There was a small
dip in the Russian IT market at the end of the 1990's
but it is now booming, some say. What is your assessment
of the situation?
Compared to western markets, and I spend a lot of
time trying to compare the different markets, it
is different. The difference is especially visible
now with so many obviously negative trends in the
west. I've just been to Silicon Valley and seen
that it's nowhere near as exciting as it was a few
years ago. There are obvious features but, in Russia,
we have quite an optimistic outlook. I try to analyse
why it's so different for the benefit of my management
team because currently there are definitely negative
trends in the States and the west; Russia doesn't
seem to be suffering from theses negative trends
at all! We're growing faster than ever!
There might be several explanations. The Russian
economy is still separate from western economies,
we are not fully integrated. This is something which
has positive and negative features. In the case
of the Russian IT market, we are currently seeing
some positive trends from that lack of complete
integration.
The main explanation, in my mind, is that the west
has a lot of inherited systems whereas in Russia,
just a few years ago, there was nothing. We've had
to start from scratch so Russia now has the opportunity
to not make the same mistakes as the west made,
if our specialists are clever enough! I have been
to over 60 countries and the ideal country doesn't
exist. Everywhere is different.
Sun Microsystems was founded in 1982. Could you
tell us about your decision to come to Russia?
Sun Microsystems was founded in 1982 and Sun Microsystems
Russia in 1992. We recently celebrated our 10th
anniversary. It was a risky project, you had to
be willing to take a chance! Scott McNealy, Sun
Microsystems CEO, was that kind of man. He's a hockey
player and said that he likes to play hockey with
the taste of blood in his teeth: he wanted to play
hockey with the Russians. So that was the reason
for him to visit Russia. Sun Microsystems sponsored
one of the hockey cups here, it was the Spartak
team and it is interesting to mention that not only
business but also the personal wish of our CEO resulted
in our starting operations in Russia. On the other
hand, there are some much more serious reasons and
those serious reasons are related to an idea: to
start using Russian software development and Russian
engineers who were involved in the design of the
Russian super computers; control over not only ballistic
missiles but also space flights and all of those
features.
The idea of our CEO was to use the potential of
the Russian engineers and those super computers
for international and American companies. I myself,
in my previous life, was a part of the team involved
in the design of Russian super computers applied
to control those flying things. I worked in that
team and that team was managed by Professor Babayan,
the architect of Russian super computers. These
were no toys, these were serious super computers.
We created 64 bit operating systems in 1976: 16
processor systems! The need for this system was
related to our space projects and definitely our
military projects and there were some technologies,
both software and process technologies, that were
interesting to Sun Microsystems. So that was the
idea when our operations started. It is different
from other companies because other companies, while
starting to work in Russia, started to sell their
products here. In this case it was a little bit
different, hence the special organisation called
Moscow Centre for SPARC Technologies was created
and this organisation still continues its operations
now, ten years later.
Currently more than 250 programmers and software
developers residing here work for Sun Microsystems
Software Projects. So the project originated in
1992 and continues.
Do you feel like you are a significant contributor
to Russia's development, that the services and properties
you provide help top companies a great deal?
Yes. I mentioned just one aspect of our activities.
Initially, the objective of Sun Microsystems in
Russia was to use Russian resources but in 1992
we started our commercial operations and, for the
time being, our office, managed by me, is responsible
for sales. We sell a lot of big systems and it is
the commercial part of our activity. That centre
that I mentioned is a separate organisation, a Russian
legal entity that works on a contractual basis with
our headquarters.
Regarding the impact, there are two aspects. First
of all, it is a successful software project and
an experiment whose results many other companies
are currently using. It is possible for software
programmers not to emigrate to the USA, to work
here and, having access to Internet, it does not
really matter where you are geographically located.
That project indicated that it was possible and
we solved a lot of problems with security and trust;
a lot of problems related to the Russian and US
government. So that was a good check. Anyway, more
than250 people now work here and that is not too
many.
As for the impact of Russian IT potential, we are
one of the biggest computer vendors in Russia. Currently,
according to IDC Sun Microsystems accounts for about
47% of the UNIX market and that is really a lot.
HP, IBM, and Fujitsu Siemens take the rest. Their
joint share is approximately the same as ours so
we are definitely number one in this market.
Ernst & Young is coming out with a report
on the Russian IT market indicating that the market
is still quite fragmented but that there is a lot
of potential. In the years to come competition will
increase in the IT market. What is your vision of
this market and how will Sun Microsystems establish
itself and continue in this dominant position?
To my mind, this should indicate our mission. What
is happening now to the Russian economy? In fact,
it is now creating prospects. IT infrastructure
is currently being created.
What is the trend in the Russian economy today?
The trend is monopolisation and huge federal structures
are being created throughout the country in telecoms
and manufacturing. In order for those projects to
be successful, you need to create unified IT resources.
It is not enough just to install PCs on tables and
say that you have IT. You need to integrate those
systems. That is the current situation. A lot of
companies are becoming bigger and they integrate
their IT resources.
When it comes to integration, Sun Microsystems is
exactly the right choice because we do not produce
PCs, we do not have these small things that we call
toys. We produce big, powerful services that provide
first of all computer power and secondly access
to databases. The beneficial part of the IT structure
is that the demand for integration is very high.
Who are the winners in that situation? Definitely
these are companies that are capable of proposing
integrated solutions and powerful systems. I do
not believe in the substantial growth of the PC
market in Russia. It is growing, that is quite right,
but currently those who want to install PCs in their
offices have already done so. The present stage
is integration. So the major investments are in
big systems today. There are not too many companies
that are capable of proposing these solutions to
their customers compared to PC manufacturers. The
PC components market is now going down and, as far
as I know, it is very difficult for famous brand
names to compete with local assemblers in Russia.
Here, PCs are cheaper than anywhere in the world.
In Russia, something designed in California can
be cheaper than in California itself. So PCs are
very cheap. When it comes to big systems, it is
a much more profitable market. Margins and the demand
are higher but, in fact, the PC market is growing
slower in volume than the big systems market.
When you talk about big systems, there are two
factors that are of great importance. The first
is friendliness and the second part is that, certainly
on the managerial level, it is increasingly a complex
decision on how to use different software and hardware
components. How does Sun Microsystems help corporations
to make the right decisions?
First of all, we envision that the users of the
computer systems should not be professionals in
computers but they should be professionals in their
own fields. If they are vendors, let them be vendors;
if they are car manufacturers, let them do car manufacturing
instead of investigation into the features of the
latest operational systems.
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To my mind, all the
features of real computer resources should not be
visible for an ordinary user. I am a computer professional
but even I would not like to know anything about
the systems that I am really using.
What do I need? I need a mailing system and a calendar
and internet but I do not need to know what the
operation system is doing and so on. What is the
difference between Sun Microsystems and other vendors?
We are capable of hiding the operating system from
the user, compared to other companies that are sometimes
even claiming that you have to read the manual before
using the computer. That is what makes the difference
because our operating system is not visible on work
stations, generally they are installed on the server
that is far away and sometimes people do not know
where the server is really installed.
We are fortunate enough that understanding grows
among people who use computers for decision making:
for company management rather than for playing on.
It is not a game. If you need to manage a big company,
you need to collect data from your subordinates
and you need to distribute the directions to them.
These are just two processes. To my mind, the mission
of the computer infrastructure is just to support
that process: first to collect the data and then
to distribute the directions but, even for that,
a client does not need to know how the operating
system is organized. He should use only those applications
that are required by business process. He should
not be allowed to do anything else with his computer.
Regional expansion is a hot issue today in Russia:
there are a lot of companies that are linking with
partners who can help them move into the regions.
Could you explain your strategy in respect of the
regions?
It is a very good point. Let us start with partners.
From the very start, we are using the approach that
all our activities with end users are implemented
through partners. We are using a 100% indirect method
and I am 100% confident that this is the right model
for Russia. It is related to this question about
regions. That is the feature of Russia - the huge
territory - and in order to cover it definitely
you could have a huge office in Moscow and a lot
of branches in all the 80 regions but it is not
economically justified. You should find some compromise
and, to my mind, we have found it. We are using
pretty small and super efficient offices. Here in
Moscow we have two, one in Novosibirsk, one in Kiev
and we are using 120 partners. So, instead of having
120 employees, we have partners and some partners
have hundreds of people.
We are using an outsourcing model and the proper
training and investment in partners is the right
approach to cover the vast Russian territory.
The second feature of Russia is that many Russian
companies prefer to deal with Russian companies.
When it comes to Sun Microsystems, they would prefer
to work with the mediator. It might be related to
security, to a way of thinking, to a lot of different
aspects but without Russian partners you cannot
work that efficiently here.
As for the regions, initially business in Russia
was business in Moscow. It is still business in
Moscow but, when it comes to the reinstallation
of real systems, it turns out that they are bought
in Moscow but installed throughout the country and
sometimes in very interesting places. In Khantymansysk,
for example - a city in the northern part of Russia.
I have never been there. They bought a super computer
for a research organization. It is a very powerful
system and it will be working in November. That
is the oil region but that computer will not be
used for oil exploration because they want to diversify
their business, they want to analyse if they could
use the computer resources that were installed there
for different tasks, not only related to oil. It
is an interesting project.
When it comes to other projects, first of all there
are the projects related to mobile communications,
where we have a monopoly in Russia. Practically
all of the providers are using Sun Microsystems
for developing systems for them. Mobile operations
were started in Moscow but currently the majority
of MTS and BeeLine equipment is installed on the
territory of the Russian Federation.
When it comes to Federal Projects, they first of
all try to create something in Moscow but finally
install their applied solutions in the regions.
When it comes to the projects in the Ministry of
Railways, they are buying our systems to control
the traffic of cargo throughout the Russian territory
and they have installed more than sixty big systems
to control that traffic. The trend is obvious -
the regions are growing much faster than Moscow.
Would that also be a major challenge for the
future? You came to Russia in 1992, developing your
leadership and partnerships. Would you now consider
the regions to be your major challenge?
Russia is the country of challenges. Definitely
Russia is still the country where business has a
lot of heritage from the old times and, as for challenges,
many foreign companies ask us if we experience some
kind of financial challenge here. I have been at
Sun for five years and I checked the figures very
carefully; I found out that we have never had any
financial problem, ever. Government, research, any
institution here: we have not lost a penny, even
during the crisis here. That is what our experience
shows and, when it comes to the analysis of what
is happening throughout the world, maybe we are
lucky but the risks are much higher than in other
countries. Definitely we are using a little bit
of a different financial model but once again we
have not lost a single penny. Anything we ever promised
to pay was paid but I know that for many companies
it is a challenge; maybe they are taking too many
risks. Or maybe they are investing money in a different
way. You should understand Russia if you work here.
It is not related to Russian bureaucracy but you
should analyse the situation in the country and
it is definitely favourable for doing business.
The global vision of Sun Microsystems is "The
Network is the Computer". How do you implement
this vision in Russia and what is your personal
vision for Sun Microsystems in Russia?
The slogan originated in 1982. I worked in a different
environment and currently it is obvious that the
Real Computer is the Network, that is the meaning
because, little by little, people start to understand
that real computer power is Internet, real computers
should be connected to each other and only if they
are connected are you a part of real computer resources.
That slogan in 1982 was a great vision on the world
of computers because in the 80's everybody was talking
only about personal computers. A personal computer
is the computer. Sun Microsystems came up with a
different slogan and at the end of the day it has
turned out that real computer is a computer in network.
To my mind that was the right vision.
How obvious is this in Russia?
The same as in the rest of the world. We use Internet.
It is even harder to collect all the data from enterprises
that distribute it throughout the country. If some
manufacturing group is creating a holding that includes
a lot of enterprises, they need to understand what
is happening in all of the enterprises of the holding.
So they need to collect data, they need to be connected
to each other and no doubt they understand that
a real computer is not the PC, it is an infrastructure
that allows them to make real decisions. So I do
not experience any real problems with that vision
in Russia. Maybe it is even easier here because,
again, we do not have a lot of inherited systems
that contradict the internet age. The lack of the
inherited system helps Russia to adopt Internet
projects.
What would be your final message to the readers
of the report?
It is not related to IT. There are no good and bad
countries. There are no countries with good and
bad people. In any country, you will find both positive
and negative features. I would like people in different
countries to understand that Russia is no different.
Unfortunately, many people do not understand it.
To my mind, intelligence is the ability to understand
differences. When it comes to the country there
are different features, there can be no bad economies
or good economies. In any economy, there are positive
and negative features so do not paint everything
with one colour. Try to differentiate. Sometimes
it is easier to calculate things in the computer,
in real life it is different, there is little positive
or negative information. There are a lot of intermediate
aspects.
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