Tech in a very cold place

A former Soviet science center is a hotbed of software innovation.

By Brett Forrest, Fortune

(Fortune Magazine) -- Time passes slowly in Novosibirsk. In front of the opera house on Red Prospect, skateboard kids skid off the plinth of the Lenin statue, chewing on Afghan nuswar, which calibrates the brain to a low buzz. Rusted auto husks and the tilting chimneys of roadside hovels appear to have slouched into poses over many decades. At the boat hotel on the Ob River, the cook does not hurry with the kasha. The capital of Siberia, Russia's thirdlargest city, Novosibirsk in winter offers few explicit charms.

But travel beyond the slot halls of downtown, past wild dogs patrolling wild weeds, past Tajik road crews in orange jump suits, and a hub of activity rises from the woodland. In this place, where capitalist opportunity has overcome post-Soviet dreariness, time moves at the pace of obtainable dollars.

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Old Soviet architecture in Novosibirsk, in stark contrast with new IT.
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A programmer restoring the glory of Mother Russia
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Tech pioneer: "My grandfather," says Mikhail Lavrentyev, "was a fighter."
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On the streets of Akademgorodok, Russia's new software hot spot.
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A collider at the Institute for Nuclear Physics

This is Akademgorodok - Academy Town - where Russian high tech booms. Action in IT, pharmaceuticals, metallurgy and fossil fuels is making Novosibirsk, tucked away in a remote tract of Russia, a hive of outsourcing. Private high tech in Akademgorodok has expanded from a $10 million business a decade ago to a $150 million industry last year, with the number of firms growing at a rate of 15 percent annually. Akademgorodok won't pass for Silicon Valley. But there is enough upside and dok was left with thousands of scientists, a bruised mission, little money, and an overwhelming anxiety.

A walk through the Novosibirsk Institute of Automation and Electrometry is all it takes to see the neglect. Electrical wires hang from the ceiling like stray hairs across a tired forehead. Paint flakes from the walls; lights in the passageways flicker from dim to dark. For an institution that once sparred with the math department of MIT, the place could use a pick-me-up.

But when Mikhail Lavrentyev, a Siberian mathematician of lofty provenance, opens the door to a research lab, he reveals what is saving Akademgorodok from sliding into irreversible institutional decrepitude: one very spherical man and another with severely crossed eyes hunched over computer terminals. These two doctoral students are writing code for Intel.

Lavrentyev's grandfather, also Mikhail, was the prime mover in creating Akademgorodok. It was while working in the closed nuclear research town of Sarov that the elder Lavrentyev came upon the idea of creating an entirely new science town. It has been his grandson's fortune to oversee Akademgorodok's repurposing. "Akademgorodok was a new idea, multidisciplinary, to give young scientists a real chance to develop ideas," Lavrentyev says. "But salaries in the '90s went south, and it became a problem for the academy. There became a clear choice when you finished your degree. Go to science, or go to business and immediately you have a reasonable salary."

So began the great hustle, as the pure scientists of Akademgorosoftly priced expertise for Intel (Charts), IBM (Charts), and Schlumberger (Charts) to make camp here in what is called the Silicon Forest. Russia's federal government has also taken note, backing the construction of a new $650 million technology business district. And in a signal of Akademgorodok's broadening reach, a local IT firm is producing a Web portal for Oprah Winfrey.

Russian science and technology present an unusual mix of critical thinking, developmental breakthrough, and professional hunger born of the proximity of actual hunger. "Inside Intel we have an expression," says Steve Chase, president of Intel Russia. "If you have something tough, give it to the Americans. If you have something difficult, give it to the Indians. If you have something impossible, give it to the Russians."

The rise and fall of Science Town

The story begins in 1958, when leaders in the Soviet scientific establishment secured Nikita Khrushchev's backing to establish a town devoted entirely to science. The idea was to collect many of the country's top scientists in a single location deep in the Siberian woods, far from prying eyes and metropolitan distractions.

By 1963 building crews had completed Akademgorodok, a scholastic and research entity 20 miles from the Novosibirsk city center. Within a few years Novosibirsk State University had opened, and its graduates plugged into one of the dozens of surrounding institutes dedicated to advanced research - a Soviet approximation of Cambridge, Mass.

In much of the world, moving to Siberia would not be regarded as especially attractive. But this is just what many of the Soviet Union's greatest scientific minds decided to do, to a large extent willingly, lured by the promise of new housing and professional advancement.

For 30 years Novosibirsk was one of the smartest cities in the imperium, a collective of academics who put their minds to everything from nuclear physics to theoretical genetics, from the space program to the weapons aimed at the great American evil.

And then the bottom dropped out.

When the Soviet state collapsed in 1991, the scientific apparatus crumbled along with it. The salaries and status allotted to scientists vanished, as did a system geared toward nourishing young talent.

A walk through the Novosibirsk Institute of Automation and Electrometry is all it takes to see the years of neglect. Electrical wires hang from the ceiling like stray hairs across a tired forehead. Paint flakes from the walls; lights in the passageways flicker from dim to dark. For an institution that once sparred with MIT, this place could use a pick-me-up.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.