Epam Systems acquires Vested Development Inc

Ovum, UK
ovum.com

Cornelia Wels-Maug

Yesterday, Epam Systems, the US-headquartered software engineering
outsourcing provider, announced its merger with Russian software
company Vested Development Inc. (VDI). The new entity will have more
than 2,200 staff spread across eight countries and will operate under
the Epam Systems name, with combined revenues of around $70m. Arkadiy
Dobkin, Epam’s CEO and co-founder, will continue in his role; Anatoly
Gaverdovsky, VDI’s CEO, will be heading Epam’s Russian operation.

Comment: Epam, founded in 1993 in Princeton, NJ, by Belarusian
Arkadiy Dobkin, heads the "Global Services 100" list of the top-five IT
outsourcing providers in Central and Eastern Europe for the second time
in a row this year. Though headquartered in the US, it has offshore
development facilities in Russia, Belarus, Ukraine and Hungary.

Epam is very much aware of the strong competition from India, and
it has responded by establishing presence in the geographies where
the majority of its clients are based (95% of its clients are in
North America and Western Europe). These sites host sales teams
as well as software engineers, but the majority of its development
facilities are offshore in Eastern Europe. Recognising the growing
demand for outsourcing services from Western Europe, particularly
the UK, Germany (which generated 17% of 2005 revenues) and France,
it responded by setting up offices in the UK in 2005 and in Germany in
January 2006. To strengthen its delivery capabilities, Epam invested
further in its offshore development centres and established the "first
of several engineering centres of excellence" in Ukraine at the end
of 2005. Though starting off with around 40 staff, Epam intends to
raise headcount here to 200 by the end of this year.

However, Dobkin is acutely aware that Epam’s 1,700 or so employees
do not give it the needed size and scalability and has openly hinted
at more acquisitions. The last one in 2004, of Hungarian Fathom
Technologies, has worked out successfully.

Its recent acquisition of VDI, which has 500 staff, seems a good
fit in terms of business compatibility. VDI, established in 1993,
is a global onsite and offshore software development provider with
offices in Russia, Ukraine, Armenia and the US. Their combined product
portfolios are complimentary and will enhance both companies’ sales
and marketing activities as well as their development capabilities.