Finam.FM (Site news), April 23, 2010

SUCCESS STORY OF ALEXANDER YEGOROV

Guest: Alexander Yegorov, General Director of Reksoft, one of the founders of Russian software developer of Reksoft, Ozon.ru and payment system Assist LIKHACHEVA: It is 9:07 in the capital. Good morning, you are listening to Finam FM. My name is Elena Likhacheva, good morning. In remote 1991, our guest together with comrades founded the company. Now it occupies a very respected, it is possible to say a leading position in is segment. Many hundreds of people work there, offices of the company exist in Stockholm, Munich, St. Petersburg and Moscow. However, our listeners definitely know our today's guest not because he is the head of this company but because seven years after 1991, in 1998, he established the resource that you definitely used at least one in your life. Besides his big company our today's guest is also the founder of Ozon.ru known to you. We receive Alexander Yegorov today. Good morning, Alexander. YEGOROV: Good morning, Elena. LIKHACHEVA: You made such face when I spoke about Ozon.ru, it is probably a little unpleasant for you that no matter what you did … You know, a singer may have a hit: no mater what he sings afterwards everyone asks him, "Sing this, "Green-eyed taxi." Something like this. It is unpleasant, is it not? YEGOROV: Why, it is always pleasant to hear. I made a face waiting for the words in which you would convey this thought. You chose the formula absolutely correctly, everything is right. LIKHACHEVA: Well, of course, it would be possible, of course, to … Taking into account the face, it would be possible to say something more abrupt. Well. It is good that you have come. There is the rubric "Status" to begin with. STATUS: Alexander Yegorov, General Director of Reksoft, CEO of Russian Association of Software Developers RUSSOFT. 40 years old. HOW IT WAS DONE: He graduated from the Leningrad Institute of Aviation Instrument Building and Stockholm School of Economics, Russia. In 1991, he established and became the head of Reksoft specializing in software development. In 1998, he founded Internet store Ozon.ru and payment system Assist together with partners. Among the hobbies he mentions foreign languages, hunting and venture enterprising. He is a father of two children. LIKHACHEVA: Good morning once again. Thank you once again for having come to us today. You know, today we will speak about Ozon.ru to the minimum extent and will speak about the company that you have founded to the maximum extent. Your stakes in this company has changed a little now, does it not? What happened to this really very interesting and respected company, say, in the last two crisis years? What happened to it? YEGOROV: It seems to me that to answer the question it is necessary to look a little deeper. The company was founded as a kind of small business at the beginning of the 1990s. There were no words "startup," "strategy" and other borrowings, there was no current newspeak. Being students of the Leningrad institute aviation instrument-building we simply returned from the army and decided to earn money somehow. Afterwards it turned out that many companies appeared during this period, in 1990, 1991 and 1992. We had a distinctive peculiarity because we did not get enrooted very much at the Motherland and already a year later we found the first foreign customer practically accidentally. We found that there was a possibility to export software with a very big difference, that is the margin. LIKHACHEVA: Wait, you mean that you made this software by your hands and brains? YEGOROV: In general, we are programmers, all three founders are programmers of different specialties. LIKHACHEVA: So, you did not buy it, did not … YEGOROV: No. LIKHACHEVA: You made it yourself and you sold it yourself. YEGOROV: We did not buy it, we made it, yes, absolutely right. Two participants of the Marleson ballet, I and Dmitry Rudakov, specialized in computer linguistics, and the third participant, Victor Kozlov, was a specialist in databases. This triumvirate started fulfillment of some first tasks of a Western customer. Afterwards there will be an interesting part… We omit the second university that has lasted for five years: the customer taught us how to work, unfortunately, Soviet higher educational institutions did not teach us this very much. The interesting period began since 1995-1996 when we earned the first money and started thinking how to develop this local success. Naturally, we as technological, young and innovative people tried to find the maximum quantity of interesting topics that could be developed and between 1995 and 1998-1999 we launched several interesting ventures inside of Reksoft. In reality I smile when I think about Ozon.ru because Ozon.ru has really become the most successful. In reality, there were several projects in reality. There could actually be no Ozon.ru at all and there could be a store for sale of automotive spare parts instead of it. So it happened that there appeared Ozon.ru due to Dmitry Rudakov who was very kin on books, literature and science fiction. It was his idea and he implemented it in principle. We understood later that at that time the company functioned in the mode of technological incubator. So, we earned money by dull work on some software applications for some Western customers… LIKHACHEVA: It is such familiar routine, right? YEGOROV: Yes, it is such routine. Afterwards we invested this money joyfully in interesting and funny things. LIKHACHEVA: You said that there were several interesting projects besides Ozon.ru. Which other interesting investment projects were made at that period? YEGOROV: I think that a very interesting project has been made. Now it is known on the market only in a very narrow segment. This is hotel management system Edelweiss. It is sold in Russia and is installed (I do not remember the precise figure) in 600-700 hotels all over Russia and there are approximately 2,000 hotels all over the world that use the system. This is a fairly serious success for such, so to speak, startup from Russia of 1995. A Swiss partner developed this system together with us. It brought knowledge of this sector because we did not understand anything in hotel business at that moment. This way or the other, the project succeeded. At first, it entered the market of Switzerland and afterwards Western Europe and in 2001 is attracted a big interest of an American strategic player, a company that produced similar products too. They were courting us for some time and at a certain moment we decided to sell this product. In reality, there w also a very bright deal from our standpoint right after Ozon.ru from the economic standpoint too: we sold a Russian product to a real American big player for a decent amount of money and the system became international. This meant that since that moment sales of the system began all over the world. It is being sold still. This means that it remains in production still and a huge quantity of people uses it. I think that not so many such systems have been made in the Russian Federation during all his time in general. LIKHACHEVA: Now you will continue exactly from the period when such really interesting startups have been made. Probably some other projects were made exactly at that period. We will continue from this thought but I would like to ask such sub-question now: why do you think that given our grandiose brains we have so few projects that succeed on the global scale? Why so few ready made already finished ideas are exported from Russia? This is not when a person simply emigrates and realizes himself there like this happens usually in our country, but why what you have done to the system of hotel business, why all this happens so seldom on our market? YEGOROV: You are absolutely right. Unfortunately it is possible to count all these cases by fingers of two hands. LIKHACHEVA: Is it right? Are there few of them? YEGOROV: Yes. There are loud names that everyone has heard, the guys who have managed to break through to the international market on a big scale, Kaspersky, ABBYY. There are less known systems. If we count all of them, there are probably 20-25 such big systems that sell products worth more than $10-15 million per year. Why is it so? Really, we have everything OK with the brains but it is necessary to understand that in the budget of development of a software product development of a software product proper occupies 7%, 12% or 15% and all the rest is organization of a sales network and support … LIKHACHEVA: To put this short, it is management. YEGOROV: This is called sales and marketing. We had a simply obvious weak point there. This weak point remains still. A new generation has come now. Let us call them post-Olympionics in slang. They were born after 1980. The think already a little bit in a different way. They grew up in the families that took care about their education, about the English language and so on and so forth. They lived somewhere abroad. In general, they already manage to work from Russia according to Western goals. Approximately until 2000-2002 it was possible to count such people by the fingers of one hand. For organization of sales between 1998 and 2005 we mostly used either the colleagues who went abroad at the beginning of the 1990s and decided to come back due to some reasons or used them right there, on the spot, due to knowledge of the Russian language, specific of our thinking and …. LIKHACHEVA: There are either our people there or those who have come back. YEGOROV: Yes. The first offer was made with assistance of this resource. Of course, there were cases of hiring of foreign colleagues. In any case, as I know, in our company and judging by stories of our colleagues whom I know well, these have been single cases. LIKHACHEVA: Well, in case of software for hotel business in principle, it is also impossible to say that this is your benefit too: they have found you themselves and have courted you, as you say. Right? YEGOROV: Now, we have found them. To be more accurate, this was the only case initially when a state structure helped because this contact came to us initially, for the first and the last case in 18 years of the company's history, from the Chamber of Commerce and Industry of the USSR in Switzerland. LIKHACHEVA: Really? I am often told that the Chamber of Commerce and Industry is the best chamber and it helps so much. YEGOROV: It is quite possible. I think that they help various industries very serious. They possibly helped someone in IT too but in the history of Reksoft in particular only one such case was registered but it turned out to be very successful. That is why we say, thank you very much. LIKHACHEVA: Is it possible to say that this is a turning point? YEGOROV: Yes, thank the Chamber of Commerce and Industry, in Switzerland in particular, very much. The period that ended approximately in 2002-2003 started transiting to a new phase. It was characterized by absence of sales personnel. What happened at that moment was a very interesting effect. During the time when we could not sell what we could do we mostly forgot how to make what we could do. Translating this complex phrase, it is possible to say that the technologies inherited from the Soviet Union on which many millions and tens of millions of dollars have been spent in marketing terms, the research and development … LIKHACHEVA: Have got homelessly obsolete. YEGOROV: Yes, the simply got obsolete, which meant that achievements were lost. It was necessary to have new achievements and, in general, that is why it seems to me that no astonishing new breakthrough projects have appeared after, if I am not mistaken, 1999-2000. If we take the new wave of the Internet projects, there are no really breakthrough projects still. So, there are wonderful super things that, so to speak, copy Western counterparts, Ozon.ru is among them incidentally because, it is not a secret, we have watched Amazon.com at that moment attentively. There are also, I think that every listener knows them perfectly well, counterparts of V Kontakte or Odnoklassniki systems, all of them have Western parents. LIKHACHEVA: Of course. YEGOROV: Not parents but counterparts. LIKHACHEVA: Is it possible to surmount this lagging behind in the near future? Let you answer this question literally in one minute. YEGOROV: Well. LIKHACHEVA: I introduce our today's guest once again. Today we have Alexander Yegorov, founder of Reksoft company, CEO of the Russian Association of Software Developers and, pardon me, one of the founders of Ozon.ru, in "They did it!" program. *** (Advertising) LIKHACHEVA: Good morning again. We receive CEO of the Russian Association of Software Developers RUSSOFT, General Director of Reksoft Alexander Yegorov. Good morning once again. YEGOROV: Good morning. LIKHACHEVA: Thank you once again for having come to us today. You have promised to say if it is possible to surmount this lagging behind about which you have spoken that have happened at the turn of the last and present centuries? We learned to sell more or less but during this time our technologies grew hopelessly obsolete and hence no breakthrough projects appeared lately in general and in the Internet in particular. Do you see the end of this lagging behind or you do not? YEGOROV: Yes, it is definitely possible to surmount it. I mean that the first achievements of the pioneer companies at the beginning and in the middle of the 1990s have really yielded their result now. So, in the process of development a whole group of member companies of RUSSOFT passed a path from business based on sale of labor force depended mostly in a different in payment for labor, well it is difficult to overcome a temptation to receive a good programmer for 40% of the budget, to further movement towards very sophisticated things. A meeting of the press club of RUSSOFT took place in Moscow recently. There the colleagues reported about results of 2009 and I noticed with pleasure that everyone spoke about transition to a new quality. This means that, first of all, our companies start working in an absolutely global way without any discounts. Sales offices and production divisions are located in the most diverse countries. Local people work there too. They are not afraid to work for Russian companies anymore, let us call this as it is. In the early 1990s persuasion of a German to work for a Russian company… LIKHACHEVA: It was possible to persuade even not every Russian. YEGOROV: Yes, it was difficult. Now we have occupied a certain place on the international market, we are respected, understood and known there and, correspondingly, the human resources situation has improved a little. Companies have grown bigger. This means that leaders there have size of a few thousands of people and represent really combat capable units. Correspondingly, they start moving to more and more sophisticated kinds of work of services and sooner or later this will definitely end. LIKHACHEVA: Quantity will transit into quality. YEGOROV: Quantity will grow into quality and there appear product solutions of a new wave based on this gradual painstaking growing up of expertise in various industry aspects. When will this happen? I think this is a matter of the next five years. Watching development of the situation in the venture industry, watching how the basic companies develop, I think this is a mater of three to five years. This means that investors ready to invest are running on the market and do not know where they need to invest, companies are ready to allocate resources for such product startups, there is knowledge and understanding of how all this should be promoted. There remained no drawbacks that existed probably in the middle of the 1990s when we thought that should we write an amazing algorithm this would be bought immediately and found with surprise that nobody needed this. Moreover, we were asked why we wasted so much time making this and that if that already existed. We could not understand why, because what we did was ten times better. First of all, it turned out that from the standpoint of a client there was no different. These were painful lessons. I think that if some of the colleagues listens to the program he has recalled one, two or three projects where he has made the same mistakes. Now this kindergarten is over. All this is calculated, there is such cold managerial calculation, marketing research, market niches, who should be driven out of there, will there be enough resources for this, if we do not have enough resources, we will not go there. All this works fairly professional. LIKHACHEVA: No romantic remained in Russian business in general, right? Of course, I joke. YEGOROV: It seems to me that business itself is always romantic because there are always risks. No, we have a lot of romantic. However, besides the romantic we have also learned to earn money. I think that this is very important. LIKHACHEVA: With what were some changes in your company in the last two years connected? Did this happen because you learned to count money, decided that it would be more profitable this way and changed everything? Or was this connected with something different? YEGOROV: You mean that the composition of shareholders has changed? LIKHACHEVA: Yes, at the beginning of the program I asked the question and you started answering it from afar, thank you. In any case, I would like to return to what happened in the last two years and why. YEGOROV: Analyzing the further ways of development after the group of venture enterprises born in our company literally between 2000 and 2001 we, I can say at once that it was due to a prompt of the investors with whom we worked and there were many different investors, came to a conclusion that it was necessary to decide for us who we were? Innovation laboratory or a professional company for production of software? We had to decide something. The partners decided that all new venture projects should be made outside of the company henceforth and should be developed independently and Reksoft should turn into a company that had been established initially, that is into a professional company for production of software. It is necessary to say a couple of words why it is interesting. The reason is that now we watch the process of chancing of the system of labor division on the global market. This means that due to a number of technical reasons, first of all, opening of borders of countries with more economic production of software and cheapening of the Internet and transportation and transportation costs practically to zero it does not matter anymore where this software is programmed. Correspondingly, the scheme of its production in the world changes. Any serious software company has a development center in India and China now, many companies have development centers in Russia and technical support centers somewhere in Malaysia, in South Africa or Mexico. This means that the whole picture acquires a global nature and this growing market of the production components that go to new markets fluctuates from $60 billion to $100 billion according to different estimates. This is a fairly serious figure and the struggle for it is going on now. This means that young companies from various countries try to eat the maximum slice of this pie. According to various Western analysts, if Russia does not sleep it has a chance to eat from 3% to 6% of this market. Of course, Indians and Chinese will dominate there in mass production simply due to the huge quantity of the population and due to the achievements, first of all, these will be Indians. However, there are also niche things, that is the niche of engineering of software, that is high-class or hi-tech software where we are definitely better and this is already not even connected with size of a company. This is connected with mentality, with the educational system and with some other aspects. We should not give this niche away and we have entered it now. We feel fairly well there. Moreover, clients start feeling this already. Correspondingly, understanding that this process was going on we decided that Reksoft should become a professional company for production of software. Since 2002, there already appeared a normal strategy in understanding of, so to speak, MBA. Incidentally, I cam to Stockholm School because I understood that I lacked basic knowledge of how a big company should be built. Correspondingly, between 202 and 2008 the company grew tenfold according to sales volumes and this required serious structural changes. An investor entered there in 2005 and helped us to simply finance the development. In 2008, I could not say that this was preplanned by 100%, we looked for the next partner and so it happened that we got acquainted with joint-stock companies of Technoserv. We talked and communicated and understood that their tasks on the global scale and on the Russian market coincided very much and we coincided psychologically. Some time later, we were made an offer, we analyzed it and decided that it was correct. Since September of 2008, Reksoft is a part of Technoserv group of companies as an independent business unit. This means that we have preserved the brand and the governance structure and so on but we have changed the Board of Directors. LIKHACHEVA: I understand that you are the only one of the three founding fathers who have remained, right? YEGOROV: Yes, so it happened that the colleagues decided to quit and, naturally, the venture fund was not very much necessary then already bearing in mind the potential … LIKHACHEVA: Of Technoserv. YEGOROV: Yes, Technoserv. That is why the colleagues have quit. We keep communicating with them in the friendly mode about other projects but I have started working on further development of Reksoft as an international company. Absolutely unusual prospects opened for quick and high-quality entrance into the Russian market. We did not work with Russia so much until 2005. Because we have support on the part of the group, you probably know that Technoserv is on the leading position on the list of the Russian system integrators, we have received access to some sectors on a very good level, naturally, in our field. Other opportunities open in the field of financial support of our further growth. That is why … LIKHACHEVA: So, the sizes are, of course, incomparable. YEGOROV: This was practically an ideal combination and we did not even thing very long. It could be seen that there would be a good configuration. Well, thanks the Lord, so far everything seems to confirm this. We passed very difficult year 2009 very successfully. The companies interact and cross-sales have already begun. In general, so far everything is going like we have expected in … LIKHACHEVA: In accordance with the plans. YEGOROV: Yes, it is practically possible to say so. LIKHACHEVA: Completing the first part of our program, could you name at least some figures you’re your contract lets you? YEGOROV: In which area? LIKHACHEVA: Results of 2008 and of 2009 if they have already been finally counted. YEGOROV: In 2008, we slightly fell short of $30 million in Reksoft. We did not finally count 2009 yet. This is a turnover, a volume of sales. LIKHACHEVA: What about net profit … YEGOROV: We do not disclose it. LIKHACHEVA: OK. YEGOROV: In 2009 there will be a slight decrease because the Russian market has shrunk very seriously. The Western market was stable. Russia decreased seriously. We got into several big contracts with our raw material companies. Unfortunately, throughout 2009 they were closed in a fairly non-systematic way and this incurred some damage. In reality, this will not have any systematic effect because in 2009 we continued development of the system of international sales. We won several serious new Russian tenders with normal financing. I think that year 2010 will be fairly successful for us and we will achieve approximately the same figures as in 2008. LIKHACHEVA: You will recover the losses, right? YEGOROV: We will recover them, yes. LIKHACHEVA: Well. We will get interrupted literally for three weeks. Now it is time of short news at Finam FM. In three minutes we will return with our today's guest. I introduce him once again. We receive Alexander Yegorov today. He is General Director of Reksoft and CEO of Russian Association of Software Developers RUSSOFT. Incidentally, these are not his only posts. He also has some others, it is possible to say, social projects. We will speak about this today for sure too three minutes later in a program of Finam FM. *** (News) LIKHACHEVA: Good morning again. It is 9:33 in Moscow. Today we receive Alexander Yegorov in "They did it!" program. This was a person with direct participation of whose, of course, he was not alone but he was with his team, nonetheless, who made several interesting projects. One of them is not simply interesting but it has sounded loudly all over Russia. You definitely know it. This is Ozon.ru. He has also established payment system Assist and is now general director of Reksoft and one of its founders. Alexander Yegorov, CEO of Russian Association of Software Developers RUSSOFT. Good Morning, Alexander, once again. YEGOROV: Good morning. LIKHACHEVA: Thank you for having come to us today. Let us go back to Reksoft. Which priority tasks do you set now for you as the manager of this company? YEGOROV: Our priority task number one now is growth because it slowed down last year, unfortunately, we need to return to the pre-crisis position and to get accelerated. Like I have already said at first, the volume of the market is fairly big and it is simply necessary to come there correctly. This priority generates a few tasks more. We see a problem moving to us in the resource part, which means that the story about the endless quantity of genial programmers roaming in Russia is not valid, they are not roaming. The quality of education has fallen a little, if we put this in a politically correct way, companies have to teach people additionally already in the process of work on the work places in their educational centers. We, like many other companies, simply sit in universities already and teach people right there. Of course, we would like these things to be financed by the state a little better because, in general, we should not substitute these infrastructure expenses from our own profit, this is not quite correct. We are doing this … LIKHACHEVA: What is the state thinks: you need this and you do this. YEGOROV: The state thinks that it needs an innovation breakthrough, this is what I hear from the state. This is exactly the task of the infrastructure. The investments are long term and this is not a task of small commercial companies to which we belong. That is why the problem of reproduction of human resources exists, it is necessary to solve this and we are working on this seriously. The second aspect, the second component of all this is concentration of expertise in applied fields, its bringing to the Western market in the form and packaging understandable for the Western buyer. So, conventionally speaking, our products should not be worse in anything: ribbons should be as beautiful and bows should be as impressive like those of other players of this market and this is absolutely not simple. I do not have such statistical data, but judging by recruitment of staff, there is such impression that practically nobody works on export of anything except for energy resources from Russia. LIKHACHEVA: I talked to one entrepreneur about this topic recently. We said that to a big extent this was probably simply some peculiarity of mentality at the current period of time. There is simply some block or some valve in the head that says, "No, you need not go there. Here is Kazakhstan and Ukraine in the best case. May be the Baltic republics? May be but hardly possible." YEGOROV: Well, the block is installed correctly. LIKHACHEVA: Really? YEGOROV: What is a block? A block in the head of an entrepreneur, manager and top manager is his expert assessment of risks. He simply does not know what to do there. He tries to work with local partners and they deceive him. He takes one try, the second and the third and nothing comes out of this. A certain moment comes when he understands, "No, it is impossible to work there." Of course, when a product is sold that is badly needed by that country the situation is simplified a little, although people there try to deceive and outplay you, that is, all conversations about the Western business ethic are simply funny. It is clear that one respectable person has said, "All principles of business ethic end approximately at an amount of 50,000 euros." I like this very much and I can simply sign this phrase. That is why it is necessary to go there to a much more aggressive environment than even our local environment here, and it is necessary to try to sell a product that is not expected on the market. This means that this is an occupied market, it is necessary to go there, to look for a hole and to move into it. It is really very difficult and that is why if there is a possibility to make money by a simpler way, for instance, doing the same in the neighboring countries where, so to speak, we have a bigger potential, it is natural and it is correct that this is done. In any case, at a certain moment we will come to a situation when the neighboring markets are captured. LIKHACHEVA: And it is necessary to develop to some other place. YEGOROV: And it is necessary to develop somewhere in that direction. The cleverest of the people who occupy the leading positions on the market of Russia and CIS now they are already quietly having experiments probably under different brands for consolidation of some external assets, they try to do something in Eastern Europe and in Western Europe. Along with this, it can be seen that so far all this is in an experimental mode. Even if big amounts measured by tens of millions of dollars are spent sometimes everyone is moving by the groping yet. We have been doing the same for a fairly long time. The systematic attempts to sell something to the West in aggressive mode actually began ten years ago, in 2000, and a huge experience was accumulated. However, by now we practically stopped relying on local human resources and on the colleagues who returned. This means that we already simply recruit local employees: if this is Germany, we have a German working, if this is Sweden, this is a Swede. We have to reshape them already for our system of values and force them to work as we need them to work. This is a very difficult process but it is very interesting and it is actual one of the attractive aspects in my today's work. LIKHACHEVA: Judging by where your offices are located, Stockholm and Munich, you are actively working in these very directions now? YEGOROV: We are working… Overall, we have nine countries and only we do not have our own representative offices. We are working with the US, with Belgium and with Switzerland very much, from which we have started. That is why permanent representative offices with our staff will appear there sooner or later too. As a rule, now these are either partners or some agent structures but we are already there. In any case, this requires time and money. LIKHACHEVA: So, there will be integration, this is a matter of time. YEGOROV: This is a matter of time. LIKHACHEVA: it is clear. The last question before the pause: where it is more difficult for you: in Europe or on the American market? Probably even not more difficult but there are some peculiarities that are inherent only to the European or the American market? YEGOROV: Of course, American market is the most difficult and the simplest simultaneously. It is difficult because it is the most competitive and it is the most difficult because it is necessary to come there with a good product and there is nothing to do there with various trifles. It is simpler than the European one and bigger and probably even resembles the early Russian market by its absolutely straightforwardness. So, yes means yes and no means no there and all this is settled in 40 minutes. In Europe it is possible to fly to some Munich or Copenhagen for months, meet with the endless quantity of vice presidents there, drink some coffee and decisions are not made. In genera, some clients, without the names again, remind Soviet ministries. So, it remains macroeconomically unclear for me how all this construction exists but they somehow they managed to earn such a quantity of money to maintain all this hordes of very talentless … LIKHACHEVA: The golden billion, if you like. YEGOROV: Yes, they manage to feed talentless people. In any case, it is clear that sooner or later this will end, probably not in our lives but some time later. Along with this, it is much jollier to communicate with the clients in Europe from the standpoint of socializing and communication. I hope that if some of the European businessmen who live in Russia listens us he will not felt offended by me, but decisions are made very slowly and in some countries are not made at all. That is, in Sweden decisions are not made at all. I do not know how they are made there. It is possible to wait for a decision for two months or for four months. It is necessary to reach a consensus by the entire staff there: a department of 200 should agree unanimously that they will order a project from Russians. Well, of course, there will always be one person against and nothing will be decided. In America this matter is settled in one day … LIKHACHEVA: It is settled by one person. YEGOROV: Yes, and those who disagree may quit the job. Everything is simple and certain. LIKHACHEVA: It is clear, I mean the style of running business in Europe like you have described, and in America too like you have described. What if I request you to try to describe the style of running business in Russia in an equally harsh way? Can you do this? YEGOROV: I will try. LIKHACHEVA: Let us do this literally in a minute. I introduce our guest once again. Today we receive founder of payment system Assist and Internet store Ozon.ru, general director of Reksoft, CEO of Russian Association of Software Developers RUSSOFT Alexander Yegorov. In a minute we will return to the studio of Finam FM. (Advertising) *** LIKHACHEVA: Today we receive general director of Reksoft Alexander Yegorov. Good morning again. YEGOROV: Good morning. LIKHACHEVA: Well, you described the style of running business in Europe and America, although not fully but in a fairly picturesque way. Let us speak about the style of running business in Russia. YEGOROV: Going back to the Motherland, there is an interesting effect: in the past, one of my colleagues in IT business called this imitated factor of the first client. Companies differ very much because practically all of them are new in Russia, leaving apart natural monopolies, if we take commercial companies, the style of running business has been formed in them on the way in seven-twelve-fifteen years when they have existed. As a rule, this is the personality of the founder or founders, his life values, how he built the company plus with whom the company worked, that is for which client it was built. These two factors provide … LIKHACHEVA: Such key factors. YEGOROV: Yes, they provide the key DNA of the company. I risk presuming that, probably, there is either simply no Russian style yet or it cannot exist at all because the country is huge, specific of the regions is obvious and there will probably be never a common picture. I mean that externally people will notice some commonness in all regions but it will escape us, Russians, because we are boiling in this and we cannot understand this. LIKHACHEVA: Of course, nobody will ever understand a system inside of a system. YEGOROV: Well, it is possible to say: nominally Russian companies that have some foreign roots – there have been investors or it is simply a division of a big Western company – of course, they are closer to canonic models from a textbook than purely Russian companies. I encountered absolutely anecdotic situations when, for example, a company had three founders and each of them, if I remember this correctly, was the president and each of the president was the general director in a rotational mode for six or seven months. So, we came there accidentally when there was one general director and afterwards by the fourth month of work we learned that there was such a thing there and we could not understood why we could not achieve any decision … LIKHACHEVA: They read Volkov in the childhood too much. You know, his book "Seven underground kings?" Not to quarrel six of them slept and one sat on the throne and afterwards … YEGOROV: The main problem was that the other two did not sleep there. If they were made to fall asleep somehow it would possibly be … LIKHACHEVA: It was necessary to prompt them. YEGOROV: The problem of IT projects is that they are long, that is obviously longer than six months and having understood that we could do nothing there we fled from there. There is a clear difference: our representatives go to Krasnodar Territory and there is one process of meeting, reception and communication; our representatives go to Kazan and there is an absolutely different style and different rules there. This is very interesting by itself, this is such absolutely separate world. Do I need to name some specific peculiarities? Well, of course, they are. I would call this: unfortunately, this is an excessive inclination to making of abrupt decisions along with practically permanent shortage of information for making of these decisions at disposal of the management. In other words, majority of our clients suffer because their management either has no access to real information or has it theoretically but is not very interested but … LIKHACHEVA: And they make decisions at random. YEGOROV: Yes, it makes decisions clearly and in a hard manner, there is even a certain charm in this: to say right at a meeting of the executive committee that we would do it this way now. Probably nobody understands this, there are some terms there, in the general costs of ownership or in the results of this decision, some calculations. Well, I would say that these are 10-15% of the companies that we have encountered. There the guys try to use all these useful methods to understand what you are doing now. The sense penetrates from the side of commercial companies that have grown in difficult conditions, have learned to count every kopeck, that is, everything is more or less in order there, decisions there have an economically substantiated nature. As soon as we approach the sector of state owners, naturally, these are monopolies, funny things begin there. LIKHACHEVA: What if I ask you to outline specific traits of your own style of running business, can you formulate them? YEGOROV: You mean … LIKHACHEVA: You personal traits. YEGOROV: Mine? LIKHACHEVA: Alexander Yegorov, yes, and his style of running business. YEGOROV: Well, probably colleagues or competitors or employees should speak about this. LIKHACHEVA: Well, wait, you are an analyst. You understand what you are doing. YEGOROV: It is very difficult… Well, of course, I can say something because I have studied in Stockholm School of Economics, I have been tested and I remember some tests there. Look, everything is the same here. Client base and some basic values had its influence. I am a Soviet student, a Young Communist League member, I have served in the border guard troops of the USSR, so, everything was OK with my basic values: to serve the Motherland and to take care about people. That is why it is possible to say what has come out of this, out of the style, bearing in mind that this has been overlapped on IT, that is the business that is in general fundamentally built on people and only on people. I say that the degree of control here is 30-50% less than in any other structure because you cannot, strictly speaking, quarrel with a key person of even the middle level because you have three of them and there are no such people on the market. Conventionally speaking, you have invested five years of labor and approximately $150,000 in him, that is, you cannot lose him, this is your asset. It is necessary to compromise. So, this balance of discipline, processes and need to compromise leads to a specific style of running business. It is possible to call it paternalist, it is possible to all it in some other way, by some scientific word. In general, we work or I work with people … LIKHACHEVA: No matter what happens you do not quarrel because this is dangerous. YEGOROV: Of course, we quarrel and we quarrel lethally, we fire etc … LIKHACHEVA: Be accurate because "quarrel lethally" is bad in business. YEGOROV: But if … Well, figuratively speaking. LIKHACHEVA: of course, in a good sense of the word. YEGOROV: But the time that, let us admit, is spent on persuasion of a manager that he is not right if it is compared to any other sector, I think that it will be threefold longer. That is, he would have been fired a long time ago if he worked for a bank or somewhere for a motor deal, I think there would not be even two conversations of such kind. I sometimes have the third and the fourth conversation and think: I wish I worked in a different sector where I would have already put him somewhere. Along with this, I possible deceive myself and this is really my personal peculiarity and not peculiarity of the sector. In any case, when I look how the things are going on for contractors to the right and to the left, I see that they do not waste the people very much too. I mean that some colleagues with whom I got acquainted at the end of the 1990s and at the beginning of 2000s in various companies, in the worst case they changed one well-known company for another well-known company but the people are the same. Sometimes you say hello to a person and ask, "How is firm A?" He answers, "Sasha, I have been working for firm B for two years already." I say, "Pardon me, I have forgotten this." This is turnover of these human resources because few new specialists appear and specialists are watched. Now I speak about specialists of really high level and about the managerial staff. LIKHACHEVA: Is there something that you have learned in the army, in the border guard troops? It seems to me that border guard troops are a very special army. Correct me if I am wrong, I have never been to the army … YEGOROV: This is definitely an elite unit, one of the elite units of the armed forces or security agencies of the Soviet Union in general. The reason was that this was not even the Soviet army, these were separate troops and border guards were separately proud of this. LIKHACHEVA: It was not the Soviet army? Which one then? YEGOROV: Well, how can you say? To tell a border guard that he is from the Soviet army was like a spit in the face at all. It was possible to get beaten for this on the Border Guard Day. That is, this is an elite unit that… LIKHACHEVA: Do you go out on the Border Guard Day? YEGOROV: Well, of course, I do not go out already. But, incidentally, I … LIKHACHEVA: Somewhere to the park to drink beer. YEGOROV: No-no, this ended a long time ago, although this happened at first. Life is arranged so that all this falls apart, although I and a couple of colleagues with whom I have served maintain relations, with one of them we even have business relations: I am in St. Petersburg and he is in Moscow and we work together. In reality, of course, I was taught a lot because these troops, at least the units where I served, were characterized by a very insignificant level of hazing, that is it had such optional and training nature in comparison to what I heard from my fellow-students and friends who served in other places. I had much more useful work. I know the guys who have hold an automatic rifle in the hands four times in two years of service. We had an absolutely different situation. For the whole days we were rushing like mad: physical exercises in the morning, marches afterwards and practice of firing from all kinds of weapons. In principle, this was very interesting for the 18-year old boys. Yes, this was difficult and the service was difficult but it was somehow experienced absolutely normally. I also thought that there were perfect relations between officers and soldiers because the specific of frontier stations was such that you were in a closed circle of people, probably about 20 people … LIKHACHEVA: That was where you learned to communicate correctly with a limited quantity of people, with a limited quantity of people on you IT market! This is it, this is the reason! YEGOROV: Yes, there were 60 of us and, in general, reinforcement or retirement of the personnel happens twice per year. A few people come and a few people go. LIKHACHEVA: Well, just like on your market. YEGOROV: Yes, exactly lie on our market. It is necessary to somehow learn to live together because tomorrow you need to go with this person or stand somewhere and somehow you remember all the time that people in our units served with combat weapons and hence it was necessary to build relations somehow correctly. LIKHACHEVA: I wish to ask. Does your wife tell you, "Listen, may be you will invest your time, we have two children and so on?" YEGOROV: Well, I have invested time in the children and the children are already adult… LIKHACHEVA: How old are they? Are they absolutely adult already? YEGOROV: Well, the daughter will be 19 in a coupe of weeks. She is a student of the second year of the polytechnic university in St. Petersburg and is, in general, and independent person. The son will move to the last grade of the school. That is, he is already practically an independent person too and it seems to me that much more important investments of time now is demonstration of what and how I do and why and explanation. Incidentally, they are curious and ask and it seems to me that there is normal contact. I do not have a problem of some break of connections with the family. I was surprised to find, I was simply shocked, of course, I thought that I was a bad father like all entrepreneurs, that I saw children little and so on. I talked to a friend of a friend on Saturday in some restaurant. I asked him what the father was doing and he said that he did not know. He did not know what the mother was doing too. So, the guys managed to bring the child to a condition when he did not know what the parents were doing… Well, he recalled afterwards with difficulty when I started asking him already frightened … LIKHACHEVA: Shaking him saying, "Recall, man! This is no good!" YEGOROV: But it was possible to see that they had absolutely no information exchange. No, we do not have this. As to the wife, I can say that she knew with what she agreed because the moment of establishment of Reksoft coincided with the moment of the birth of the daughter. This was at the very start of our family life. She somehow got adapted to this lifestyle. It seems to me that there are no special contradictions. Of course, she would like us to… LIKHACHEVA: Two processes went in a parallel manner. YEGOROV: Yes. That is, we somehow have not lived well. LIKHACHEVA: Actually speaking, she has nothing to compare with, right? YEGOROV: Nothing, right. That is why it is probably necessary to ask her but in this sense we have an absolutely harmonious interaction with her because there are no claims against me coming home late, and I really come late sometimes. There are also permanent business trips, that is I am actually absent at home approximately half a month per month. LIKHACHEVA: You know, this is like in the funny story, "Blind and deaf captain of long-range ship," such ideal husband. YEGOROV: Yes, yes. Well, what can I do. LIKHACHEVA: Do you take her at least to the hunt? YEGOROV: I took her at first but finally stopped because the clutched the barrel at the moment when something was flying and, in general … LIKHACHEVA: She felt a pity for a bird! YEGOROV: Yes, she felt a pity for a bird. She is a very soft person and likes animals. She tried to live with this somehow but finally said, "No, I cannot." She has the next phase now: she tries not to let me anymore. So, I visit a shooting range more than a hunt now. LIKHACHEVA: One of the last questions. Why do you go hunting? Do you relieve stress or something? YEGOROV: No, I am simply very fond of shooting. LIKHACHEVA: Do you shoot well? YEGOROV: Normally. LIKHACHEVA: What are your results? YEGOROV: I qualify for a candidate to master of sport. LIKHACHEVA: So, at the parting I will wish you that everything you do further, exactly … How do shooters say? When you hit the target, hit the bull's eye? YEGOROV: Hit the bull's eye, hit ten points. LIKHACHEVA: Hit ten points, right? Wish you always have ten points. YEGOROV: Thank you, Elena. LIKHACHEVA: Shoot fewer birds anyway, I agree with your wife. Come to us again some time. YEGOROV: Thank you for the invitation, Elena. Good luck. LIKHACHEVA: Good luck