22 million figure.

SibIT no longer has the money, a source close to the Faktor group said, adding that investors reclaimed their remaining funds at the end of the summer.

"There wasn't much left. A lot had been spent. They rented spacious offices and all the management underwent training in Ireland."

SibIT general director Vitaly Savichev confirmed that the investors had recalled their funds.

"They don't comment on the fate of the money invested," he said.

The company isn't planning to shut down, however. But initial plans to enter the U.S. market are now in doubt.

"The tempo at which investors put in money when the company was being formed was naturally broken," said Savichev.

As for the $12 million in orders, "some died a natural death, while others were put on hold," he said.

Both Savichev and Nikolsky blame the international crisis that has hit the IT industry, starting in the first months of 2001.

"SibIT's history is quite ordinary these days," said Bulat Gaifullin, president of the Software Developers Association.

"All that's different is the scale."