The next Silicon Valley: Siberia (cont.)

By Brett Forrest, Fortune

Revival

So began the great hustle, as the pure scientists of Akademgorodok had to find a way to survive, to commodify and commercialize the high-tech expertise that once served the state. Now IT offices are springing up all around Akademgorodok's leafy lanes and industrial back alleys.

The first was Novosoft, which launched in 1992 and partnered with IBM. SW Soft, an IT infrastructure outfit that specializes in server software, has more than 10,000 international customers and funding from Insight Venture Partners and Intel Capital. Intel opened an Akademgorodok office in 2004; it employs 200 programmers who optimize chips and microprocessors. Schlumberger has purchased a plot of land on which it is building an R&D lab.

The low cost of rent, services and salaries - roughly one-fifth of Western prices - appeals, but so does a system that builds on the foundations of science to produce programmers. "None of our programmers in Novosibirsk are programmers by education," Intel's Chase says. "They are physicists, chemists, biologists, mathematicians. They are, first of all, scientists. Secondly, they learn how to program as an afterthought."

Another IT success story, IBM partner and Novosoft spinoff Axmor, employs Web mashup technologies - combining a spreadsheet, say, with a Google map - to create applications for digital media and retail banking. Taking direction from IBM's suburban campus in Raleigh, Axmor is housed in an apartment complex on Akademgorodok's edge, where a pack of mongrels lurks at the entrance. Inside, the game room - the marker of the IT firm - has a table-hockey game manned by two slender, sun-deprived code punchers.

Pavel Toponogov, Axmor's director, turned his initial $30,000 investment into $1 million in revenue in a few years. The bulk of work comes from outside Russia, much of it generated through Internet advertising. That is how Harpo Productions, Oprah Winfrey's media company, hired Axmor to build a Web portal. "We didn't really know who Oprah was," says Andrey Kanonirov, Axmor's IBM project manager. "But we know who she is now."

At countless turns in Novosibirsk, the ultramodern collides with the outmoded. The Novosibirsk Institute of Nuclear Physics, one of Akademgorodok's top exporters at $30 million a year, houses an electron-positron collider that its 65-year-old director used in his school days. In a drafty hangar that was until recently inhabited by drunks and rodents, Screen Photo Electronic Instruments produces night-vision devices for a San Francisco firm. "It's so cold here," says Vladimir Aksyonov, the general director, wrapped in a white lab coat, "there's nothing to do but work."

Yet Siberia is no longer the isolated place it once was. Before the railroad came to Novosibirsk in 1893, travelers from Moscow endured a ten-month journey by horse cart. Today, Dmitry Verkhovod interrupts a meeting to sign for an overnight package from Ozon, Russia's equivalent of Amazon.com. "Look at this," he says, grinning with civic pride. "Even out here in Siberia, I can receive DVDs, books, music."

Verkhovod, deputy president of the Siberian branch of the Russian Academy of Sciences, is in charge of plans for Novosibirsk's one-million-square-foot technology business center. "Right now we don't have a way to commercialize our developments," he says. "The Novosibirsk Akademgorodok is a huge brand, and it has to be marketed."

It will take time. Lavrentyev emerges from his institute, braced against a cutting wind, wearing only a sport coat. On his lapel is a small pin, a cameo of his namesake. "My grandfather was a fighter," Lavrentyev says. "I think he would appreciate worldwide high-tech brands like Intel and Schlumberger here. At the same time, I think he would want business to pay for using our brains."

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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.