Foreign IT companies may have to yield some ground in Russia due to the import substitution policy the government has proclaimed in the high-tech sector. So far, they have remained the largest market players, investing in training Russian IT specialists, among other things. Pavel Gontarev, the deputy director of SAP CIS, talks about his company’s vision of its future in the Russian market in an interview with Sputnik.
The Ministry of Communications says that 1 million skilled IT professionals are needed to ensure the Russian market’s independence. Recently, SAP conducted a study of the personnel potential in Russia and some other CIS countries. Is this figure realistic?
Pavel Gontarev: The entire industry, including employers, higher learning institutions and the Ministry of Communications, is committed to improving the personnel situation. Recently, our colleagues from the Ministry succeeded in increasing the number of IT students, which is very important. As for the figure, we all need to work hard to make it a reality.
What does SAP do in Russia to improve the quality of training and the number of IT professionals?
Pavel Gontarev: We work in several areas. We have specific departments at dozens of higher educational institutions that provide future IT specialists with basic SAP knowledge. Perhaps graduate schools cannot and should not train specialists for a particular vendor. Therefore, our university departments follow the right approach, which delivers the best results. On top of this, we have a rather strong training center, which trains consultants to specialize in specific areas. We have trained over 100,000 employees over the last seven to eight years.
Most major companies that invest in Russian specialists are foreign players. On the other hand, we constantly hear about the import substitution programs and limiting the presence of foreign vendors in Russia’s public sector. Aren’t you playing into the hands of those who seek to reduce your market share?
Pavel Gontarev: We believe that the initiatives to shut off the market and to support domestic producers are different in nature. We support the idea that Russia must become more technologically advanced and move from the raw materials sectors into more intellectual ones. In this sense, it is logical to promote the IT industry in Russia. We support and are actively involved in this, including through joint projects in Skolkovo, the Foundation for Promoting Internet Initiatives and other similar institutions. On the other hand, we consider ourselves an infrastructure vendor. We provide a platform, and the domestic players can use this platform to build their solutions. When we came to the Russian market, local businesses had a very vague idea of what the ERP is. Currently, SAP in Russia employs about 1,500 people, and, if you count all of the SAP specialists in Russia, then this number will be about 40,000 specialists – all Russian citizens performing high-tech jobs at Russian companies.
What if you start losing the auctions because of these populist sentiments?
Pavel Gontarev: We are aware of it, and we think of it as rain. It’s raining now and it will always rain, and there’s nothing that you can do about it. However, we realize that our customers have a clear understanding of what they need and what they are willing to pay for. In turn, the state insists that it has no plans to introduce any restrictive measures.
Is there a real market alternative to your company?
Pavel Gontarev: I’d say that the SAP has no direct competitors in the Russian market. Of course, there is competition in some industries and there are product niches. All software is replaceable. After all, a customer can develop a system for its own use from scratch. Whether it’s an effective or economically justified approach is beyond the point of our discussion. Finding a replacement for a business application always depends on individual circumstances. Each specific customer in each specific project has specific issues and requirements in terms of functionality, scalability, security, user friendly interface and many other variables.
Competition in the business application industry primarily concerns a competition of ideas. What else can we offer the customer, and how can we streamline his processes? What are the customer’s inefficiencies compared with those of competitors? Where does the customer excel when compared with the others and why? What technologies can give the customer an edge? These are the typical questions that SAP experts ask themselves. Our company gets its reputation from providing answers to these questions based on our expertise and knowledge. If we’re speaking about trivial things like automating the bookkeeping, document management or payroll processes, there are other solutions available on the market. If these meet the customers’ needs in terms of functionality, scalability and security, customers will always make their choice based on price. We are certainly not the cheapest provider out there. I must say that the entire IT market is aware of this.
In this sense, we are very interested in the Ministry of Communications’ initiatives to create a Russian software registry and show preferences for the software listed in this registry. Frankly, it doesn’t clear up who will be the judge to decide the degree of “similarity” of different products. I’d very much like this body not to become someone's lobbying tool.
Are you expecting your business in Russia to slow down in connection with the political situation? Does your business model incorporate such risks?
Pavel Gontarev: Of course, the risks are there. They are associated both with various initiatives coming from a variety of sources, and the reaction to these initiatives on the part of the customers. Take, for example, a state-owned company whose IT director needs to carry out a business project. On the one hand, everyone is telling him that he should use domestic products. On the other hand, as a professional, he realizes that suitable domestic software is not available. That is, if he opts for a foreign-made solution, he can get punished. If he chooses a domestic design, his project could fail, meaning that he can also get punished. Eventually, 8 out of 10 project managers will decide to do nothing at all. This is very dangerous. Not only for us, but for the entire innovation-based industry.
On the other hand, this situation offers opportunities as well. If the state or state-owned companies really focus on innovation, we are even willing to bear additional costs, be it taxes, or anything else, for the sake of seeing the sector grow in general. If Russia comes up with initiatives to develop products targeted at the global market, we will be willing to realize them together with Russian players. It’s important not to recreate already-existing products and limit the development time to several years. Otherwise, by the time a solution is ready, it will no longer be needed. Innovative applications must be developed.
What areas can such products cover?
Pavel Gontarev: Primarily the ones with high domestic demand and ones where we enjoy the necessary expertise. For example, Russia has many oil and gas and mining companies; therefore, the digital field software and other apps to automate the production process could be developed in partnership with local players and be in demand in other markets. Railroads may be another example, as Russia has a developed railroad network. Our expertise as well as that of our Russian partners be used to develop a high-demand product for railroad routing, with cost optimization and so on.
Do you see any improvements in training Russian specialists?
Pavel Gontarev: Positive dynamics certainly exist, thanks to the efforts of the state and private companies. However, our research revealed a worrisome trend whereby students begin to work already during the second year of their studies and only choose the profession of a programmer or a system administrator.
What’s wrong with that?
Pavel Gontarev: The problem is that they often put a cap on their professional development, as after graduation they could qualify for much more prestigious and better-paying jobs, like that of an IT security engineer, business applications and industry solutions consultant, business architect or IT entrepreneur. A bearded programmer or a system administrator wearing a sweater is clearly a simplistic approach to the IT industry. One can hardly expect to achieve any innovations while using such personnel. I’m in no way downplaying the importance of these professions, though.
How can this problem be resolved?
Pavel Gontarev: Primarily through educational programs; as it turns out, many students are not aware of the prospects qualified IT professionals have. I also include high school educational programs to create a positive image of this profession. The second stage involves career guidance at higher learning institutions. Again, many students are simply not aware of the markets, such as consulting, systems integration or mobile applications. Major IT companies, including SAP, have an important role to play here. We’ve been working in Russia since 1999, and we have certified over 10,000 consultants and trained a total of 126,000 employees over that time, which is not too bad.