June 22, SPIF 2012
“This is the Emerging Silicon Valley” – William Savage, Intel Vice-President
The competitive advantage of Russian Internet and software players in the global market is in their ability to provide complex solutions. Russian IT industry Goes Global business breakfast participants confirmed it today.
The meeting of the representatives of major Russian software and Internet companies, and digital commerce market players and investors were introduced by the breakfast organizers: Igor Agamirzian, RVC CEO; Sergey Plugotarenko, Russian Association for Electronic Communications (RAEC), Director; Valentin Makarov, RUSSOFT Association, President. Denis Viktorov, National Business Network federal Office, Editor-in-chief, moderated the discussion.
Igor Agamirzian commented on the active and passive market assets of the Russian industry as a whole: “Human capital is a doubtless asset. Human capital is becoming more important than financial one in the contemporary world and contemporary economy. It is defined by the creativity of the middle class, it is determined by the system of education, including that of the engineering sector, which has long history in Russia. Passive assets – which determine difficulties in reaching the global markets – are, first and foremost, human aspects, not technological or business ones: they are in our mentality, in the habit of introspection, of seeing oneself as a center of the world. Unfortunately, we have not yet achieved the critical mass of people who actually understand how modern global economy works, how consumer demand is structured.”
Dmitry Grishin, Mail.ru Group General Director, spoke to those present on the significance of Russian IT companies’ entering the global market, he also pointed out that today an acute shortage of skilled staff is felt due to the rapid expansion of the market: “For further development at the same rate, large institutions are to be created to rear qualified IT experts, and we shall take care of their employment then.”
Arkady Volozh, Yandex CEO, agreed with Dmitry Grishin in his speech and emphasized that during the last two years Runet life witnessed a number of positive events, such as the IPOs of two Russian Internet companies (Mail.ru and Yandex, the most expensive companies in Europe), the inclusion of Yandex in NASDAQ index, active expansion of Russian players to foreign markets beyond CIS, etc. Having launched its Turkey portal, Yandex was the first to reach the market which does not speak Russian. Search requests on yandex.com.tr take into account the morphology of the Turkish language, it can correct misprints and process synonyms. “It is too early to speak of success or failure right now since our main efforts are planned for summer and autumn.” “But we can already speak of very fine figures on some indices, although some of them are not that fine,” Volozh pointed out.
Ozon.ru, the Internet retailer, grew 80% in 2011, said its Chief Executive Officer Maelle Gavet. But, as she put it, Internet commerce faces serious problems in Russia: foreign Internet shops can deliver orders to Russia without paying customs duties and VAT. “Personally, I’m quite worried about it for I saw how this almost killed Australian Internet commerce as local Internet stores just were not able to develop,” she said.
Russian Internet and software companies did a huge job during the last three decades and joined the list of global leaders on many indices. At the same time, access to global market helps developers maintain a certain level, Alexander Egorov, Reksoft Chief Executive Officer, believes: “We get fine projects only when we count upon global leadership.” The combination of a “powerful service companies’ platform active in the international market and good production companies development environment inside the country with the prospects of reaching the international market” forms, according to Egorov, the basic form of successful development of this industry in Russia, and he points out that it is necessary to focus on the development of the service sector.
At the same time, the participants of the meeting agreed that high level of expertise is the main bet of the Russian IT industry in its road to global leadership. Arkady Dobkin, EPAM Systems President and CEO; Dmitry Loschinin, Luxoft President and CEO; and Sergey Shestakov, Prognoz Company Vice-President, spoke about it. Shestakov cited several reasons for Russian leadership in development: “the complexity of the project, that is, the combination of development, integration, the need to provide a full-fledged basic tool set, and the flexibility issue is also important – not only in licensing, terms, but also in the flexibility of the basic technology software, the ability to quickly respond to the criticism of system functions.”
The participants of the business breakfast see in the education base and investment in research as the main condition for the Russian IT industry development. Serguei Beloussov, Runa Capital Senior Founding Partner, reminded that many projects, such as ABBYY, emerged in the period when a lot of money was invested in physics, mathematics, computer science in Russia: “We would like to see more investment in science because it is the investment in science that produces breakthrough projects. It is research that gives birth to such companies as Parallels, ABBYY, Kaspersky Lab.”
The success of Russian companies in the global market in many ways depends on skilled human resources: developers, managers, researchers. According to Dmitry Loschinin, “programmers will emerge, a developed environment is necessary for it – and it is exactly what we witness in India and China now.”
South-East Asia is the most interesting region for the expansion of Russian IT business. Igor Ashmanov, Ashmanov and Partners JSC Chief Executive Officer, an expert in artificial intelligence and software development, spoke about it: “The advantages of this region are in the fact that it does not yet have any development of its own. The South-East Asia is mainly occupied with copying, but you can’t copy everything,” believes Ashmanov.
Sergei Andreyev, ABBYY President and CEO, believes that it is necessary to attract experts of high potential to Russia, and called upon those present to think how to make Russia attractive not only to developers, but also to marketing experts which determine the understanding of market demand.
Alexandra Johnson, DFJ-VTB Aurora Managing Director, spoke about foreign investment in the Russian market. She believes that “the contribution of the Russian industry to the global technology market in much greater than the world believes.” Alexandra asked to “broadcast” the success stories of Russian companies to the world, and to grow an internal market capable of offering a unique product attractive for foreign investors. Besides that, Alexandra emphasized the need to unite the efforts of industry players in the struggle for better development conditions, and suggested that RVK could take this task upon itself.
As for the size of investment in Russian Internet startups, it made up about $750 mil. in 2011. All in all, taking into account the 2011 IPOs, Runet attracted more than $2 bil. in investment last year. Marina Treshchova, Fast Lane Ventures General Director, told about these and other figures concerning the investment attractiveness of Runet.
Alexander Galitski, Almaz Capital Partners Founder and Managing Partner, added that the insufficient promotion of the Russian IT industry in the global market reveals “not only the weakness of the IT community, but also the weakness of the journalist crowd in the international market.”
Pyotr Darakhvelidze, WebMoney Transfer Development Director, spoke about the current situation and growth prospects of the electronic money market in Russia, and about innovations in this sphere related to 2011 changes in legislation (the law on the National Payment System). Pyotr Darakhvelidze pointed out that “Russia can lead the planet on a number of indices” characterizing development levels and the culture of electronic payment use.
In conclusion William Savage, Intel Vice-President, pointed out the diverse potential of the Russian market and its assets. Together with other foreign experts present at the breakfast he recognized the potential of the Russian IT industry, as its global success is obvious in all segments of the market. Having heard the speeches of the most brilliant representatives of Russian software and Internet companies, a part of the global industry elite, Savage shared his sincere impression: “This room seems to be an emerging Silicon Valley.”
Presentations and detailed reports on the event and the analysis of Runet and software markets in the Russian and English languages can be downloaded at: http://rocid.ru/events/forumspb12/