TAdviser Interview: The owner Lanita Georgy Gens – about priority inversion, a phenomenon of Huawei and the cancelled most profitable transaction

Georgy Gens: As the economy at us grows not quickly, in 2017 all expected at best stagnation. Therefore when at the beginning of last year all heads of the companies entering into the Lanit group planned 10-15% of growth, I considered that they are excessively optimistic. Really all the plans exceeded. Also it turned out that we are not unique. The market really quite strongly grew. All large players showed growth.

At the same time, as we well understand, the state budget of money did not spend any more. On the contrary, there were reductions.

Interesting situation. In principle, explanations can be a little. The first – pent-up demand. The second – digital transformation which is necessary for the companies not to be lost and save the positions in economy. I consider that for a long time the most effective method of growth is an increase in labor productivity. By the way, in this sense very important role was played by German Gref.

Georgy Gens: Yes. And its active promoting led to the fact that both the president Putin, and the prime minister Medvedev, and others began to advance a subject of digital transformation. There was a fashion, and it is good. When people understand that IT can give, invest in technologies.

Once I talked to the quite famous person, and he told me that IT shniki on dislike for them are in the second place after builders. Builders are not loved for the fact that they do not hold a promise, and IT shnikov - for the fact that they though very intelligent, but is absolutely unclear that offer.

Before sale in IT sometimes reminded attempts to sell the book to the people who are not able to read. Now are able to read and already understand that the book is necessary. This very significant change. It led to the fact that interest in IT services grew. Customers bought already a lot of ADP equipment, and now learn to use it effectively. Therefore sales of "iron" grow slowly, and here projects, solutions which bring essential benefit for business, became much more demanded. For an example, our IT services grew almost by 30%, and distribution - for only 10%.

Georgy Gens: Think for five years very difficult because technologies quickly change and life changes, political factors can work, for example.

Georgy Gens: If to speak about rubles, then we had growth always. There was no year of falling. At the end of 2017 we grew by 19.7% to 137.1 billion rubles.

If we speak about dollars, then a situation another. We had a falling when the rate which we won back only by 2017 jumped.

Georgy Gens: I speak about group in general, but also in separate companies the situation is similar.

Georgy Gens: To me dynamics in rubles is more important, but there is a wish that it was not due to jumps of a rate.

Georgy Gens: At us all companies planned growth for 2018.

Georgy Gens: Planned with the same growth as planned for last year (these are 10-15% depending on division), but not with it what was upon in 2017.

Georgy Gens: I am afraid to think further, than for a year. It is almost senseless. But, as soon as there is a new technology, we try to invest in it. For example, blockchain. We invest in this direction: just started the new DTG project (Digital Transformation Group) within which we will be engaged in it. We already even have several projects, one of them - creation of the platform for fight against a counterfeit of goods and transfer of a supply chain to a blockchain. At this stage our task – to know everything about this technology and to be "landing" for fast formation of possible cases and pilot projects.

Georgy Gens: We even create it because we propose new solutions and we look for where they can be applied. We look for projects where the new technology could bring benefit. If it is possible to offer the project on new technologies, then we offer it on new technologies. Of course, only if it is the project in which and the customer is ready to try new and where it is possible though slightly to risk.

Georgy Gens: It is difficult to estimate it. We have many big projects. They quite strongly influence turnover.

Georgy Gens: Yes. The project of construction of DPC of Sberbank led to the fact that turnover of our Insystems company grew by 100%. If not to consider this project, then growth of turnover of the company would be 40%. It is, by the way, too impressive digit.

Georgy Gens: Yes, in 2017. Respectively, they are obviously not going grow in 2018 for 100%, but, nevertheless, put growth by units of percent. It in spite of the fact that such big project will not be any more.

Georgy Gens: Roughly speaking, there is nothing that grew more than by 30%. About growth was 10%, about 30%. For 2018 again plans quite optimistic though it seems to me that the economy so quickly does not grow.

Georgy Gens: Perhaps, the fashion will work. Perhaps, common sense. But most of all real need works. Without technologies development is impossible. Obviously, in all countries high-tech industries develop quicker, than the others.

Georgy Gens: One more interesting story is Magnet. They managed, relying on the correct ideas of customer service and the correct technologies, to build federal retail chain stores which well are controlled with the help of IT.

Georgy Gens: It so. Though I consider that now there is an excessive roll towards insourcing.

I try not to use as far as possible insourcing at myself in the company. If I need to do something for myself, then I consciously do not use many competences even if we are able to do it better than others.

If I need to conduct a research, then I will try to attract the because it is necessary for me that I had competences which will remain. If I want to develop something new and it will give me essential competitive advantage – yes, of course, again the. But if something more or less standard is required, then it is better to involve after all contractors, than to create and develop the.

Georgy Gens: Not especially. In the Lanit group there are a lot of large, stable businesses. They occupy a considerable market share in the areas.

Also we have a number of the small companies which successfully work in the spheres, but they not strongly influence group turnover. For example, it is a fine command which is engaged in Big Data, – CleverData company. One more example - we made cool projects on Postgres. They it is more, than at other companies, but their "weight" in a total turnover is small.

Georgy Gens: Housing and public utilities GIS system. On the data which are available for us, it is the biggest project in Russia on Postgres. He proves that Postgres can be applied to the big high-loaded systems.

Georgy Gens: Yes, including there was no practice. GIS of housing and public utilities, in my opinion, one of the best IT systems which exist now.

Georgy Gens: In development of GIS of housing and public utilities more than 200 people worked at a maximum. From them it was very much connected with Postgres. And all in the company more than 500 programmers who are engaged in development on Open Source work. We pay to this direction much attention.

Georgy Gens: I look at competitors and I understand that the IT companies now and lay high-voltage wires, both build buildings, and are engaged in other non-core businesses... It became the general rule.

If to tell about Lanita, then here a basic word - "group". In due time I tried to select IT, engineering business, other directions. For example, I have four distribution companies - for retail, for integrators, for distribution of network equipment and for distribution of the electrotechnical and engineering equipment. And even in these four companies it is not possible to make the identical system of motivation. We try as much as possible where it is possible, to do unification, but these four companies are different businesses, and they differently work, are differently organized. If our companies resembled more or less, then we would have not a group, but one company or at least group with much smaller number of the companies. So in group there would be one big distribution company, one big integratorsky, one – retail and so on, but so it is impossible. We have in group absolutely different businesses. Therefore to say that Lanit is a group which consists only of the IT companies, incorrectly.

Georgy Gens: It is difficult history – our most profitable businesses change all the time. For example, Insystems made very big, good project in due time and did not receive for it money. It was in 2013-2014. And just now, in 2018, Insystems will be calculated for the credit which was taken by the company to survive at that moment.

This story taught us to much. Evgeny Virtser (the CEO Insystems, - a comment of TAdviser) such effective and such cool leader how now, without this lesson would be? It is not sure.

The good direction - consulting, development of the big systems. But if you work with the large customer, i.e. risks that the head will exchange, alterations will begin, new functional requirements will be delayed, the normativka will exchange or something else will occur. And here where you were going to earn, you begin to lose. Happens that the customer in general refuses the project. Fortunately, it happens seldom, but history when to you change functional requirements – you won one project, and your customer up to the end does not understand precisely that it is necessary for it, - is quite often.

Any project is the two parties: customer and developer. If the customer is insufficiently qualified or is not motivated on result, then the project is waited by great difficulties. Then the project from which you were going to earn 20% can bring minus of 50%. Of course, if you have three projects – two with profit, one with losses, then losses can be leveled. But as we have very big projects, even one financially unsuccessful project can lead to significant losses.

Other example. We perfectly understand what is distribution. Here everything at you goes well, but suddenly there is an overstocking by some product and panic in the market begins, all begin to go to minus, and you lost money.

So I cannot tell what gives more profit and that - it is less. I can tell that because we have many directions and business I am diversified, we are steady in the development. If one subsidiary company has problems, then they "are blocked" by other successful businesses. That one direction develops better, another. We well made good money on ERP systems, with development, with outsourcing … Actually we constantly monitor the market, we look attentively at all potentially interesting directions, we look for new points of growth. And this combination of diversification and permanent search of new opportunities allows us to save the general positive dynamics of business.

At the same time I practically have no profit more than 10% anywhere. And in general is much lower, unfortunately. Though it seems to me that in IT there has to be more. And to become the international company, you should have a stock of money, including on R&D. But it is absent. So our scale of business does not yield proportional revenue which you could invest quietly. With admiration I look at Huawei company which spends 15% of the turnover on R&D and at the same time it has a lot of profit.

Georgy Gens: It seems to me, the taxation system of China stimulates high-tech business much more. In China a huge number of privileges, preferences. And we have, in my opinion, too much state in economy, and we are quite strongly harmed by insourcing. Though there too there is an insourcing …

Georgy Gens: Of the state it is complete there, but at them it turned out slightly better. Huawei, by the way, started in at one time with Lanit. Moreover, while Huawei entered the Russian market, for it it was the first foreign market, and Lanit was more Huawei. But then they managed to turn into the largest international corporation, very active and ahead of all.

Georgy Gens: I think that they are forty times more than us.

Georgy Gens: Yes. But the main thing that they have a huge profit and a huge stock of money with which they can develop where want.

Georgy Gens: It and the help of the Chinese government, but also, of course, is special model of business. At the plants they tell that this was developed and made, for example, by Japanese, and this equipment is purchased in Sweden or in Germany, and there come besides Japanese and train personnel. Or something was copied, but then improved and reduced the price. Besides, in Huawei people very well work.

Georgy Gens: At them in general it is considered that if the person left work earlier, than fulfilled 12 hours, then it is strange. They work more, than Americans. Also work with passion.

Georgy Gens: Anything similar. In Huawei of salary not the highest. At least, not above, than in other similar companies. For them honor - to work in Huawei. By the way, Huawei has, of course, an ingenious founder. Huawei is a national company. The owner of corporation possesses only 2% of stocks. All other stocks are owned by employees.

Georgy Gens: Yes, but, to receive shares, it is necessary to fulfill very well years five. But, when you will become a shareholder, you will begin to receive quite decent dividends. So motivation there very serious at people. But if you leave, then you will have no actions.

Huawei said to me: "Do you understand that we will make all? You have no chances neither, nor at Americans at anybody". I ask: "Why?" In reply: "Well, understand, we have one million graduates in IT professions. Million a year. From them one million wants to go for work in Huawei. Do you understand whom we take?" To them people who consider that it is indecent to work less than for 14 hours a day which consider that on Saturday it is indecent not to come to work come. As a result at them in an hour of effective work salary, of course, lower if so to count.

Georgy Gens: First, we when began, and worked – at superinterest. When Lanit started, I did not go to have a rest the first five years in general on how many. Then went for a week. And, by the way, on Saturday I always worked. Whether it is useful whether well it is the matter of argument. Whether the fact that people throw the families that they live only work is good? Absolutely unevidently. Would I like to try to make so that my people worked around the clock and waited until on an old age of years go somewhere and will see something else, however, with money?

Georgy Gens: He agrees, but if I offer such system of motivation, then I kind of try to sell this idea to employees. And if not to sell it to them, then they work as work. Someone is keen and plows on 12 or for 16 hours. And, by the way, receives more money, there is an additional stimulation and other. But whether I want to do from this corporate culture, I am not sure. It is not sure that it is useful for people.

Georgy Gens: There is one more moment which is important too. If you want to receive something from people, then it is good that you did the same. And I do not want to work for 16 hours now. I do not consider that it for me is good. And I do not want to force others.

Georgy Gens: I allocate some key heads with options too. At us this scheme exists.

Georgy Gens: I was never a shareholder of "Yandex". But it is one of my largest missed opportunities. The whole history is connected with it. When there was my transaction with Komptek (Georgy Gens purchased distribution business at the founder of "Yandex" Arkadiya Volozha in 2005, - a comment of TAdviser), I could purchase 10% of "Yandex" for smaller money.

Georgy Gens: At this time just 10% of "Yandex" for the amount smaller were on sale, than I paid for Komptek. I long communicated with Arkady, and he then told me that he sells a share in "Yandex" now, called the price and at the same time was surprised that it is so expensively bought.

Georgy Gens: I did not become interested. All this story passed by me, and I was surprised too what investors are ready to pay dearly so for. As we understand, they bought correctly and correctly delivered on Arkadiya Volozha who was always the outstanding manager. My error - that I knew what he is the good head, but nevertheless did not estimate perspective and did not seize the opportunity.

Georgy Gens: 10% would cost much, and then cost little actually. It would be my most profitable transaction in life. But, by the way, I can tell one thing which is very important for me. I for myself decided that such transactions – the fact that they did not take place, maybe, and to the best. Otherwise it would turn out that for the sake of what I stuck all the life and that earned all the life, would be less, conditionally, than I would earn just unexpectedly, for free. And then it turns out that all previous efforts are kind of devaluated. It is not really good too. All want a freebie, but it is not sure that this freebie is useful.

Georgy Gens: They had an option program because they were going to become the public company. I consider that it should be done only in this case.

Georgy Gens: First, unclear, why. Nobody especially will purchase and if purchases, then not for very reasonable money, most likely. Secondly, the publicity is created for something. If money is necessary, for example.

Georgy Gens: On the western market if leave, then, most likely, my son or other managers, but not I. I will develop business in Russia so far.

Georgy Gens: They change all the time. At us schemes of motivations constantly change, something adapts, something is rebuilt. Someone is motivated more with a net pay, someone - on result. The systems of motivation absolutely different, at engineers, at those who are engaged in service, at those who are engaged in consulting, at those who are engaged in development, at those who - sales.

We implement solutions for personnel development to clients and also we use them at ourselves. At me very professional, absolutely outstanding HR director and my deputy, are Nadezhda Shalashilina who works hard in the company years. It began at me the secretary.

Georgy Gens: So far Philip is an owner or the co-owner of business which it also develops. So if he does this business, then he also owns it.

Georgy Gens: Never could understand about a magistralnost of the directions. Do you understand what is our retail?

Georgy Gens: Do you consider that this trunk direction?

Georgy Gens: It is very big. But the matter is that also all our new investments are a serious story too. For us it too the big, important direction.

Georgy Gens: We, as well as in "Yandex", for example, have option agreements which concern heads of different businesses, but they are suited in a different way. The company remains to mine, and under the agreement the head receives a share from dividends or from possible sale of business. So actually – the same benefits as though was a co-owner of business.

Georgy Gens: No, this information is not true. But I can tell what it is connected with. At us with them there are a lot of joint projects, but we in the same way together work hard also with group of NCC, and with Croc. In general on the market the huge amount of rumors, often the most ridiculous goes. How many times told me that I buy some company or our business someone buys.

Georgy Gens: Yes. We have general projects with other companies. Sometimes it develops then into something bigger, sometimes - no. Perhaps, the similar general project will be also with Positive Technologies. We together do a product. Security very strongly interests us, we work hard with all, we try to do some joint things.

Georgy Gens: Roughly speaking, we will sell security as service.

Georgy Gens: There is complex history. We with pleasure will tell as soon as we formulate.

Georgy Gens: Perhaps, with them too something will arise. We now rather actively participate in one project. They bring a new product to the market now.

Georgy Gens: Informzashitas. I am on friendly terms with Pyotr Yefimov many years. Also, as with Sergey Matsotsky from IBS or Boris Bobrovnikov from Croc.

Georgy Gens: Well what means, the conflicts? We compete with them already for a long time, but we for open fair competition.

Georgy Gens: Everything changes very strongly. In zero years there was a tendency to growth. There were several successful merges, several unsuccessful. Now I treat such transactions very accurately. I am interested in the company only if we receive something new, for example, on technologies, or we strengthen what we already have. There was an interesting experiment with which I am very happy – creation of Consist Business Group company. It was very risky as became on a condition "50 on 50". I had before a similar story when I bought 50% K-Systems, and it was the bad experience.

Georgy Gens: No, I left earlier. History was such there. We with Eduard Voronetsky were co-owners of the company "50 on 50", but he was a CEO, and I was as the external adviser. As a result I say to him: "Listen, I came to you as the computer business specialist, on technologies, and you are engaged in the real estate". He answers: "You understand nothing". Then I announced to him the decision to leave business, and he says: "Ok, but I will not be able to pay money to you at once". I on it: "Well, pay me when you are able".

Georgy Gens: Up to the end was not calculated as there was a crisis and all those risks about which I warned were implemented. And the moment when it decided to leave business in general was farther. He to me came with space remainings of IRBIS and asked whether I want to take away them. And I took away. We agreed on quite reasonable conditions. As a result I on IRBIS returned that invested earlier. Now the share of IRBIS in the Russian market of mobile devices grows. Turnover of IRBIS only in 2017 exceeded indicators of previous year almost twice. It is pleasant that as a result everything developed quite so. But since then I began to be afraid to do business "50 on 50".

Nevertheless, in Konsist we made it again and made very successfully. Perfectly Pavel Goryansky (the CEO of Consist Business Group - a comment of TAdviser), my former employee works. It is very effective. At the same time I had less costs of time more good stories, including financial.

Now taking into account all previous experience we do not aim to absorb. We want to look more attentively what in the market will occur further.

Georgy Gens: If the competitor normally works hard for the customer years, and I can offer only the same, at the same time there is no gold mine, and just work in normal conditions, then we in such cases do not even approach a subject. If you work hard years with the customer, you can do this work better, than others because you deeply know the customer's problems, you take of each other the hint. Conditionally speaking if you use the same doctor if he is pleasant to you, and everything is good, unless you change him then for other doctor who same? If suddenly to you came a star which the truth is able to do better, here in such cases it makes sense to change. If we can make something better, we come.

Georgy Gens: Yes. And at us it is complete of contractors.

Projects in IT happen such scale and novelty that any single company just has no competences on all technologies. Quickly it is very difficult to increase new competence of IT. Have in the command the excess number of the specialists who are not involved in projects is permanent, is not profitable. Therefore we work in cooperation with other players of the market on large, difficult projects on system integration, development of software, equipment by the engineering systems.

Georgy Gens: So far it does not occur.

Georgy Gens: Postgres – yes. But this process will slowly take place if it is reasonable to carry out it. And it is important to understand that developments on Postgres are more expensive, than developments on Oracle.

Georgy Gens: Because product not such perfect, as Oracle. Because it has no billions of dollars of investments into development.

Georgy Gens: My office solves the stated problems, but to this product still is where to grow and it moves in the right direction. It is necessary to understand how many money and time was invested by Microsoft in a similar product.

Georgy Gens: If there are any tasks which can be solved using My office, and is not necessary for this Microsoft, we, of course, will offer it.

Georgy Gens: Attempts are. We deeply studied it, as well as Linux. All our we study and very much we try to advance.

Georgy Gens: It is long process. Besides, in the West all the same there is a lot of new. I tried to finish Leonid Reiman, still in due time when he was the Minister of Communications that it advanced telephone exchange "Quantum-m" for which software developed Lanit-Terkom. The station was almost at the level of western. Reiman explained that if to put only the Russian stations, there will be a degradation of networks, and all that is made, develops in the world, will not come to Russia. In the moment, of course, it is possible to importozamestit everything. But only after time you risk and to remain in the same moment.

Georgy Gens: Business investments out of Lanit group, out of core business, I have all unsuccessful. Moreover, I for myself decided that I will not be engaged in them. It, by and large, is also not necessary for me.

If to speak about collecting which can be considered partly investment too then these are, of course, not pictures. I buy pictures sometimes for own pleasure, not as the professional collector, and as the fan of painting. More seriously I am engaged in so-called Livre d’Artiste - books by artists. It is pleasant to me, I invest money there. We hold a set of remarkable exhibitions. Another exhibition on this subject devoted to sculptors in Livre d’Artiste will take place in Pushkin State Museum of Fine Arts at the end of April. I invite.

Georgy Gens: Began to work less, to travel - more.

Georgy Gens: Abroad.

Georgy Gens: Yes. At the same time, where I would not leave, I stay in touch, I participate in weekly directorates. Just began to use more modern means of communication and to work far off. Also began to travel more. At the same time the last trip led to the fact that I can have quite interesting project in Brazil now. Small, but, nevertheless, nice.

Georgy Gens: The favourite directions – where the sea. Recently I began to be engaged in kitesurfing.