Interview with the CEO Croc Boris Bobrovnikov

TAdviser: At an input in office "Croc" the plate on which it is written "With return hangs!". What does it mean?

Boris Bobrovnikov: We have such interesting undertaking which is called "Long live the idea!". It is crowdsourcing of the ideas in the company. I.e. we say: "children, you think up something, and we then if it is useful, will play among offered some prizes, somebody will go to Cyprus or will receive iPhone". Thus we stimulate creativity because it, as a matter of fact, is sense of existence of the company. This competition at us is held years 5-7. I do not want to tell that we achieved something cardinal, on the one hand. With another - daily there are some improvements, maybe small. Place such plate is one of the ideas. People returned from where, from an object, from negotiations, and we are glad to it.

Boris Bobrovnikov perceives a crisis situation as a method to receive more adrenaline

TAdviser: How in general mood in the company how you estimate mood of customers, mood in the market in connection with such difficult year in Russia?

BB: First, there is a lot of people, and everyone perceives country situation differently. Someone perceives as a misfortune and mourns. I, for example, perceive as a method to receive more adrenaline that is remarkable, actually. I do not want to tell that we are absolutely quiet, but as it is not the first crisis and not the last, we know how to behave, we know the rule by which crises in general develop.

We, of course, do not know the future, we do not know how many this crisis will last, we do not know depth of falling of economy. We, of course, cannot expect it, but, nevertheless, we have some set of algorithms which was used in all previous crises and use now. And from it we feel rather surely.

The most important that the model of business of the company is ground under volumes which we receive from customers. If volumes for some reason decrease, then we are able to be reduced or be optimized too. If volumes increase, we instantly increase. Now volumes in rubles do not decrease therefore also we do not decrease.

It is clear, that all began to receive less in sound currency, well and that, as a matter of fact … The whole country grew poor twice, but it is not an occasion to be upset strongly.

At the same time there are some things which are obligatory: first, it is impossible to stop development. In crisis just all developments happen much quicker. As a matter of fact, it is one of edges of this many-sided medal. The companies which in crisis do not stop the development recover from crisis with a much bigger market share. It is the checked piece in 1998, 1999 and so on.

At the same time activity in crisis in the market is normal twice above. We have accurate mechanisms of determination of activity of customers by amount of requests for pilot projects and so on. We can objectively count.

TAdviser: Means, customers began to order pilot projects actively?

BB: Yes. If in 2013, for example, we had, for example, fifty pilots from whom several pieces developed into projects, then in 2014 – already 100 pilots from whom nearly 70 became projects.

To that there are two reasons: first, normal customers look for competitive advantages, methods of optimization of the main business processes and in general everyones to a noukha. IT - one of the most important instruments of modern business. IT - a key to survival of any company.

Secondly, some Itshniki try to raise the importance in the opinion of company management therefore some pilots continuously start, it is possible too. Such pilots are necessary not for search of the best technological solution of an essential business challenge of the customer for this reason they are never fated to become projects.

We, naturally, prefer pilots whose purpose - to understand as it is better to make the difficult project, and life taught us to estimate perspectives of each pilot more attentively.

Also the number of fast projects which last several months and which show some specific result increases, i.e., give some cost efficiency.

In crisis new technologies are most demanded. From large world leaders it is known what to expect. And here from small producers with new technologies - it is unknown. Clients are ready to risk and try small including "no name" of producers to gather to themselves some competitive advantages, either to save something, or to optimize something. They are ready to risk, and we together with them.

If in not crisis time we build solutions on world leaders, on the largest producers, then in crisis their share is blurred, appears very many small remarkable, cool, effective solutions. It is clear, that it and certain technological hazards, but in crisis people risk more because on a game efficiency and survival of the big customer.

TAdviser: What changes happened in the Russian market for the last year?

BB: Changes, first, are that nobody thinks long-term now. All long projects are frozen everywhere, except the state infrastructures, or quasi-state, quantity which, by the way, grew. The number of projects in the private sector decreased, but from it there are the average size projects which are directed, generally for activity optimization.

Life does not stop, life without IT is impossible. All look for some competitive advantages. If to speak about technology trends, then this universal implementation of BIM technologies in construction. We expect just gold mine here. Farther we see that the law on personal data contributes, demand for lease of DPCs sharply grew in the last few months.

TAdviser: Only in few months?

BB: You understand that so far the iron will not be attached, nobody will do anything. When the law became effective, and operations of the regulator of retaliatory character begin, from this point it is possible to expect a shaft of requests. As a matter of fact, so always was on all questions connected with security.

There is a trend of substitution of the American producers the Chinese further. I do not think that all from it will be happy, I even think that all from it are unhappy, and will be even more unhappy, but, nevertheless, it is a certain trend.

I think, there will pass a little time, and all as undermined will substitute the Chinese producers on somebody. I am almost confident in it. These are more likely tactical things, but all the same they affect the market.

TAdviser: Last year especially and at the beginning of this year too officials, state corporations spoke about import substitution much. And substitution of the American products the Chinese is valid it is observed, and substitutions American Russian somehow not really. How do you consider in what niches in what segments perhaps real import substitution?

BB: The term "import substitution" in itself - purely political and tactical, there is nothing organic under it. Certainly, there is a concept "diversification", and in principle those customers who are more far-sighted or who have special requirements to security, and such there is a lot of, never put eggs in one basket and never used the producer from one country, and just one producer. It is banal risky. So if I have an iks producer, and it at some point will go bankrupt, what I will do? I will begin real problems. Therefore most of big customers always had at least a dualism if not three platforms. What, by the way, supports the competition among vendors and helps to constrain the prices. It not really occurred long ago among heavy software products (Oracle databases, for example).

TAdviser: By the way most of all worry about it …

BB: It is possible to endure as much as necessary.

TAdviser: The main state IT systems just work for Oracle...

BB: Means, they also will work for Oracle. And they will not work at anything as the friend because nobody will create the competing product. It is clear why, huh?

TAdviser: There is an opinion, and even not opinion, but the movement towards creation of the competing products.

BB: As in crisis objectively it is less money, the companies, respectively, invest less therefore the probability of emergence of the competing products is less. It was never zero, actually, and we have remarkable product 1C, for example. They do a cool ERP system and, by the way, even before crisis a significant amount of customers in our country began to pass to ERP 1C or just to implement 1C systems if they had no ERP. Without paying attention to SAP, Oracle and all the rest. Just because 1C has a worthy product. But it appeared not because someone proclaimed the term "import substitution" but because 1C Company made a good ERP system - rather inexpensive and much more convenient for the Russian user.

Boris Bobrovnikov: "There is a trend of substitution of the American producers the Chinese. I do not think that all from it will be happy, I even think that all from it are unhappy, and will be even more unhappy"

In this plan, of course, import substitution will work, but let's say that it no more than the competition in the best manifestations. The company invested, received a good product – passes a number of customers to it, very well. But from repeated repetition of this or that word, for example, "honey" - in a mouth it will become sweet not. Exactly the same happens to import substitution. Therefore yes, someone will change for something, but it is rather under the influence of economic factors, but not tactical.

It is clear, that there are customers who are under sanctions or customers at whom by order it is necessary to make substitution.

TAdviser: Judging by the last large tenders, in the new systems created from scratch, Oracle, for example, try to use more and more seldom …

BB: Yes, but it is a certain world trend. You see, the whole world moves towards Open Source. It is a trend. These or those tactical reasons can this tendency accelerate slightly or slow down slightly, but all the same it is a trend.

Yes, of course, all want to get down with Microsoft and to pass to Open Source, but the speech about it goes years 5 – 7, and show me at least someone who got though cost efficiency is obvious here. Nobody does it because big customers do not undertake risks. What for? Purchased the license and you feel cool.

TAdviser: You told that customers can regret that they change American for the Chinese. In this connection they can regret? In what a problem of the Chinese equipment?

BB: When the Chinese suppliers began to enter largely our market, they raised the prices at once. When you sell in small volumes, you can though to give and still to pay extra. While rather high sales began, we found out that all of them raised the prices to real, and the actual prices of Huawei, for example, they same, as well as at Cisco. Because the plant making their products same or they are nearby. Respectively cost value will be approximately the same.

At the same time at Chinese madly difficult and almost not working business model. Therefore those Chinese who in the market are longer or those who study on others errors, just make the Russian teams. And here business is done actually Russian, but experience big difficulties from communication with head office.

TAdviser: How do you estimate dynamics of IT market in 2015 rather last year?

BB: In Russia the quantity of money depends on price of oil. Price of oil fell, in the country there was less money, respectively and less money for IT. In rubles market size remained approximately the same, as last year, and in currency dropped by 40%.

TAdviser: And revenue Croc?

BB: We assume approximately plus of 5-7%.

TAdviser: How did demand for your services in terms of services for last year change? What services became more demanded what are less demanded?

BB: The business intelligence is demanded. ERP implement everything as undermined, in particular, by 1C.

Our cloud - plus of 30-35% grows every year. Orders for the application software became more. Generally it is quasi-state structures. Our programmers are more loaded now, than in previous years.

The salaries of programmers, by the way, almost did not increase in rubles, respectively in Russia they became competitive again, and at some point steel is cheaper even Belarusian, oddly enough. Belarusians saved the rates in currency, and we how many paid in rubles, it is so much and we pay. Now very many work is transferred from abroad and becomes the Russian programmers. Therefore the market of the application software in Russia, I think, significantly grew up. Just our programmers became twice cheaper European.

TAdviser: Croc does something for foreign customers?

BB: We have no offshore programming. We after all specialize in individual large complex projects in Russia. Purely we are not going to ofshorit, not really interesting occupation.

TAdviser: A number of integrators is reoriented on own products, development of drawing solutions in recent years. It is possible to give IT and their product WorksPad which is on sale as in Russia, and abroad as an example. Not so long ago purchased Lanit the developer of software for electronic textbooks. Whether there are at you some plans connected with own products?

BB: We – integrator in the environment of enterprise. I tell nothing about SMB, I tell nothing about distribution, I speak only about enterprise. We have all individual projects, we have not a circulation. So we refuse flatly and we do not participate in any drawing products. Yes, it is unconditional if we implement document flow, then we can use conditionally own solution. It means that at the following implementation we will save, for example, up to 50% of resources because we will make use of the acquired experience. But all the same it will be at least 50% customization if to us carries.

Therefore let's say that under individual projects we do individual solutions, and we do not do drawing solutions and we do not want to do them. It means that our product is a certain intelligence. It as in construction. We do not build block houses, we build all buildings individually. TsMT – one building, stadium - another, and office FGC - the third – buildings different, and commands same. A set of engineering solutions almost same, and we are engaged in combination, i.e. integration, but not development of some elements.

Drawing solutions are just other business. It is impossible to tell that we did not try it. Tried many years ago, but did not work because we have other mentality.

TAdviser: With what products did try?

BB: We made in due time and delivered on arms of the AIS "Clinic". Made for clinic of FSB which was and is the largest European medical institution. The contingent of 120 thousand, 5 thousand visits a day and so on. We had the most serious medical system: 40 medical specialties, 650 doctors, interface to all imaginable and inconceivable medical devices, tomographs, KT. So there was a certain integrated medical system. We did it two or three years.

It works still practically without changes, and at some point very strongly outstripped the market. After that we tried this solution somewhere to offer, somewhere to replicate, and it was impossible to us.

TAdviser: In what year it was?

BB: Implemented in 1999-2000.

TAdviser: The peak of implementation of these medical systems in Russian regions was in 2012.

BB: Perhaps, then we outstripped the market. Now we participate in a number of medical implementations, in particular, in the interesting project of the Government of Moscow too.

TAdviser: How do you consider whether the new wave of consolidation in the market of integrators is expected? Not so long ago Lanit and Systematics announced merge of the consulting.

BB: I am not sure that it is necessary to someone, frankly speaking. I do not expect any consolidations, merges, absorption and so on. Now to all seriously not before, all companies are engaged in survival.

TAdviser: And you including?

BB: Naturally.

TAdviser: As for staff shortage in Russia. The Ministry of Telecom and Mass Communications and the Ministry of Education conduct work on increase in number of budget places in universities on IT specialties. Whether the state efforts in this direction bear some fruits?

BB: I can tell nothing about the state efforts, I do not know. At APKITE the Committee on Education which is headed by Boris Nuraliyev for many years works. Efforts of this committee of IT specialty appeared practically in each university. A few years ago rectors began to ask about the help. Universities have this competitive advantage fierce competition too. The population decreases, especially young, respectively and universities compete. IT - one of competitive advantages.

With training of IT the situation became much better, but at the same time at us the market ceased to grow and we do not need the mad number of specialists now. On the other hand, there is still definitely no surplus because very many frames leave to big customers who continue to be engaged in a ridiculous game under the name insourcing. Therefore in IT market there is no unemployment and is not expected, and was not in 2009 when the market was reduced by 40% in currency. Many companies then were reduced by 10-15% if not for 20%, and unemployment was not.

TAdviser: Reductions take place now?

BB: We have an enrollment on some disciplines.

TAdviser: And how the total quantity of employees Croc will change if to compare 2014 and the end of 2015?

BB: We now approximately in volume of 2014, 2200 people, are about 2013-2014 a plus-minus. So we have a permanent inflow of the fresh personnel - we do not lay off set of trainees and young specialists. Some disciplines grow, and some disciplines are reduced. It is market situation, I would not tell that the company was reduced.

TAdviser: Your opinion on such new company as "The national center of informatization" which is done by Rostec and Rostelecom is interesting.

BB: Next insourcing.

TAdviser: It is not absolutely insourcing. They will look for after all customers outside in relation to themselves.

BB: It as much as necessary. So far it to anybody was impossible.

Insourcing is not a national disease, it not is present at one country. For example, in Turkey IT market is now in a status of the sharpest staff shortage which the companies solve differently. Many keep around the companies which solve own IT needs, but not because they love this occupation. Having received MBA on this subject somewhere there in Harvard, they perfectly understand that it is not the best way. But if in the market there are no companies which can give this or that service on outsourcing, they are forced to do it.

Boris Bobrovnikov: "I do not expect any consolidations, merges, absorption and so on. Now to all seriously not before, all companies are engaged in survival"

As I like to eat with two theories of origin of mankind: theory of divine origin and theory of evolution, i.e. competition. If there is no competition - there is no progress, there is no advance. The company insourcing is engaged in mastering of the budget therefore specialists of any qualification and any intelligence, getting to hothouse conditions, begin to master budgets and immediately lose efficiency. It follows from this that any market company is much more effective than any insourcing company. The insourcing company will perform those functions which to it were assigned by the main customer, i.e. parent company, to solve these or those problems with this or that degree of success. But it will never because it is not competitive enter the market.

The most successful insourcing company was "Sibintek (Siberian the Internet the company)" at Yukos, and very strong children worked there. They are in IT market also now, these are pretty big names. But even Sibintek in the best years, despite appeals and requirements of parent company, could not receive external contracts. And it was the most successful company with the strongest people in the market.

All other insourcing organizations are certain clones, they cannot compete with the market companies. There is a divine origin, and here - the theory of evolution.

TAdviser: Concerning the American vendors. With IBM you did not establish partnership?

BB: No. This normal market development when the producer at some point, having collected a considerable market share, tries to contact the big customer. Respectively, at this moment large players are not necessary to it, he so considers. But if we look in categories of turnover of several companies which did it in Russia, then we will see that their turnover after such actions drama falls. Not only because there are sanctions or the general falling of economy, and just because the vendor otstrelit a certain number of partners.

Look at turnover of Oracle company which scared away all large players. We ceased to be guided by Oracle as on the world leader. The Croc company at some point received absolutely undeserved claims from Oracle company. They just now return to the initial status.

TAdviser: Whether correctly I you understood that because Oracle and IBM began this shooting of partners, at them turnovers considerably fell in Russia?

BB: Of course.

TAdviser: From other vendors you expect the similar scenario of development?

BB: I think that all large vendors will behave so. Some already begin.

TAdviser: Who begins?

BB: I think that Cisco on the verge of such status.

TAdviser: Do you with them have a partnership?

BB: We are the largest partner of Cisco.

TAdviser: Do you wait that you are otstrelit?

BB: I told many years back: "Guys, the more we are independent of these or those producers, the we feel better". And history showed it. In our portfolio there are all producers which only are in the nature, or almost everything. At us can someone and is not present, but on that there were these or those reasons. Or were too busy, it is possible too. We - the multivendor company, and change or leaving of this or that producer from our turnover can be, certainly, painful, but it will not be for us fatal at all. So if we speak in categories of sales volume, then we have sales volumes 2013, 2014, 2015, 2016 very slowly, very quietly grow, in rubles, naturally.

TAdviser: In recent years, revenue, in my opinion, falls...

BB: Revenue fell due to decrease in supply rate of the equipment, and now it grows due to increase in volume of services. If we take sales volume in general - we had it slightly less than 30 billion rubles, and now it will be slightly more than 30 billion rubles. It means that in terms of diversification, it is banal safety of business, we are steady. We have more than 900 relevant customers and several hundred vendors with whom we work. The more vendors, the we are more protected from the whims connected with sanctions from political or physiological problems.

TAdviser: So in case of loss of Cisco as the partner, you will not lose stability?

BB: It is Oracle and IBM just otstrelit partners. And there is still a drawing practice in the different countries of the world when the producer when it has a powerful office, the developed market and is enough volume of this market, another selects to itself ten of key most big customers and works with them directly. All other market is spread with partners. It is intermediate model - a compromise. As a matter of fact, on it there is also most of producers, for example, of NR, SAP. Oracle went on it with big delay.

In the market there is a place all. The most tasty pieces to himself are taken away by the producer, and all remained market that too there is a lot of, these or those partners divide.

TAdviser: Do you have plans to be engaged in the option program, to motivate with it key top managers?

BB: I watch closely enough what is done by our partners, competitors, companions and so on. From my point of view, the program of options no more as cheating. I observed it on the example of a number of global manufacturers. Quite strong discontent of employees is connected with this program. There are growth periods when this program is perceived by all with a bang. But if to take a situation for several years (five or more), then normally it is "zilch", i.e., usually it comes to an end with discontent of own employees. Therefore, from my point of view, the simple monetary and financial relations plus still a certain incentive in the form of a good situation in collective is and there is the correct motivation. All the rest is exercises which are fraught with the conflicts.

TAdviser: Whether there are plans of some administrative reform in the company? Some founders of the Russian IT companies depart from management.

BB: After that the company dies. It is noticed. There are many examples in the Russian market. When the top officials leave, begin to be engaged in a relax, the company ceases to exist.

TAdviser: Do you have no plans for the account of a relax yet?

BB: I will discuss it approximately in 46 years (at the time of the publication of an interview to Boris Bobrovnikov 54 years, - a comment of TAdviser).