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2019/05/21 10:40:13

TAdviser Interview: The head of Cisco in Russia Johnathan Sparrou - about digital economy and work in difficult conditions

The vice president of Cisco company for work in Russia and the CIS Jonathan Sparrow in an interview of TAdviser in May, 2019 told about plans for business development and productions of the company in Russia and also about how he is worked with it in the difficult conditions which developed in the country for foreign vendors.

Johnathan
Sparrou's
Geography of the cities and regions with which we discuss in Russia projects of "the smart city" – from the Far East to Kaliningrad.

Digitalization of economy for Russia is one of the main priorities. On it both state structures, and business are focused. Johnathan, what, in your opinion, features of transition to "digit" of the Russian economy from the rest of the world consist in?

Johnathan Sparrou: First, there is a number of the features connected with the huge size of the country. Our company participates in the projects connected with digitalization in dozens of the countries, there are appropriate national programs. But these projects are not as large-scale, as in Russia anywhere. For example, such program is in Germany, and Russia in 49 times more, than Germany! It imposes certain specifics.

Other feature I would call structure of economy: in Russia in economy the important place is taken by the oil and gas industry. It has the huge potential for digitalization, however this industry in itself strongly differs, for example, from bank or automotive industry that inevitably gives to processes of digital transformation some specifics. Though, of course, possibilities for process optimization and implementation of high technologies are in all industries.

How do you consider how Russian economy is "digitized" in comparison, say, with the USA – from Rodina of Cisco? In what areas Russia did make great progress in comparison with the USA in what – smaller?

Johnathan Sparrou: It is difficult to compare. But, for example, Moscow according to the rating made by Resonance company was included into ten the cities of the world offering the best terms for life. In many respects it is caused also by the implemented solutions on the "smart city" direction - and it no other than an example of successful digital transformation. I think that if Moscow continues also further a way by the principle of the choice of the best IT solutions, then by 2030 it has a chance to be on the leading position in this rating. Though Moscow is, of course, not all Russia.

And in the USA, in turn, there is a city of San Jose where Silicon Valley is located. It is considered that this valley – our future: there all digital, just about will appear unmanned vehicles. But also the USA – not only San Jose. For example, in the States many processes in banking sector are quite archaic. Look at least at "analog" bank checks. At payment of taxes it is still necessary to draw the check, just like that it is impossible to transfer funds. Checks are used there and for other transactions. It is one of examples when the USA in respect of digitalization takes not leading positions.

It is very difficult compare the USA in general and Russia in general since in the different industries there are pluses and minuses. But in the USA, perhaps, the environment for development of startups, the new ideas is better. There is a venture capital and an effective legal system for protection of intellectual property is created.

What nevertheless in your opinion, now the overall level of "otsifrovannost" of Russia, without comparison with the specific country?

Johnathan Sparrou: Countrywide he is very different. It is more correct to speak about the certain cities and areas. Some are digitized better, some it is worse. For example, in Nizhny Novgorod, Kaliningrad, Yekaterinburg, on Sakhalin a quite good situation. There are ideas, there are plans. And Moscow is selected even at the international level.

But there is a mass of regions where a situation other. It is important to understand that digitalization is a long way, and for providing digital services not only technical solutions are required. Also regulatory base, debugged public-private partnership, digital infrastructure is necessary. But it is the most important – that Russia already followed this long way. The approval of the Digital Economy of the Russian Federation program was a good incentive for acceleration of transition to digital rails not only the state and municipal bodies, medical and educational institutions, but also and business companies working with these organizations. The Russian government understands need of digital transformation of all spheres of public administration. I think, unlike many other countries, we are any more not in the beginning, and somewhere in the middle of the long way about which I spoke.

In your opinion what system problems of political and economic system in Russia interfere with faster transition of the country to "digit" in general?

Johnathan Sparrou: In my opinion, it is, besides, country scale and also aspiration of founders of some young companies to transfer them to other jurisdiction since they consider the Russian environment not optimal for business as soon as possible. Unfortunately, it quite often occurs.

Among other problems – political realities known to all which, of course, complicate work in Russia of the western companies. Certainly, it does not do well digitalizations. However I want to note that in general we very actively and productively cooperate with public authorities in Russia in the development area and implementation of federal and regional programs of digitalization of economy. We, certainly, are partners.

Against the background of sluggish development of the Russian economy customers become price-sensitiver on IT products and services, and at the same time depreciation of the ruble does more expensive solutions of the western suppliers. How does Cisco react to this situation? Whether you plan or already provided some changes in the price policy in Russia?

Johnathan Sparrou: Services is another story because they are usually provided at the expense of local personnel resources. This part can be considered in rubles though something all the same depends on dollar. But the cost of the software and "iron" is set in dollar price lists or euro and is fixed.

We try to be flexible. When it is possible, we provide good discounts. However at strong change in the exchange rate of currencies (for example) to our customers and us, of course, it is the share of 25% hard. At strong rate fluctuation, happens that the project of the customer is changed: something from it can be removed, to replace something, to postpone something. Fortunately, the last years the rate is stable.

I want to note that in general the market of network solutions grows in Russia. For this purpose there are several reasons. The first — macroeconomic stability. It is very important factor for our business in segments of B2B and B2G. The last 2-3 years the situation with currency rate cardinally does not change, and we see that clients buy from us the equipment not only for the current projects, but also for those which were planned earlier. One more reason — digital transformation of economy which is well under way. Demand for IT solutions is really high.

Cisco said earlier that sanctions of the USA against Russia caused difficulties with import of products: it was necessary to make some papers proving that the product has no dual purpose on each device. It in the company was called this call. This situation remains?

Johnathan Sparrou: We need still to fill a set of forms, but we created special solutions which automated this process, and now it does not take a lot of time. So first queue from requests really was built, but now everything is normal.

On what solutions and services of Cisco do you do the main rate in Russia? What of them have the greatest perspectives?

Johnathan Sparrou: Digitalization is, first of all data. They need to be collected, to transfer store protect. Therefore we stake on our traditional products: network IT infrastructureswitches routers and also solutions for DPCs and information security. We are large solution provider for information security.

Also we look at analytics as on very perspective business. In 2017 we purchased AppDynamics analytical company – developer of systems for application monitoring. They can be applied in any company which works with a large number of data through applications: airlines, financial and insurance companies, and many others. And in the USA they are used, for example, also by Domino's Pizza.

At the global level the possibility of investments of Cisco and in some Russian developers is considered?

Johnathan Sparrou: Yes, periodically such possibilities are considered. Developer companies in the field of network infrastructure, analytics could be interesting to us. We already invested means in startups in Russia, but not directly, and through funds. For example, we had a big investment with Alexander Galitsky – the founder of Almaz Capital fund. This fund invested in the different companies.

Whether found in some Russian cities already application of the solution Cisco Kinetic for Cities which you actively advance recently? What cities are shown round to it interest, maybe, test it?

Johnathan Sparrou: To this solution great interest. Cisco Kinetic for Cities is a platform which can collect data from sensors, sensors, etc. Over it it is possible to build on solutions and services in the field of the "smart" cities from other developers. Thus, Cisco Kinetic for Cities – peculiar Apple Store of "the smart city": storage of huge arrays of collected data on the basis of which it is possible to provide these or those services. If software developers have an access to this platform, to these data, they can create applications and services for residents.

It is sure that in 10 years of such developers of city software, useful to inhabitants, will become much more, and the solutions created by them will cover all major spheres of life: health care, education, transport, tourism, different social services and many other things.

However so far we wait when there are local solutions and services which would work through our platform. Therefore we show Cisco Kinetic, we show in what business cases it can be used. And also we conduct negotiations with two suppliers – local integrators which want to offer Cisco Kinetic for Cities for management of different services. We already discussed a possibility of use of this platform with many regions and the cities in Russia. At the same time discussion geography - from Vladivostok to Kaliningrad.

With what regions in the field of projects of "the smart city", digital education and health care does Cisco already cooperate? Give examples of the largest/interesting projects in this area? What did you for them deliver?

Johnathan Sparrou: As I already told, geography of the cities and regions with which we discuss in Russia projects of "the smart city" – from the Far East to Kaliningrad. In particular, this Skolkovo, Nizhny Novgorod, Samara, Yekaterinburg and others. We are going to begin interaction with many cities. I will note that specialists of Cisco enter into the working group on start and project implementation "The smart city" at the Ministry of Construction, Housing and Utilities of the Russian Federation. It means that our competences of this area are recognized at the highest state level. In general, we are open for communication with all regions who has an interest in development of this subject.

Also we actively cooperate with Moscow where tens of projects in the field of "the smart city" and digitalization of the most different municipal services and services are conducted and planned. For example, we participated in large projects of digitalization of education at schools of Moscow within which we built wireless networks at several thousand Moscow schools.

Also, for example, for May, 2019 at us in final implementation phase the project with one of medical institutions of federal importance which, I hope will become a good example of how digitalization and solutions in the field of Internet of Things help medicine to become more effective and comfortable.

Though in general in Russia concerning the smart cities we, of course, so far at the beginning of a way. However this process goes, there are ambitious plans, the management has an understanding of need for such projects, but it is necessary to find sources of investments and to prove their need.

Often not at the will, and according to the indication of the state in the projects of "the smart city" paid from the budget, regions give preference first of all to the Russian IT solutions. How Cisco is going to bypass this problem?

Johnathan Sparrou: We always try to propose to customers the best solutions on competitive price, further – their choice. And they often select us that once again confirms the fact that we are partners with public authorities in the field of different federal and regional programs of digitalization of economy. However, of course, in those purchases where the choice of solutions of foreign suppliers is strictly regulated, it is necessary us more difficult. But so far we face so tough regulation extremely seldom.

In general creation of own high technology production is an important task for many countries. We work more than from 2.2 thousand as local partners in Russia - system integrators, the IT companies, etc. and actively we help them to develop competences.

Also since 2011 Cisco has production in Russia. Local assembly allows to reduce significantly delivery time of products for clients and helps Cisco to conform better to the Russian regulatory requirements and requirements to the price. Our local line of solutions includes products are available in 4 groups, including switching, routing, wireless access points and the IP telephony.

In Russia the enormous problem of shortage of IT specialists is observed. Often for them fierce fight from employers is conducted. And how the situation with technology experts of Cisco is, in particular? As far as they are enough?

Johnathan Sparrou: The shortage of IT specialists is one of the most critical problems in Russia, I would tell. It is about deficit of hundreds of thousands of personnel. Recently I was at a meeting with representatives of one of the largest corporations in Russia where their CTO (Chief Technical Officer) noted that the most burning issue is a staff shortage.

In general, qualified specialists in the field of IT – fundamentals of digital economy. Russia has enormous personnel potential in this area, however its implementation requires cooperation of educational institutions with the best world companies in high technologies. For this reason we actively work with many educational institutions in Russia and through "Network academy Cisco" we support tens of thousands of young people who connected the future with high technologies. Having been trained according to our program, many of them continue development in this professional sphere.

Our purpose – education of specialists in the field of ICT, capable to develop national IT infrastructure and to stimulate digital transformation of the Russian economy. Results of this our program in Russia very good: in 2017/2018 academic year in academy more than 30 thousand people were trained.

The number given by you trained according to the program of Network academy Cisco in Russia in 2017/2018 academic year is 9,000 more, than was a year ago. What such growth of interest in it is connected with? And what directions of training are most demanded?

Johnathan Sparrou: IT play more and more important role in business and in life and when people are defined, than to be engaged in it in the professional plan, even more often select technologies. Seeing demand, we open training within Network academy in the increasing number of universities, at the expense of it there is a gain of graduates.

Recently this list included Higher School of Economics (Higher School of Economics National Research University) with which we signed the agreement on cooperation too. We have a wide choice of rates, but training in networks for data transmission, to IoT technologies, information security is most demanded according to our program. By the way, a principal theme of the coming to the end academic year in "Network academy Cisco" is just the information security.

What now Cisco place in development of technologies 5G in Russia? In what initiatives do you participate?

Johnathan Sparrou: The number of questions concerning the regulatory base of a 5G is not worked out yet. While in Russia the issue of selection of frequencies is resolved, it will take some time. It is important to understand that Cisco does not make base stations. But at the same time any mobile operator needs qualitative reference network without which it is impossible to unroll full-fledged infrastructure of a 5G — and it is already our business. Transition to a 5G will increase quantity of transmitted data in 5, and it is possible also by 10 times. And these data need not just to be transferred, but also to transfer cheap and safely. Provide how many you should pay on today's quotations if you increase consumption of the mobile traffic by 10 times tomorrow.

Thus, our task — to develop and supply for mobile operators the equipment which will help to provide cost-efficient transition from LTE to a 5G. In general, the range of solutions of Cisco for a 5G is quite wide: it is possible to note, for example, the backbone ASR 9000 multiservice routers, trunk NCS 5500 devices and compact NCS 560 and NCS 540 routers suitable including for creation city and networks of aggregation of a 5G traffic. Generally, in area 5G we see for ourselves big perspectives for deliveries of a package core and transport networks of data.

Except solutions for a 5G, we provided the updated product portfolio for one more wireless technology recently – Wi-Fi 6. WiFi standard 6 will add a 5G, together these technologies will open the mass of additional opportunities for our customers.