Translated material
“Darwinism does not work in Russia”
-- SAP, like Microsoft, now distinguishes Russia from the so-called BRIC countries, which also includes Brazil, India and China. What is the reason? Is it only due to the abnormally high growth rates of the IT market?
-- The emergence of the term BRIC was simply caused by the fact that new, previously non-existent players appeared on the world market. Remember the classification: first, second and third world? Russia is not a first world country, but not a third one either. Russia is not a developing country. This is the key feature. Russia is a developed country, but it developed in accordance with a different paradigm. According to a different algorithm. The fundamental fact, however, is that it is a developed country . It has industry, infrastructure, education, healthcare. All this is at a good level, although it differs from Europe in that, for example, your industry has its own standards, GOST. The education is excellent. Healthcare covers every citizen. There is no comparison with China, Brazil or India. At some point, present-day Russia reminded me of post-war Germany. The country had very serious problems. But very quickly Russia managed to find itself where a highly developed country should be. It is the only developed BRIC country.
-- This is the only BRIC country with large oil reserves.
- That's right, Russia has oil. But 50% of our business in Russia are medium-sized enterprises. Not those related to subsoil development.
- What is a “medium-sized enterprise”? Apparently, there is a threshold, after which an enterprise becomes “average”?
- There is no threshold. It doesn't depend on size, but on the DNA of the company. From how the company arose, how it works, how decisions are made in it. There are companies in Russia that were once state-owned and then were privatized. Their DNA contains the genetic code of government corporations. Many large companies are like this, for example oil and metallurgical companies. But over the past ten years, completely different companies have emerged. Among them there are also large ones, so size is not the main distinguishing feature. The important thing is that the DNA of these companies is completely different. A completely different management style. Such a company is headed by a compact team of managers, consisting of business owners or hired managers, and they work in the same way as is customary to work in the West. I would note the similarity of such companies with German ones.
-- Heads of IT companies that provide IT implementation for other people's businesses know more about the state of the national economy than bankers and statisticians. You have been in Russia for more than 15 years. Could you share your observations?
- I see the market divided into four segments. The first is resource economics. Oil, gas, subsoil development, chemical industry. The IT industry here will see further growth, since oil companies still have a lot of work to do to increase their own efficiency. If so, the demand for our products and our services is inevitable.
The second segment is the public sector. By the way, he was the largest customer for IT companies ten years ago. This also includes transport and energy. True, RAO UES will now be privatized, but still. Military-industrial complex, defense industry. Recently this industry was not visible at all, but now it is developing very quickly. Large mechanical engineering - ten years ago it was in a state of clinical death, but now it is developing very well. I see great prospects in the Russian public sector and the military-industrial complex. This will be a very interesting part of the market for us.
The third segment is medium business, which we have already discussed. The consumer is at the center of this business. Consumer demand in Russia is very high, so construction companies, players in the retail trade market, and car dealers are doing well. We concluded many contracts this quarter with retail chains. Really big, serious contracts. Supermarket chains, cosmetics and shoe suppliers are all our clients. Geographically, this is all of Russia. A completely Western business model operates here. Precisely Western. This is not China, and this is not business in Russian with the participation of officials, no. Real entrepreneurs work.
Finally, the rest of the CIS, Russia's closest foreign countries. The picture here is not uniform. Ukraine is somewhat similar to Russia, but it is smaller and has no natural resources. The Kazakhstan market is mainly a market for natural resources. We started work in Azerbaijan, and it started quite well. But the entire CIS accounts for no more than 10% of the Russian market.
-- The introduction of IT in the public sector is aimed only at automating the work of officials, and not at IT services for citizens. The creation of e-government is only being declared.
-- The stage of implementing database management systems has been completed here. When I worked at the Russian Oracle ten years ago and sold databases, the public sector was faced with the task of entering its data into a computer storage environment as quickly as possible. Nobody thought about applications, they told me: we have good developers, they will write us any software. Then, ten years ago, officials really thought exclusively about automating their own labor. This is no longer the case. Now it is clear to officials that the idea of using home-written software does not work. They're thinking about applications that do more than just store and retrieve information. They need software that helps them manage and make decisions. E-government will be the next step. There will be, I think, a big breakthrough. The situation changes from year to year - the age of many officials is such that it is clear: they never worked in the Soviet Union, they never worked without a computer. They understand very well what e-government is.
- Still, for the most part, regardless of age, they are more like Gogol’s characters than a Western-style official.
- Firstly, you are wrong to think that Western officials are so different from Russian ones. Secondly, for any official, a record in his resume that he was involved in electronic government is very important.
— In Austria, already six years ago it was possible to enroll a child in school without leaving home. In Denmark, you can consult a doctor online and make an appointment, and this is a government service. When do you think elements of e-government will appear in Russia?
-- Many IT services for the mass consumer are developed in Russia, perhaps better than in Germany. For example, online banking. Russia has already developed a culture of consumption of such services. The question you asked is a question of close time. I expect a breakthrough in a year or two.
— Okay, another question about small and medium-sized businesses...
- No, no, I didn’t talk about small things, I talked about average things.
— I said this out of habit, meaning the established term Small and Medium Business, SMB.
- No, only S. By the way, all that S is “1C” (the name of the company is a Russian software supplier, a competitor of SAP. - Ed. ). They're great.
-- To be on this market, you need a distribution channel for your software products, right? Like 1C. But SAP does not have such a channel, because SAP does not sell boxes with its programs.
-- We work directly with clients from large companies. With government organizations - through partners. And in all countries. In the USA our partner is Lockheed Martin Corporation, in Germany - Siemens. In the market of medium-sized enterprises we try to act through partners. There are such people in Russia. You can contact them and get SAP products, as well as services for their implementation. You see, trading databases is much easier than trading our products. But we already have a network of qualified partners, and it is growing. They know how to sell SAP and can do without our help. We have passed the critical point in the development of the affiliate network.
-- When will the growth of the Russian IT market finally stop? Maybe analysts will reconsider their calculation methods, and it will become clear that 25% annual growth is an overestimate? IDC has already revised its estimates for the IT services market in Russia.
- It's hard to say. I think growth will continue for a long time, but how fast? Nobody has canceled the cyclical nature of economic development - oil cannot only become more expensive. There will be a slowdown in growth rates, of course. The reason may also be external. For example, if problems in the US economy lead to a decrease in supplies from China, China will buy less Russian aluminum, and this will be felt in Moscow. The pace will slow down in the energy sector because the organizational structure of the industry is changing - for some time no one will make decisions about purchasing software. But then there will be growth again.
— Do you take political risks into account?
- I don’t see any big political risks for the medium term.
- How long is the average term?
- The next eight years (the secretary enters the office and hands Jovan the booklet “Putin’s Plan - Russia’s Victory” with a sticker “Gift from...” and a signature attached) .
- Who is the donor? No, I'm not asking his last name. Is this an official? Businessman?
- This is my financial director (laughs) .
-- If you headed a Russian software company, what activity would you consider the most promising? Offshore programming? Making your own software products? Consulting?
-- There are no prospects for offshore programming in Russia. Except for a few large companies - Luxsoft, EPAM. It's hard to compete with Indians. Russia is not a cheap country; labor will always be cheaper in India. They also have other advantages. Indians speak English. Indians naturalized in the West become customers for their relatives running IT businesses in their historical homeland. This is important. There are many Indians and they help each other. This is the peculiarity of their culture.
Russia has its own very large market, and I would bet on developing my own wide variety of software products. Information security tools, system software. It’s impossible to break into the market of systems for managing business processes, everything is busy there, but it is quite possible to develop programs on the platform of SAP, Oracle and other Western manufacturers. You can test your software product here in Russia and try to take it to Western markets. Many do not want to do this - why, if they are not starving in Russia? But look what happens. I'll give you a real example. A team of Russian programmers moves to Israel and discovers that there is no market for their product within the country. They need to do something, they need to look for work abroad. They open an office in California, then find an American investor, and what is the result? A large American software company, and its programmers are Russian. Why didn't they create such a company while working in Russia? Because they already had a good life in Russia. Darwinism doesn't work.
The state could help. But no one ever told me: okay, we will buy your software, but you will open a development center in Novosibirsk.
- Should they have said so?
- I think so. And the state should say “we expect this and that from you” every time it buys our software products.
—What state could you cite as an example that is opposite to Russia in this sense?
- China.