Interview of TAdviser with the chairman of the board of directors of IT Group Tagir Yapparov

Tagir Yapparov: Change of approaches to informatization in connection with requirements of import substitution is a task not simple, especially in a situation when there are big working systems which development should be continuous, and functioning - stable.

For the last 25 years there was the common market understanding that in certain spheres there are no Russian products. The developed technology landscape long time remained stable, and its changes require great financial and organizational efforts. Therefore reserved and even negative first reaction to requirements of import substitution – is quite clear.

At the same time there are niches where the Russian technologies or play a noticeable role, or even dominate. We come up against situations when domestic goods are more effective, and often they can be implemented for money which needs to be invested only in technical I will support foreign analogs.

In our practice there are such projects with replacement of foreign workflow systems by free solutions. Also we discuss replacement of SAP HR with one of clients on "BOSS the Personnel officer" according to the similar scheme.

Change of platforms bears certain risks, but large Russian developers are ready to guarantee the continuity of work and understand how to manage these risks.

Other situation – when tasks are not automated yet. And here the Russian companies have an opportunity to compete really with foreign products. Therefore often at import substitution customers are focused on new tasks. They with care treat what already works, but discuss new opportunities and new solutions which are in the Russian market with great interest. For example, our product WorksPad solves tasks which now are only set by customers.

The most difficult situation with technologies in which the Russian companies did not invest earlier and where mature market of foreign players was created. But the example of "MyOffice" shows that Russians invest also in such situations. Here it is important that there was rather big time period of support of the Russian producers. Such models of support work not only for us. For example, in the USA the RedHat company received the first years financing from security officers, SAP at the beginning of the history lived in Germany for the order account from the German budget organizations.

Long-term support from customers is very important to players of the market. It allows to be engaged in long-term planning and to raise a maturity of products in common interests.

Tagir Yapparov: I estimate rather risks, than the personal doubts. And therefore would not deliver 100% that it will last long very much as it is about policy, and it strongly changes. Political solutions can be cancelled and in some industries there are to that examples, to take, for example, a story with Turkey.

Tagir Yapparov: That solution was not cancelled, but also not implemented. The severity of laws can be compensated by non-obligation of their execution, as stated. And laws can change.

Import substitution should not lower competitiveness of the enterprises and the country. It is necessary to create the products allowing to compete. And that to reach it, it is necessary to have support from clients. Therefore the attitude of customers towards the Russian technologies in general is very important.

In some countries history when support of national producers is tied to state policy works. If the large organization buys products not from local national producer, then it supports creation of jobs in other countries. And officials understand that they for it will be criticized. Therefore they will select rather national producer. Otherwise a direct question of the voter why instead of a national product it was purchased foreign with creation of jobs in other country, they will not be able to answer. Those who do not create jobs do not win elections, do not become governors, mayors, etc.

Tagir Yapparov: Yes, and it should show it. At us, unfortunately, this model did not work. The official was not obliged to show the patriotism and it did not affect his career. At the same time there was the return. The official could humiliate the Russian producers defiantly. It to him escaped punishment. He did not spoil the career. Now the situation changes. I consider that one of pluses of this situation – education of such culture, understanding that purchase of the Russian products leads to creation of jobs and to improvement of our country.

I always speak to clients: "I understand that one of your scenarios – to pick at random different properties of the best products, to collect in one heap and to tell – and you make here and then I will work with you". But it is profanation and not that model which will allow to work and develop normally. The working model – partner.

Tagir Yapparov: They become much more. Today before them a difficult task. It is necessary to save continuity at strict requirements of import substitution and the falling budget. Therefore it is necessary to look for difficult innovative solutions.

In general, ask us very simple question: "The IT budget was really reduced. At the same time tasks of development did not decrease. The current budget corresponds to the budget of support, but not development rather. What to do to us? We need to transform approach which was built earlier".

I consider that the situation forces buyers becomes adherents of domestic developments since none of global vendors will solve this problem. Earlier officials could tell – "we can pay how many it is necessary". Now global players say: money is not enough, and places cannot be made it and under the law. Therefore there are objective reasons which strongly change behavior of people. And their motivation.

It is sure that in general it will lead to increase in trust to the Russian players and to emergence of a stack of the Russian technologies. It is clear, that a lot of things will become on open source software. And here it is important that the Russian players began to participate in contribution in these products. This model gives real opportunities even for those spheres where foreigners take almost exclusive positions. In technologies of databases, for example, the interesting case with Postgres and with two-three players who passed in the register is implemented.

There are tasks which are difficult for solving on the existing Russian technologies. But it does not mean that these technologies will not develop in Russia. For example, it is difficult to Oracle to replace on the high-loaded tasks since it has technologies of a clustering, optimization. Technologies are hardware-software, software is optimized. But, as far as I know, now there are developments of similar Russian technologies.

Tagir Yapparov: It is difficult for me to be objective. I as the person from the industry, I think more of support of the industry. People state, for certain, it is more or as equals think of security. For me the history of dependence and loss of control upon transition to foreign technologies – absolutely clear subject. We saw it and understood rather well in the past, but our influence was rather weak.

In the 90th years we were included in one project financed on the Hermes line (the German company Hermes provided insurance of export of the German producers to Russia, a comment of TAdviser). It was the multi-billion credit on which, including, there was an informatization of state agencies. Siemens was a general contractor. At a meeting there were representatives of Siemens, the customer, other officials and also we. Discussed our part of works. It became clear that we are given only 2% of the contract for almost all works. I told that it is wrong and that I do not understand a role of Siemens. I sincerely did not understand and asked the German in what imagination he could imagine that in the course of automation of the German state agency the Russian contractor would be the main general contractor, and Siemens would perform work for 2%. He laughed and began to say that it is the German gift. And as I was prepared, answered it – first, it is not a gift, but the credit. We will return it. Secondly, in this credit you overstate the prices of computers, etc. Their answer was that it conditions of the credit agreement. The share of the Russian contractors should not have exceeded 2%. Then we swore and dispersed. All this was just unpleasant for me. But struck me that any official did not support me.

Tagir Yapparov: Yes, their situation did not excite. It I to the fact that the industry not strongly influenced a situation. It was one of big errors. We opened our market as any serious country did not open. Therefore what occurs now is connected also with security, but also gives the chance to develop the industries. The industry of IT – one of the competitive hitech-industries. Export grows. We said long ago that in export we need to be supported. About support inside we did not even dream since we did not see any initiative. But the fact that support is implemented now, is good chance to become stronger. We, for example, within group carry out transformation and we strengthen development of the direction of the software.

Tagir Yapparov: In investments into new products, in marketing, on sales. For example, last year in structure of turnover for the first time more than a half was the share of sales of our software and "software" services (custom development, software testing and so forth). And now we, without reducing revenue, we increase a share of software and services. This trend gives us the chance to become the software maker, and we work on that to turn this transformation into market positioning.

Tagir Yapparov: What milestones I consider essentially important for the Russian market. The first is that the Russian market is not capitalized now. The lack of capitalization does not allow to invest dolgosrochno and on a substantial scale. Access to the capital difficult, credits expensive. Value creation allows the company to attract money, to plan development. I consider that in 5 years in Russia there will be about ten companies which will be quoted at the exchange and will become the big players clear to the market.

To enter the capital market, it is necessary to have turnover not less than $100 million. At us there is not a lot of such players in software business. I consider that in five years emergence of ten such players is very successful scenario.

Tagir Yapparov: Of course. We are going to have such total revenue from software business in 3 years and actively we suspect a subject of merges absorption. Perhaps, we will construct more aggressive strategy on this direction. We have both a good portfolio, and strategy, and there is dynamics. We understand that we can reach it.

In terms of the market - it essentially. The Fragmentirovannost of the market and small number of such players is a problem. The Kapitalizirovannost is still important the fact that it does the company transparent. Now consumers know about us very little. The trust does not arise. The publicity creates other understanding of our business, strategy vision, forecasts – that will be with us in 10 years.

Tagir Yapparov: Yes, strangely enough. The non-public companies often have no reports, there is no public strategy.

In terms of technologies, in 5 years in the main niches there have to be strong Russian players. It both office software, and application solutions, and system stack.

Tagir Yapparov: In a present situation the Russian software in a public sector has a share of 20%, foreign – 80%. Should be on the contrary. At least, the Russian software should pass a 50% barrier.

Tagir Yapparov: Anything. We actively work.

Tagir Yapparov: In three years, not earlier than. Our turnover and our dynamics say that it is real. We actively work with consultants, we know, as other players conduct such work. It is very important. If one company goes public – nobody will normally estimate it.

Tagir Yapparov: I consider that placement of 1C will be the most successful. I think, in the next 1-2 years it will take place since it is difficult to provide that Baring Vostok has other strategy of an exit.

Tagir Yapparov: "Forecast" had good chances since it has technologies, the quite good market in Russia and developing in the world. But he could not make it because of heavy debts. They became considerably big.

Armada and Sitronics are sad stories. About Sitronics I will not speak, it not only about IT, but also about microelectronics. And here Armada in my understanding was just a bubble. Considerably overpriced. It was a game of shareholders and it was not connected to create the success story based on technologies, products. But in general these both two an example very negatively affected opportunities of capitalization of IT market. All decided that it is almost impossible. Also spoiled the relation of investors to the industry.

Tagir Yapparov: Here everything is simple. Luxoft became more expensive than IBS and in this situation, obviously, it was necessary to separate the companies and to carry out delisting. Purely technically you cannot separate the company without delisting. And further played the law which demanded that they showed the shareholders to play in tenders with large Russian customers. Therefore they needed to become individuals again - owners of IBS. And Luxoft went to the foreign platform as his primary clients – abroad.

Tagir Yapparov: It is rather developers, but not everyone. In our business the scenario when the company is profitable is quite possible, generates income and can develop, without attracting investments. Entry into the market of the capital is an increase in a level and the next step. It is necessary not to each company. There is a number of players which can not accept this step and develop in the plateau where they grow not strongly, but make good profit. We also on a number of the products sit and we puzzle – to reinvest profit and to make breakthrough, but the niche not really big and breakthrough will not yield result. Or to leave in the next niche, but there are players. Some are ready to sit in the niches, some want to attract investments and to do breakthrough.

Tagir Yapparov: It is considered a natural step, the indicator of the fact that the company is interesting, transparent. It allows to achieve quicker the goals through purchase of the companies. We consider this scenario working and interesting. If we attract the investor - it is a question of one or two years. But also there is an opinion that the financial investor is rather problem, it is rather shackles, than wings. Therefore there is no accurate scenario yet.

Tagir Yapparov: This question is very important for customers. We hear its all the time. Therefore now we look at the Russian producers and we conduct work on testing, on interaction in preseyla, we try to select developers and to create solution stacks. For example, in corporate mobility we carried out such work – MDM from Scientific Research Institute SOKB, security from Infotecs and our technologies connected with office work, with work with documents in our product WorksPad. Now actively we work on creation of joint mobile solutions with InfoWatch. It allows to say that in corporate mobility there is a softovy Russian stack similar to technologies of global producers. The same work goes in other tasks.

We see that there is a class of mature suppliers who consider this problem of one of key. It is expensive part of development to which earlier developers not strongly paid attention. The requirement absolutely clear, it is fulfilled not only us, but also other players of the market. One of the ideas which was in the market was that the Russian system integrators do not work with the Russian developers. Now the situation changed.

With t.z. merges absorption – a question not in buying in addition, completing technologies, and a question in strategy. In it we see several niches which we want to develop actively. For example, in corporate mobility it is not interesting to us to supplement our technology of MDM ohms or security. But it is interesting to us to move towards business applications. We plan at the end of 2016 – the beginning of 2017 to issue the platform on the basis of WorksPad which will allow based on our solution to do applications. Here we are ready to consider technologies, the ideas, and here we see big perspectives for absorption.

Tagir Yapparov: So far not. We looked around ESM more. But there the structure of the market so strongly changes that all of us postponed this talk. We look, we try to predict.

Tagir Yapparov: In the market there were platform leaders. Documentum, OpenText, Filenet. Also there were Russian producers which did the solutions. This landscape strongly changes.

Tagir Yapparov: And on open, including. There are also domestic players having claims for creation of own systems. The moment is interesting therefore we adjust the estimates so far.

Tagir Yapparov: The question of a regulatory framework is very critical. It is an issue not of acceleration, and a question of transparency. The released NPA base has very much the general description of restrictions and actually many things in them are not detailed. It allows to take the western product and through the Russian company to sell it as formally Russian product. Those restrictions which are can quite be bypassed using the partner or "daughter". Without radical intervention in a product. Therefore there was a clear discussion around the fact that such "repaint" should be stopped. But at the same time detailing which would allow to structure more objectively these exceptions did not happen yet. There is a big discussion about how to describe all this to do not pass the "recoloured" western products, but at the same time not to deliver additional barriers before the Russian developments. If not to regulate all criteria, then the gray zone is formed and the possibility of a conflict of interest, unfair competition appears. If there are no described criteria clear to all market and applied at examination it will precisely lead to legal claims, and these claims will have a prize perspective.

Tagir Yapparov: I am a supporter of self-control in the market. I consider that now there is a chance to approve criteria. I hope that the industry will be able to configure this process. It quicker and more effectively, than to go to court. So far I use the efforts that similar criteria appeared.

Tagir Yapparov: Here a key factor is the publicity of stories. I think that all administrative punishments are penalties on 50 or 100 thousand rubles, the dismissal maximum, reprimands – are not strong tools. And the publicity is the strong tool. I hear from customers that they receive direct tasks from the management – to develop strategy, to tie to it motivation. This year most of officials whom I know is engaged in development of three years' strategy of import substitution of IT in the departments. Further it will be in their plans. Also will be controlled. It is not model which is constructed on fear. In my opinion, now one of market tasks - to construct a real story, but not profanation of process.

Tagir Yapparov: My opinion – all such projects require leadership. There was both a problem of study of the regulatory base, and technology problems, and problems of promotion, pressurizing. But there was no leader, a command.

Tagir Yapparov: Today the top management of the country is interested in a question of import substitution in IT, it is "driver" of process. And is farther in implementation there is a lot of movements. And if the country leaders were not active in this question, then movements would decay. It is clear, that key motive of the management – security. But also the competitiveness, and industry potential for development of economy in general, are also estimated. And it leads to structuring all problem, and without it a task not to solve.