Head of IT Tagir Yapparov: About transformation from integrator in software developer of the Interview TAdviser

Tagir Yapparov: The main idea which is the cornerstone of this transformation is connected with the fact that one of our purposes is value creation of the company. At the same time several scenarios – from the exchange before private investments or consolidation with someone who already has cost are quite admissible. From the point of view of shareholders value creation allows to build more long-term model of work because it is access to the capital which is rather limited in the market today.

Analyzing value creation factors, we understood that the cost of infrastructure and project business are strongly discounted in relation to volumes. At the same time service business is estimated approximately in business volumes …

Tagir Yapparov: Yes. And, for example, the business constructed on own technologies will have coefficient much above to total revenue. Also business at the heart of which cloud services is highly appreciated. Besides, having analyzed market development perspectives, we understood that infrastructure business will stagnate and become more competitive. Therefore there was a strategy of focusing on software development, creation of own technologies and professional services.

Within implementation of this strategy the last years we actively were also engaged in transformation. And it was not hidden and did publicly. It helped us because differently some changes without explanations would be treated as negative.

And when the main changes were or are made, or are already implemented, time to speak about new positioning came. Historically so it developed that we have a quite good software and service Aplana brand and infrastructure IT. Carry out rebranding of IT, its painful repainting in a software brand is rather difficult because at people in 27 years the accurate association was created that IT is engaged in generally infrastructure projects. Therefore we decided that within transformation it is simpler to us to develop the existing Aplana brand.

We perfectly understand history and its value. But at the same time our future strongly differs from what IT did earlier. Also there comes the moment when we should make decisions which fix these changes not only in terms of digits, shares or some new projects, but also in terms of what we offer customers.

Here so there was an understanding that it is necessary to be focused on the Aplana brand. At once I will tell, the solution was given hardly and we long discussed. Opinions were strongly shared because in this story there are many internal emotions. Having selected software and service groups, we turned on in it and IT as integrator of the solutions connected with software. And not only own because in many solutions there are also other technologies.

Here one of examples of such "software integration": now we discuss the project in which – our product is used with one of large customers. But the customer tells – "in the project seven software technologies – who should collect them? Collect". Though our internal vendor participates in this project of 100%, IT is tightened already as the system integrator according to software. We collect this solution, we configure it, we test, we replicate at the client.

Tagir Yapparov: These are our own products and services – custom development and software testing under the Aplana brand as I already told above, software integration and services from IT, product companies "Business Logic", "BOSS Personnel systems", "Advanced systems of self-service", "IT academy" and also the strongest consulting and implementation practice concentrated in the company "Aplana. Business solutions".

Behind a circuit there was MobilityLab which is at an investment stage and therefore EBITDA having a negative indicator and also some other businesses so far.

For example, we did not begin to enter into Aplana Group the business connected with "the smart city" because it often is under construction on PPP models and it is difficult to mix it with software.

Our strategy – not to do global rebranding of IT and Aplana. Sharp steps can negatively be treated. Our market is very sensitive, on the one hand. With another – he did not get used to transformation and to changes. Therefore we adhere to tactics of coexistence with gradual substitution more likely.

But in general, it seems to me, in the Russian market there came the moment of focusing and determination of a way. And focusing requires certain solutions. It is senseless to develop that direction which unpromisingly. For example, at us is niche business is an automation of gas station and own excellent product. Once there was a growing market. But now everything, there is no big dynamics of this market. There is Rosneft, there is Gazpromneft, there is Surgutneftegas, there is Lukoil – and all. This direction continues to bring stable income. Business is profitable, but without dynamics. What with this product to do?

Tagir Yapparov: Actually any player of the market has this or that system. Just I to what to eat significantly the growing markets, and am the markets which stagnate. Therefore strategy, on the one hand, very dynamic, with another – requires focusing. And we are at a stage when very actively we work this focusing. I will not tell that we managed to work up to the end it, but in general we made the most part of work.

Tagir Yapparov: I think, the market now such is that higher multiplicator cannot be received.

Tagir Yapparov: Approximately and. Now the market became difficult in terms of value creation. The model of publicity became much worse therefore IBS and postponed the IPO until fall. Therefore also all similar projects which are discussed, are on the verge of postponement now.

Tagir Yapparov: We initially were going to undergo audit for 2018 and already on the basis of these data to create the plan of further actions. Therefore, roughly speaking, our task did not change. So we are going to go to a waterway. At first the first players will go public, they will create assessment model, will begin to create the history of the market, and then – in a waterway – the following will go.

Tagir Yapparov: It is a lot of plans. First, we have a product line which we develop. Secondly, we understand that it is necessary to be enlarged, integrate. The market is strongly fragmented, and in it there is such natural motivation, thirst for enlargement. But it is connected with value creation. It is impossible to be enlarged, without having cost. So some model of assessment, infrastructure of the company which already has cost and so on should be constructed.

Tagir Yapparov: Yes, less than 30% usually are not considered. It is such standard.

Tagir Yapparov: Everything strongly changed. The market of that system integration which existed, conditionally, in the 2000th leaves. And there comes the market another – in terms of both consumption by customers, and integration services. Infrastructure competences became rather widespread. There were many players of the average and regional level who are capable to do such projects …

Tagir Yapparov: It is unique on some difficult things, just they are not enough. For example, conditionally, "cloud" for the Central Bank is story for 5-6 companies in the market. But how many such projects? Sberbank, FTS, some more customers – that's all. So there is not a lot of really difficult large-scale projects. And simple projects became closer to commodity.

The second history is that customers build direct vendor relations. Already all buyers learned to receive direct discounts. And when there are purchases, the vendor allows a discount to the client. And further biddings go so that the marginality which is not closed, and open. Well, and time it open, for integrator this delivery cannot be supermarginal.

Difficult integration projects went more likely to software which share began to increase. Difficult competences because many technologies gather on software level now began to form. It is any more not that integration where the margin became on delivery. Now it is professional services, and it is more difficult to sell them, more difficult to support. Actually it is other specialization. So business of deliveries – it, in general, was much simpler.

High-marginal businesses which were in old model became much less marginal, much less profitable. But at the same time they require better risk management. It is necessary to consider risks which just were not taken earlier into account.

We are in the market where it is clear how to manage the growing business, and it is much more difficult to manage the stable and falling business because all the time technologies change, all the time vendors change, all the time it is necessary to invest in competences and in some support of the offer of the market. Therefore those companies which had a strategy of transformation let and with losses, but constructed the way …

Tagir Yapparov: Yes – IBS, Croc. For example, I consider, Croc has an excellent strategy. Everything that we tell about software, they tell about the managed services. It is very interesting to Boris Bobrovnikov to be engaged in the managed services and he, in general, around it builds a certain strategy. And we with the same burning eyes speak about software. IBS have too the strategy where both software is, and services.

Tagir Yapparov: It is difficult. This reorganization on the run. It, of course, "bloody" and difficult.

Tagir Yapparov: Well as? We actually lost a big piece of business.

Tagir Yapparov: Yes. We, of course, compensated it by the growing service business, but at the same time it was necessary to invest many efforts, money, resources. It was difficult history.

Tagir Yapparov: We just told – "we will not be engaged in it".

Tagir Yapparov: Ceased to participate in a big range of low-marginal infrastructure projects.

Tagir Yapparov: People were reduced, translated. Generally, all did that is necessary. In one place accepted, in another reduced. Of course, it is such difficult situation because the market estimates any transformation as a problem. When in a year you reduce hundreds of people in division, it looks as such history of closing of business. And I was reached by rumors that "well everything, IT will be closed". Why? Because these people are reduced. It is clear, that such rumors arise, and with them it is necessary to live.

Tagir Yapparov: We conduct a similar discussion around the technologies connected with the smart city. Obviously, there are markets which will be structured around state or near the state corporations. Because these markets are connected with an administrative resource, with big financing, with lobbyism and with long terms of payback. The smart city is an investment project with long term of payback and with very big risks around changes at the customer. The mayor exchanged, the governor exchanged …

Tagir Yapparov: Yes, it concerns all projects of PPP. This subject began market players, and now it forms around Rostec, Rostelecom, Sberbank. And it is clear that all technology players who have good solutions all the same will be there. How will it be grouped? Some joint companies, consortia, licensing options – it can be different architecture. But to it everything goes.

For example, I am sure that in several years all departments will pass into a state cloud, to the operator whose name all of us know. But it is all the same there will be a history of PPP. As far as it will be successful – a question very difficult. I think, many projects will be unsuccessful for various reasons. But it will be more successful projects since there is a formation of niches which are guided by suppliers not market, but state-private or about state.

I consider that technologies will go from private companies because the state suppliers, firms, the companies will not be able to compete with suppliers of technologies. For rather simple banal reasons – because at them the motivation, speed and activity will not be simple to be enough in order that to do it competitive. So below there have to be correct technologies and players of the market. Before the solution gathered on a stack, conditionally, the American-European-Asian. Now will also try to collect on mainly domestic stack. This stack will doformirovyvatsya still, but it will be, it seems to me, market.

Tagir Yapparov: It seems to me that its role will only amplify, and it is rather important for us too. She will remove a part of risks which arise in such lot of work.

Tagir Yapparov: In America the large vendor can undertake similar projects, in Russia - no. There is a brilliant example – Oracle. If to take business of Oracle in America, then 80% of his contracts straight lines. If to take business of Oracle in Russia – 100% of contracts go through partners. Why? Because Oracle does not undertake risks. I was present more than once at discussions when there came some vice presidents and spoke "and why in Russia all through partners? We have in America everything on the contrary. Give we the American model we will make – directly we will sign the contract with all and we will drive". And the Russian managers attracted the Russian partners, me including to explain why so it is impossible to work. And we discussed, explained specifics, features of the Russian business which differs from American.

There is a concept of government contracts, the Federal Law, huge risks which are born by the supplier. These contracts will not pass either the American lawyers, or compliance, there a part of conditions is unacceptable. One of problems of the Russian market that we because of the Federal Law were left in such non-standard model of work.

Tagir Yapparov: Yes. We have fixed price contracts, with the fixed term and unstable volume. So in the world change of volumes changes terms, changes cost. Our change of volumes does not change terms, does not change the cost because to terms of reference it is usually written so that the client can change conditions and requirements for course of execution of the contract.

Tagir Yapparov: This change of requirements which in the world automatically turns into additional resources, into terms and so on. And under our contracts any reasonable player who plays in the world will not subscribe in that model which is stated in the Federal Law now. It is simply unacceptable. Any risk manager will not approve these contracts. And there is a lot of such factors. Therefore the western companies, even when they could play in tenders, tried to do it through partners on whose shoulders all risks laid down.

Tagir Yapparov: Here a question such – it is interesting or uninteresting. So far it is interesting. But in general, of course, my role changes, and operational functions gradually leave to younger managers. It is absolutely normal history. It is process objective, and it even should not be considered as planned or unique. With age the person spends less time for field operational work and is more focused on strategy. Besides while I have children school students, any travel are tied to their vacation.

Tagir Yapparov: The project was closed for obvious reasons. It is difficult to be engaged in business, without being involved.

Tagir Yapparov: Well, of course. Same huge work. It is necessary to understand the market, to communicate. It is constructed on talent management too, and talent management is a work.

Tagir Yapparov: Yes, long. There was a moment, they not bad worked, but strategic perspectives, I think, in this model was not. Therefore focusing now 100% on IT-Business. And the hobby remains. I also listen to music. Recently brought together friends at Gregory Porter's concert. This is the young jazz singer, the American who precisely will be a classic of jazz. And here, I purchased ten - another of tickets, reduced on a concert of friends.

Tagir Yapparov: No, there is not enough time and forces. And, then, the fantastic hobby is a growing-up children. Especially, boys. It is more and more interesting.