I just got back from visiting my partners in Flatsourcing in Kazan, Russia. This was my third trip to Kazan, and by far the most exciting. This stems from both the growth we are experiencing with Flatsourcing, but even more importantly the changes that are taking place right before my eyes in the city.

On arrival in Kazan, one of the first things you notice is that the whole city is under construction. Since last year a major road repair program has taken place and pot-hole lines streets have been replaced with paved, widened highways. Soviet-era block houses are being replaced by new apartment buildings. I was fortunate enough to stay in a new apartment that Oleg’s family has purchased. In the last three years mortgages have become commonplace in Russia, and cars and apartments are fast becoming part of the middle-class lifestyle. Speaking of cars, as we drove to work each morning, we passed dealerships for Honda, Toyota, and Hyundai as well as Mercedes and BMW. Word is that the Chinese auto manufacturers will be invading next year. They already have their fleets on the road in the form of big beautiful city busses. Just last year the city bus fleet was ragged, its been upgraded by Chinese manufacturers like Golden Dragon.

Shopping malls are all over the place. Kazan actually has more shopping malls per capita than Paris. We ate lunch at a shopping mall food court at a Russian fast food chain ironically named CCCP (translated as USSR). I asked the guys if this was offensive or threatening to anyone. Nope, they said, they Soviet era has been relegated to nostalgia by modern capitalism that is fueling the country’s growth. CCCP now is simply a fast food joint serving the world’s biggest brand, Coca-Cola.

You can’t help but notice how IT oriented the city is. One of the things I trumpet about Kazan is that there are more than 20 universities, most of them technical. This is a university town graduating the next generation of computer programmers annually. Kazan, and Russia as a whole has a culture of IT. The coolest job you can have is a computer programmer. Being high tech opens the doors of opportunity, including working at Google in St. Petersburg, or eventually working in the US if you are good enough.

Billboards around the city advertise HP desktops and laptops. The government has just invested in a beautiful IT startup “IDEA Park” to provide office space to startups complete with furnished desks and computers. The rent is discounted 50% for winners of an annual business plan competition.

Two years ago Fujitsu moved an entire office from the UK to Kazan through a partnership with a Russian based IT company, ICL. Since then, IBM has moved in and is partnering with Kazan State University and there were rumors when I was there that Microsoft is next and that top talent is starting to be recruited by Microsoft.

I can’t wait to see what Kazan looks like next year. One thing is for sure, the Flatsourcing office will have quadrupled in size and we’ll be hiring more!

Finally, the hottest gadget in Russia by far is the iPhone. I brought three of them over for Oleg, Alex, and Timur and they were promptly unlocked and filled with some of the most amazing software that we’ll learn about over here in the near future. I ended up leaving my personal one behind as well. Even though carriers don’t sell them yet, and they go for upwards of $800 on the black market, our last night there we were surprised to see the women at the two tables on either side of us to be taking pictures of each other with their iPhones. An apt metaphor for falling borders in this ever-flattening world!

VentureBeat reports that Draper Fisher Jurvetson is heading to Russia:

Besides Russia, the fund, called DFJ-VTB Aurora, will invest in the neighboring Commonwealth of Independent States, including Belarus, Georgia, Ukraine (home of another DFJ fund), and others. The fund plans to invest between $2 million and $16 million per company.

Initially, DFJ is not contributing directly to the fund. But, by helping pick companies, it will have the opportunity to co-invest in them down the line. Half of the money will come from the Russian government and twenty percent from the European Bank of Development and Reconstruction.

Thousands of highly-educated engineers and scientists in the region have the skill, talent and motivation to build big companies, said DFJ’s managing director in Russia, Don Wood, in an interview with VentureBeat — they just haven’t had the resources or role models to do so, he says.

This is great to see VC getting on board with the technology opportunities in Russia. Oleg, are you ready to start putting a business plan together for Flatsourcing?

We are very pleased to announce the very first BarCamp to be held in Russia. BarCamp Kazan (Russian here) will be held on August 4th, 2007, in Russia, Republic of Tatarstan, Kazan.

This BarCamp conference will coincide with my trip to Russia to visit my colleagues at Flatsourcing, Inc. we are all very excited to bring the “unconference“-style conference to Russia.

Kazan is a city with multiple excellent technical University programs. There are many highly qualified computer scientists and web programmers, and we look forward to this opportunity to bring them together, and share some of our experiences through our last six years of developing our global partnership.

I’m personally excited to host a conference session with my colleague Oleg Kurnosov in which we will share concepts from Thomas Friedman’s excellent book The World is Flat. This book has had a tremendous impact on us both personally, and provided a blueprint (and name inspiration) for our current joint venture, Flatsourcing Inc.

We want to extend the invitation to anyone and everyone to join us in Kazan August 4 for this BarCamp. The airfare might be a little steep, but we will make sure the conference is free. Thanks to everyone who is helping to put this on. Be sure to read the announcement on the Tatsoft Blog too, (English version here.)

Two recent articles about Russia caught my attention as our Flatsourcing development team is based in Kazan, Russia. Last week’s Business Week featured an article on the current oil fueled economic boom in Russia by Jason Bush, Russia: How Long Can the Fun Last?. In it he points to the software industry as a showcase example of Russia can and is moving from natural resource-based economic success into knowledge-based growth.

And Russia is well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry. Now, its tech companies are starting to give India’s outsourcing sector a run for the money. Software exports will top $1.5 billion this year, vs. just $128 million in 2001. “We really can compete on a global scale,” says Dmitry A. Loschinin, chief executive of Russia’s largest software developer, Luxoft.

This is really interesting to us as we continue to build our partnership with our Russian team. I have tremendous respect for their education system after traveling to Kazan last spring. I believe in that because of the strength of their education system in science and engineering disciplines that Russia is becoming a world leader in software development very quickly. And we plan to be part of that through Flatsourcing.

Speaking of Russian developers, the New York Times featured an article today by Eric Pfanner titled New To Russia: Google Struggles to Find Its Footing about Google’s struggles in competing in the Russian search engine market. My take on it is that the challenge has been issued and Google will continue to climb in market share in Russia.

The company’s difficulties in Russia probably have more to do with the complexities of the language than with politics.

“Our understanding of Russian was not as good as we wanted it to be,” said Kannan Pashupathy, head of international engineering at Google. Google revamped its Russian site last week, Mr. Pashupathy said, improving its ability to deal with Russian, a complex language in which nouns may be one of three genders and be declined in up to six cases.

This article also is great read. It’s fun for us to see this focus on technology and software development in Russia, and it is clear that our little secret won’t be such for long.