October 2007 Newsletters Archive

Welcome to the October issue of GidaScope!

First news is that after three successful years in Hong Kong, the heart of Asia, GidaByte landed on the U.S. soil. The portal is now operating from Washington, D.C.

Secondly, Riding the Russian Technology Boom is now available! You can find the book at: www.russia.futuretext.com or www.amazon. Buy it today, don't miss you chance to find great partnerships in Russia.

This being said, this issue of GidaScope will offer you a unique glance on what this book is about. The excerpts from several chapters will take you on a quick tour of Russian history; show you what's happening in the Russian IT world; you will witness my personal account of the horrific 9/11 events; and also learn how to deal with the potential of Russian regions; get some wisdom from Russian folklore; and much more!

Have a great ride!

Subscribe to GidaScope today! (www.gidabyte.com/subscription)

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Lessons from Russian History and the Power of Information Change

Three hundred years of the Tatar-Mongol yoke shut Russia’s window to the external world.  Many historians argue how this long absence from world affairs impacted Russia: some assert that it was totally negative (lack of Renaissance influence, economic backwardiness, suspicion towards foreigners), while others believe that it served as an incubator for preservance of the true Russian culture and religion and greater assimilation with the East.  Most importantly, Russia survived and relieved itself from foreign dependence in the 15th century.  And the country really needed changes.

And the changes came.  In the West it’s a little known fact that in the 16th century Ivan the Terrible, the cruel and impulsive ruler of Old Russia, was also the first among Russian tsars to understand the importance of Western knowledge - information technology of that century – for Russia’s isolated capacity.  In 1547, the Russian tsar sent Mr. Schlitte, a recruiter from Saxony, to bring artisans and scientists from Europe to Russia.  Furthermore, the conquest of Narva, a city-citadel on the Baltic Sea, opened a small window to Europe for the young Russian state.  Conceding the pride of isolation for the need of gaining necessary experience, the Russian tsar allowed the signing of the first Anglo-Russian trade agreement, followed by a trade agreement with the Netherlands, opening the way for hundreds of foreign craftsmen and specialists to the Russian lands and instilled the first changes in the minds of Russians.  Albeit not yet significant in number, Western engineers, craftsmen and merchants became part of the Russian landscape.  In just two generations this was to be changed by the new man of the epoch.

Undoubtedly, among the greatest men in Russian history was Peter the Great.  He was the first to bring a true information revolution to Russia by much more dramatically opening the country up to the outside world in the early 1700s.  If you will, Peter saw Russia as a gigantic motherboard which urgently required a newer and faster processor.  It also needed the power of Western knowledge and science in order to survive among the growing industrial powers of Europe.  Peter was the first and probably the only leader that was both a Channel of change and a Connector himself.  Such was his abundance of energy, and so strong his explosion of will, power, urge to change and serve to his country and people, that he rocketed Russia from the marshes of the past to the global world.

Peter started his information revolution with technology training.  Calling himself a tsar/worker, Peter was all about energy.  He had an incredibly curious mind and wanted to know the substance of many things.  Many of his advisors could not help him in deciphering this information.  Hence, he reached out those who knew it -- foreigners.  The German District (Nemetskaya Sloboda) in Moscow and one of the first foreign advisors of young Peter, Francois Lefort, were among the earliest influences on the Russian tsar.  A brave officer, who came to live in Russia in 1675, Lefort won Peter’s attention with his wit, diplomatic skills and networking abilities, and later served as his Ambassador and trustworthy advisor.  

Peter was a relentless learner.  He sent himself and a group of young and ambitious Russian noblemen to the West to study and start the new information stream flowing to Russia.  Like Gulliver in the Country of Lilliputans, everything was of interest to him in Europe – wharfs, hospitals, schools.  He had an incredibly sharp mind able to learn shipbuilding, arithmetic, astronomy and artillery.  Witnesses of that time recalled that the Russian tsar was magnetising with his unusual combination of cultural simplicity and bright mind.  Not only was he a genius himself, he was a role model of the time.  Many young officers who later shaped his government and military circle adored the young emperor (though at times were afraid of his short temper and fierce reaction to misdeeds).

From his teenage and early youth age Peter noticed that Russian economic development had rusted and needed an enormous shake of political will and Western knowledge to be able to compete with the West.  Being a visionary of the time, Peter was the Russian Deng Xiaoping who engraved in his mind the breathtaking task of pulling Russia out of the marshes of apathy towards the salty breeze of a belated but truly Russian Renaissance.

After a few years, the wave of advanced knowledge and information brought by foreign specialists created new industries and changed the nation’s military capabilities, helping to make Russia a strong contender on the world scene.  Building Russia’s “window to Europe,” Peter never neglected education, thus he created the Moscow State University and the Russian Academy of Science to continue training future generations at home.  From this time forth, Russian science grew and matured, and its researchers attained the respect of the world community.

Read more about Russian history in Riding the Russian Technology Boom: www.russia.futuretext.com

"Yemelya the Fool" and Russian Programmers

Take, for example, Russian programmers or innovators: they are a colourful mix of Dostoyevsky and Tchaikovsky, Kulibin and Einstein.  They are inventive and creative, finding “out-of-the-box” solutions and opportunities not seen before.  For a moment let’s jump back to history. 

The history of people’s traditions and accumulative knowledge of best known characteristics of a nation are often concentrated in fairy tales and fables.  Among the most mysterious features of Russian character so incomprehensible to a Westerner is “nothing-to-doing-ness”.  Sometimes Russians just sit and contemplate, simply observing the events around them as if in slow motion. 

It’s exasperating to a productivity-driven Westerner, but it actually is productive – they’re coming up with ideas, or at least gathering up their energy, as they appear to be doing nothing.  Some explain it with the long Russian winters, others believe that this is one of the ways the Russian soul works, grasping the heavenly bread and ignoring the everyday’s offerings.

One of the most popular Russian fables of Yemelya the Fool shows exactly that phenomenon.  It tells that a lazy (or shall we say relaxed) soul might still get what he wants just by not missing an opportunity.  Yemelya was asked by his in-laws to get some water on a frosty winter day.  He unwillingly goes to get some water out of the frozen river, digging a hole in the ice.  Suddenly he sees a large pike appear in the hole, and catches it with his bare hands – what a Russian fool can do!  The pike cried to let her go. 

However, Yemelya thought that he was not a fool and not going to release his dinner.  The pike promises that she can do anything, magically fulfill all of his wishes.  Yemelya agreed and started experimenting, from making his sled move without his horse to training firewood to jump through the window to the woodstove.  Finally Yemelya decided to marry the King’s daughter and… become smart. 

He does so and lives happily ever after – showing that in Russia, at least in fables, success is not necessarily only due to hard work, but rather seizing the right opportunity before it slips away.  A similar character named Ivan the Fool virtually populates hundreds of Russian fables with his infamous ability to take the best from the worst circumstances by being a simple and creative person.

Well, be it Ivan the Fool or Yemelya, the main feature of Russian fools is to do things differently, contrary to pragmatism.  Russian fools oppose mathematical analysis, material profit and they have no desire to follow the example of worldly people.  Nevertheless, they always win (at least in the fairy tales).  The main quality that helps them to achieve success is their willingness to do something with no profit for themselves, self-sacrifice for a better cause, kindness and an ability to see an “out-of-the-box” solution.  In Russian folklore being a fool helps you to get the biggest prize and is the only starting position that brings you to your ultimate goal.  The hidden formula of this “fool” is intuition and the “natural guts” that allow you to think differently.

Read more about Russian culture and business in Riding the Russian Technology Boom available on-line: www.russia.futuretext.com

IT Sector in Russia – the surging “Googles” of Russia

The Russian IT industry’s incredible growth from the late 1990s through 2006 was driven by sustainable economic growth substantiated by oil and gas sector developments, a steady boom in public-sector spending, and tremendous growth in the purchasing power of the Russian middle class.  This upbeat Russian IT sector performance has brought an estimated 20–25 percent annual growth (by comparison, the US and EU’s IT sector recorded just 5.8 and 3.4 percent growth, respectively, in 2004).  This alone puts Russia among the top performers within the BRIC economies.

Now, let’s begin with PEOPLE, and look at an average Russian IT specialist or as we call them in Russian - “IT-shnik – [Aitee-shnik]”.  He or she is the fruit of synthesis of physicists, mathematicians, engineers and programmers.  You’ll find there are several groups of Russian IT minds:

A) Soviet engineers and scientists who worked in scientific and research institutions in the ‘50-‘80s
B) The current IT elite born in the late ‘60s and ‘70s, including former military and programmers
C) Young rebellious minds of the ‘80s and ‘90s that are making profits in mobile content
and other new markets.  The future of the Russian IT world, though, are young, or are just being born now. 

Even today people from the first two groups can be found in many IT companies, managing system integration firms, offshore programming businesses, mobile operators and others.  Yet, I see that once rebellious, the young minds of late 1990s and early 2000s will transfer themselves into the stable core of new leaders ready to cope with global challenges of the future. 

The Russian Software Association (RUSSOFT) in its research on outsourcing trends in Russia, states that Russia holds the third place in terms of the number of scientists and engineers per capita globally .  Russia is proud to be among the countries with the highest literacy rates in the world (98.7%) and has some 4.7 million students.  In fact, some 40% of university degrees are awarded in technology and science, while in 2003/2004 Russian universities produced over 45,000 IT engineering graduates.

So who exactly are the leaders of Russian IT? 

• According to the results of the survey “The iTop-100 of the Russian IT industry,” over 70% of top managers are over 40 years old.   Males prevail over females – in the iTOP-100 of 2004 there were only four women present.

• Typically, the Russian IT manager is the top manager and co-owner of the company (45% are founders of companies).

• All top managers have higher education and many have doctorate degrees.

• Russian IT managers are eager to speak publicly and help the younger generation learn the ropes of the IT business.

• Most IT managers are active members in industry associations.

• “Itops” managers are wealthy.  They own elite real estate, spend good money on travel and entertainment, and some own yachts and horses.

• ITops are very keen users of the most advanced electronics and latest IT gadgets ITops are advanced readers and bookworms

Take for example, a list of TOP earners in Russian business elite.  Based on “Finance” and RBC joint research - “Rating of Russian Billionaires 2006” a good number of Russian IT and telecom top managers made it there to their highest levels in 2006 .  The rating includes 720 top managers who control a total of USD 291 billion in oil & gas, mining, retail and ICT sectors.  Here is the list of TOP-15 ICT CEOs:

• Michael Friedman, chairman of council of Alfa Group, is top 3 in the list and the first among ICT heavyweights. His wealth is estimated at USD 11.4 billion. 

• Top-seventh in the rating, and the second among ICT goes Vladimir Evtushenkov, the largest shareholder of AFK Sistema with USD 7.3 billion. 

• TOP-17 and No. 3 in ICT is Alexey Kuzmichev of A1 Group (Alfa ECO) with USD 4 billion. 

• TOP-83 – Alexey Ananiev, CEO of TechnoServ A/S with USD 465 million

• TOP-89 – Dmitriy Zimin, founder of Vimpelcom with USD 450 million

• TOP-90 – Alexander Leviman, Board Member of AFK Sistema with USD 450 million

• TOP-103 – Eugene Novitsky, Board Member of AFK Sistema with USD 405 million

• TOP-129 – Timur Artemiev and Eugene Chichvarkin, co-founders of Euroset with USD 330 million

• TOP-162 – Alexander Goncharuk, Board Member of AFK Sistema and Head of Sitronics Holding with USD 265 million

• TOP-189 – Georgy Gens, President of LANIT Group with USD 215 million

• TOP-193 – Gennadiy Kiryushin, General Director of SMARTS, mobile operator, USD 200 million

• TOP-206 – Dmitry Zubov, Deputy Chairman of Board of AFK Sistema USD 129 million

• TOP-209 – Anatoly Karachinsky, IBS President with USD175 million

• TOP-312 – Boris Bobrovnikov, General Director of CROC system integration company, USD 105 million

• TOP – 341 – Boris Skvortsov, Chairman of Board of SMARTS with USD 100 million

Very impressive for the industry that almost was non-existent a few decades ago! 

From my work and interaction with IT-shniki I can say they are very intelligent, generally very easy to work with and open minded.  They are ready for challenges and can easily challenge you with their new ideas, while being receptive to your business proposals.  Many times it has happened that a foreign company initially stumbled due to preconceived notions on how to do business in Russia, but eventually made a full strategy change and carved out its position based solely on the feedback of Russian managers.  It is certainly a less bureaucratised industry than others and you may be pleasantly surprised by the level of business awareness among its younger elite.  Yet, no industry is perfect.  At times, you will face some arrogance and skeptical thinking, as well as unbounded over-enthusiasm. 

Read more about the Russian IT market in my book - Riding the Russian Technology Boom: www.russia.futuretext.com

9/11 and A4Vision: New Security Microcosm Becomes Reality

With tragedy always comes opportunity, and the IT field is no exception.  Russian IT security companies have contributed their share to the tech boom of the “War on Terrorism” era.  But before I tell that story, I’ll share with you a glimpse of my experiences the day the world changed.

It was the evening of September 10th 2001, and I was sitting at New York’s noisy JFK airport nervously looking at my watch.  I was leading an Uzbek IT delegation going to take part in the CTIA trade show in Los Angeles organised by the US Department of Commerce (USDOC), and two of the delegation members were missing.  “Where in the world could they be?” – this question loomed large as the flight time approached fast.  I was personally responsible for the well-being of these ambitious IT guys with scarce English vocabularies.  In fact, out of 15 people in our delegation only a couple knew passable English (and they were not the ones who were lost). 

Aside from this, I was pretty excited.  This was to be my second visit to Los Angeles, a vibrant city filled with IT ventures.  I was also happy that I could recruit this large delegation, most of whom never been to the States and had high hopes for good matchmaking opportunities for their businesses.

“Hey, Andrey, do you think these T-shirts are cool?” –  the sound of a familiar voice relieved me and I saw the two missing “buyers” happily demonstrating to me their newly purchased black T-shirts emblazoned with large “FBI” logos.  “You guys! Come on, I don’t want you to be late to this plane! Besides, you can buy these cheaper in the city…” 

Moments later, we boarded the United Airlines flight to LA.  Most of us felt very tired. Well, and we had every reason to feel so, as we had arrived from Tashkent in the early afternoon, after some 18 hours on the plane.  This flight meant another 5 hours in the air, flying from East to the West Coast.  Well, what can you do?  Sleep, as the wise men say.  The plane roared and finally took off.  Little did we know then as we were among the lucky ones – the world was heading towards 9/11…
 
We were shocked in the morning after we realized that something horrible had happened and how easily one of those planes could have been our own.  We realized that the whole world had just changed to a new era – and a new reality.  This reality has obliged countries around the world to increase security in every possible way.  Needless to say, our flight back home on the 16th was a nightmare – huge lines in LAX, nervous people talking on their mobile phones to relatives, empty looks and confused minds. 
 
 With the new reality came new rules.  Long security checks at airports, increased security measures at immigration, and of course, new identification systems.  Many IT minds realised that the increased interest in security solutions created opportunities for the IT business.  Some time before, in 1998 two young fellows from Moscow, Artem Yukhin and Andrei Klimov, graduates of the Moscow Bauman University, created and later patented a totally new computer-based image-recognition technology that was to conquer the American market of authentication security in just a few years .

They created the company A4Vision in 2000 from scratch, but using an aggressive marketing approach and a good deal of negotiations with venture capitalists, eventually managed to secure USD 30 million of investment.  While initially A4Vision technology was meant to be a part of robotic vision technology, after the world changed on 9/11 and countries had a need for making passports and visas more secure, they modified it to be solely facial recognition software.

Read more about Information Security market in Russia in my book. Buy it today at: www.russia.futuretext.com

“When in Kazan, Do As…” – Or, Think About Regional Outreach

Regional outreach is a good way to approach your important customers in rapidly developing Russian regions.  While Moscow may have been the summit of what you wish to accomplish in Russia, one shouldn’t neglect the opportunities existing in other parts of Russia.

I spent some time covering regional development for BISNIS and Foreign Commercial Service, and organised a few trips for US companies interested in making partnerships in the regions.  Everything is different in the regions.  People are different, nature is different and business is different. 

Among my best experiences that I ever had was my trip to Kazan, a city with a history spanning 1,000 years.  Kazan is the capital of Tatarstan, a large republic that has abundant natural wealth, growing infrastructure and a rapidly developing economy. 

Let me share how the idea was born.  While the Foreign Commercial Service concentrated its support to US small and medium businesses, we somewhat neglected large established companies that had worked in Russia for quite a while.  As a matter of fact, we did occasionally help these companies in other areas, like meetings with government officials, but since they had their own staff and sufficient funding for regional development we just did not enter that field together.  Besides, American Chamber of Commerce in Russia was very active in its regional outreach program.

Yet I thought that gathering a good business group of large ICT companies would be mutually beneficial for us.  The companies would feel our support in organisation of important meetings with regional government officials and businesses, while regional businesses will have a great opportunity to meet new people, gather ideas and strike new partnerships.

We received an overwhelming response, and we even had to limit the number of companies.  Harris, Sun Microsystems, Corning, Paradyne were among the companies in our delegation, most of which have been very interested in doing business in Tatarstan.

In our two days program we had four round table meetings with the Tatarstan government officials, among which many decision makers were present.  The presentations by the US companies at the local Chamber of Commerce gathered over 80 people from local industry.  As a result, some found new distributors, some cemented their ties with important corporate clients, and some got better understanding of how business in Tatarstan really works.

Both, the Tatarstan Ministry of Trade and Ministry of Communications were extremely helpful in organising this event.  In fact, the Ministries had very professional staff and they were extremely helpful in arranging the whole trip.  Farit Mansurovich Fazylzyanov, the current Minister of Communication of Tatarstan (Deputy Minister at the time) proved to be very forward leaning and offered his unlimited support to telecom and IT investors in Tatarstan.

Obviously, traveling to a new region with a delegation is beneficial, but it’s not hard to do on your own too.  Most of all, it requires planning and coordination of meetings in advance.   You may want to contact the Ministry of Communication; also it is very important to engage the Ministry of Trade and Foreign Economic Cooperation in that region, and the local Chamber of Commerce.  They can provide contacts for regional businesses in advance who might be interested in meeting with you.  You’ll want to talk to major corporate accounts, system integrators and distributors.  If you are a U.S. company, I also strongly recommend you to contact a BISNIS Representative, who might be able to help.

In case you are interested in Tatarstan, here are the contacts for that region:

1) Tatarstan Ministry of Trade and Foreign Economic Cooperation

4 Ostrovskogo Street
420111, Kazan, Republic of Tatarstan, Russia
Tel: 7-8432-92-04-55
Fax: 7-8432-92-16-45
E-mail: info@tatarmintorg.ru
www.tatarmintorg.ru
Contact: Dr. Flura N. Shaikhutdinova, Head of Foreign Investment Department

2) Tatarstan Ministry of Communications

8 Kremlevskaya Street
420111, Kazan, Republic of Tatarstan, Russia
Tel: 7-8432-64-34-94
Fax: 7-8432-64-51-42
E-mail: info@mcrt.ru
www.mcrt.ru
Contact: Mr. Farit Mansurovich Fazylzyanov, Minister

3) Tatarstan Chamber of Commerce and Industry

18 Pushkin Street
420111, Kazan, Republic of Tatarstan, Russia
Tel: 7-8432-64-62-07
Fax: 7-8432-36-09-66
E-mail: tpp@radiotelecom.ru
www.tpprt.ru
Contact: Dr. Shamil Ageev, Chairman of the Board

Important tips for regional outreach: make sure that you make yourself clear on transportation, interpretation and airport pick-up.  In our case, for example, the only bumper was that instead of a Mercedes bus that we hoped to see in the airport, we faced a good ol’ Russian bus that was not really impressive but eventually got us to the hotel.  Jokes and good Russian humour helped to get us through this abrupt reminder of Russian reality.  Most of the delegation members were local Russian representatives who knew the peculiarities of doing business in Russia.  You may want to contact the Chamber of Commerce in advance, as they can help you with your logistics.

If you are organising such a trip, make sure that you plan enough time for one-on-one meetings.  Meetings with officials are important, however, nothing is more efficient than face time with companies.  Leave open time on your schedule to add meetings as you meet people.  And of course, save time for a little tourism too!

Read more about Russian regions and how your company can benefit from it in Riding the Russian Technology Boom.

The book is available at: www.russia.futurtext.com