Andrey Morozov

Russian Programmers the Best in the World

Profile magazine and CNews.ru: 2002: IT market in Russia

Russian telecom market saw a milestone event in December 2002. The first IN based prepaid system was put to operation. CBOSS, developer of the system, is the Russian software company. The event focuses attention on outstanding achievements of Russian developers of intellectual platforms and impeccable qualification of Russian programmers. Andrey Morozov, CBOSS President, answered the questions from CNews.ru.

Cnews.ru: What changes on IT market in Russia in 2002 you consider crucial?

Andrey Morozov: I believe that financial growth became the major enabler for the whole Russian market, IT and telecom in particular. When there is money on the market, is grows prolifically, otherwise it is a mere survival. That’s natural.

However, these changes affected the market situation only. It would be false to assume that there has been some technological breakthrough that underlies development of the Russian IT market. Or that we suddenly began to work far more effectively than in the West. Both assumptions are not true. In fact, we see that situation on the Russian market is better than on the Western [market]. There is more money on the market, it became more interesting, more ready to consume. There should be no reason for illusions – that does not indicate any increase in efficiency that is worth mentioning.

Cnews.ru: You have been repeatedly stressing the advantages of Russian software products for telecoms over Western solutions. Could you specify the areas where advantages are seen more clearly? Is it something worth mentioning at all?

Andrey Morozov: As a rule, we see that Russian products provide complex automation and have more functionalities. Quality of technical support is better. Cost is more attractive. Implementation is faster. There are three factors that underlie these advantages.

First — we are able (as acknowledged worldwide) to work more intensively and effectively compared with the Western countries. Outstanding achievements in science and industry often became the source of admiration for the whole world. Starting from the Russian fleet built by Peter The Great to launching the first Earth satellite and manned spaceflight, to the first nuclear power station and cyclotron.

Second — the high level of our education. We used to have the best system of public education in the world. Now we reap the best specialists. Broad-minded, with rich educational background, they are capable to solve tasks the Western colleagues, with their narrow specialization, will never approach.

And third is unmatched creativity. The wit, mentioned years ago by Russian military leader A. Souvorov, and creative approach are integral characteristics of Russian specialists.

It is the combination of these factors that make our programmers the best in the world. With modern management and access to the best development tools and technologies, supported by adequate financing they create systems that compete with products of the largest brand names. 

Competition of Russian and Western IT providers have a number of peculiarities and reminds me of a short-distance road cycling. Indeed, it is the pursuer, who follows the leader all the way, wins the race. Following the leader in the wake is easier, air resistance is 30% less. This saves the pursuer power for the final spurt. In order to go the second, the cyclists often wait, and wait long, testing self-control, for someone to make the move and break first.

In the USSR, IT was mainly used in military and related spheres. Business applications of IT until recently found no demand. However, when it appeared, Western technologies were the first on our market. They had certain experience of business application, sometimes not quite impeccable, however.

At the same time, emerging Russian information technologies for business took in the global experience that yielded numerous technological advantages. Specifically, we started with the most advanced, brand-new development tools, modern technologies and promising architecture decisions.  And, this, naturally, affected the output.

Cnews.ru: There are a number of shortcomings, characteristic to Russian solutions. What is their nature?

Andrey Morozov: Among shortcomings of Russian solutions, mainly on external markets, one should mention a traditional biased approach of Western companies, managers and founders to such solutions. Historically, Russian companies exhibit poor marketing efforts, lack branding and consequently the presence of their solutions on the market is miniscule. Russian companies spend much effort on development of the product and less on product marketing.

It is the other way round in the West. Marketing and penetration efforts take the lion’s share of investments. Due to this, practices of Russian companies are beyond understanding there. This is the root of prejudice and biased approach to Russian technologies.

Besides, primitive, amateur approach to IT development is still a regular practice in Russia. Speaking of the early stage, it is quite natural. For example, young graduators from Stanford Bill Hewlett and David Packard began their company in a garage, where they made an audio-signal generator. On the other hand, it is important how long the production stays primitive. Unfortunately, providers in Russia sometimes fail to realize the requirement of industrial phase in production. This compromises the whole industry.

Cnews.ru: Technological advantages should inevitable affect market positions. What is the share of Russian companies on the market of IT for telecoms in this country?

Andrey Morozov: Speaking of products with CBOSS trademark, we replaced other solutions many times. Focusing on all products and Western installations in our segment, there were dozens of migrations to CBOSS solutions. According to independent research, our products have about 50 percent of Russian market.

It is interesting, that there was not s single migration from CBOSS. Probably, this fact accentuates technological advantages of Russian solutions and a positive effect on their market positions.

Cnews.ru: There is a growing amount of press coverage devoted to reviving production of hardware in Russia. Do you think there is a possible niche for Russian hardware manufacturers on the telecom equipment market? And is there a chance that they will be able, some time, to capture that niche?

Andrey Morozov: We do not busy ourselves inventing a bicycle. As IT providers we do not manufacture the equipment we plan to use. After all what does modern equipment consist of? Besides hardware components, there is always a software layer. The more complex is the equipment, the more important becomes the software. Look at the cars. The concept of the chip tuning the engine needs no introduction. Suffice it to say turbo boost pressure is controlled in software on the engine. Change some bits in the code, and bingo, you've got more boost. You see that already today a car, made of metal and, possibly, plastic, has the software capable to change performance parameters considerably.

Being far from diminishing efforts of those who start from manufacturing equipment for their solutions, we are confident that once hardware is available from professionals, why do it again? Ok, those professional manufacturers are from the West. So what? Let’s look at the cost of the equipment. There are three distinct constituents. First, the cost of hardware itself, formed as a combination of manufacturing costs. Then comes intellectual property constituent and, finally, marketing and finance constituent. Bear in mind that the software cost includes support and consulting services, while marketing constituent contains cost of branding.

The cost of “physical layer”, that is hardware itself, is miniscule compared to the two giant ones: intellectual and marketing layers. That is why when a provider creates added value, it is the most expensive layer that yields more profit.

Why go natural economy? We do our business differently. We take hardware itself, part of intellectual property and branding from our Western partners. However, the most part of added value of intellectual layer we create ourselves. Thus, added value we created in the equipment is overwhelming.

Cnews.ru: Intellectual property. What is your strategy?

Andrey Morozov: Only novelty. We create our technologies from scratch. Naturally, we do not steal. Trademarks and intellectual property rights are duly registered.

Cnews.ru: Is it possible to steal or hack your solutions?

Andrey Morozov: You can break in or hack any system, everything. As the proverb says, “When there is a wish, there is a way.” However, nothing has been stolen from us, and to the best of my knowledge, even no attempts.

On the one hand, when creating intellectual property we protected our technologies from unauthorized use from the very start.

On the other hand, the technologies we speak about are quite complex. One would require support and professional service to operate them. Consider impossible: our system appears on the illegal software market and someone buys it. What’s next? The costs of effective operation of such system and purchased from provider are very different. And the difference is enough to finance a 100% legal purchase. Professional service makes operation of complex systems cost-effective. There is no way to save a penny on support.

Look, there are good sport cars, but nobody, or almost nobody steals them. Why? Exclusive, finely tuned cars require top-qualification servicing. This service is available, however from one or two companies with narrow specialization. Of course, they know their customers in person.  Consider such car is stolen. What next? Who will do the servicing? All you can do is watch it stand in the garage.

Cnews.ru: It's common knowledge that a demand for IT is characteristic to highly competitive markets. They also say, that there is no competition on PSTN market. What do you think?

Andrey Morozov: Exactly. Our experience with PSTN operators shows that they are not free to make their own decisions.

Well, they compete, of course, in a way, on the market of cellular services, for example. However, I’ve got the feeling that they have no freedom of choice, at least as far as information technologies are concerned. Suppose you offer such operator a very interesting solution, the solution that objectively meets its requirements. However, due to some administrative or organizational reasons the offer is rejected. It turns out there is no choice for them, and we cannot regard them as operators who are capable to take up competition. They are positioned as if outside business layer. They do not try to offer a better service or tariff, or provide attractive customer care. When no instruments or mechanisms, characteristic to competition environment of telecom service operators, are used, it is hardly possible to consider their competitive capabilities at all. 

A commercial enterprise has a well-articulated business aim: it is all about profit, market share, capitalization, cost of shares and being attractive for investors. Such enterprise is free, to a certain extent, to choose its way to business goals. That’s what competition is about. Some prefer equipment from Hewlett-Packard, others from Sun Microsystems. It’s the business results that will show who is more effective, whose instruments and tools are better, who was more pro-active and precise in assessing prospects.

It is important that we are not saying that IT policy of a telecom enterprise, as a member of a holding, should be independent from everybody and everything. That’s nonsense, directly opposite to no-choice situation. The optimal balance should be somewhere in the middle.

Cnews.ru: There are a plethora of opinions about prospects of IP-telephony in Russia. What is CBOSS approach to this technology?

Andrey Morozov: From the very beginning, the principle of convergence has been in the focus of our technologies. It is the basic principle that underlies all our development. CBOSS stands for Convergent Business Operation Support System. Convergence is the ability to process heterogeneous data uniformly. In particular, that means that all technologies that we develop target IP, including VoIP, as well as voice traffic.

Cnews.ru: Seventh IP telephony conference elaborated on the IP traffic growth issues. Specifically, that in Russia the volume of IP traffic will very soon reach the point when incumbent telecoms will prefer to confine to a very specific tasks, following the example of Ukraine. What is your opinion? Do you think it is important to concentrate on cooperation with the state bodies, as many companies claim, for example on the legislation on telecommunications?

Andrey Morozov: As we are not an operator, we do not take part in these debates. We are a provider of convergent solutions that work with any traffic, and, after all, it is all the same for us. However, we also think that any attempts to restrict technology from the legislation point of view, are, to put it mildly, very far from progress.

Restrictions on hazardous technologies that affect human health or deteriorate ecological situation are quite reasonable and cause no objections. However, attempts to impose legislation restrictions on harmless technologies in order to protect some other technologies do not look effective and, from the economic point of view, are weird. And, naturally, beyond the interests of our industry.

It is natural, when the government, using available regulation mechanisms protects the state, or, what is better, national interests. But, when old, outdating technologies are protected at the state level, that’s fairly reasonable. I doubt that it would be better for national interests to have voice traffic larger than IP. If not, then, obviously legislation should have nothing to do with it.

Cnews.ru: Is there a deficit of IT specialists in Russia? Is the brain drain problem really bad and aggravated by poor schooling and higher education?

Andrey Morozov: We are familiar with the human assets issue. Some analysts say there is a 30% HR deficit on the Russian IT market. However, I would not link it solely to a brain drain problem or poor schooling. You outlined two options. Indeed, the issue has more aspects.

Today, due to a favorable market, we witness another phenomenon. Drained brains return home, finding inadequate demand for their labor in the West. And they come to us. We gladly employ these specialists. There are dozens of them already. However there are even more programmers who stayed at home working offshore, selling their labor and brains to the West.

This issue has something to do with mentality, besides finance. It is not only about the money, vitally important, of course, but also about an opportunity to realize one’s potential. Does a person enjoy demand and appreciation of his or her capabilities? Does the person have tasks aligned to his or her potential? Are they interesting and encourage creativity? Is his manager capable to use human resources wisely? Are the tasks rewarding and with impressive scale? Are person’s abilities duly acknowledged? Are career horizons wide enough? Our experience shows that if we consider all these factors together, we are able to provide a competitive job environment here, in Russia.

Today such people work in CBOSS, Russian developer. In the result we sell intellectual property, rather than labor. We sell the right to use our technologies abroad. We do not sell irreplaceable natural resources. It is neither oil, nor coal. Neither gas nor wood. It is neither brains nor labor. It is the right to use results of labor. On a physical level, it is quite intangible. But for this intangible product we get paid in hard currency, we pay taxes, fees and salary, we capitalize our intellectual property. From the point of view of national interests, we carry out a creative and noble mission. 

We have to admit, however, that national education level dropped significantly since the USSR era. This is a nation-wide tragedy. Obviously it’s about a social demand for education and science, or lack of such. In the USSR era, it was the military-industrial complex that formed such demand. Today, unfortunately, we see no good, large customer. 

Why unfortunately? No customer – no offer. Today, IT industry, namely telecom could take the role of a social customer to create demand for science and education. For example, our company tries to contribute to the level of higher education in this country.

CBOSS University Support program envisages special courses and seminars in modern IT disciplines for students of leading Moscow universities. Last school year this program attracted 300 students. The curriculum was developed by the specialists of our company in collaboration with Moscow institutions of higher education (including MIEM, MIREA, MIET, MGTU, MGUL, RGGU, GUU, MTUSI). In 2002-2003 such courses are held for over 1000 students.

We created 250 vacancies specifically to address the needs of summer internship program. CBOSS encourages career aspirations in students through exposure to real-life projects at a large IT enterprise.

We open a chair at Moscow Engineer Physical Institute [MIFI]. Recently we held a mathematics contest for university students. Received a letter of acknowledgement from Moscow mathematical education center. The event gathered a lot of participants, with 36 students in the final. The contest turned out very popular and we plan to work in this direction to encourage interest of younger generation to science and education. 

As a hi-tech company that works with intellectual property, we invest heavily in the system of education. Both on national and corporate level. We received a license for further professional education. We have a number of classes, fully equipped with modern computers. When reconstruction works are over, professional education program will receive new facilities and more resources.

It is worth mentioning that we are concluding a contract with Sun Microsystems. Sun plans to use our infrastructure to teach its technologies and solutions.

Cnews.ru: What are the trends, in your opinion, for IT market in 2003?

Andrey Morozov: Favorable economic situation will attract more investments in the industry, including IT. We expect market to rise. Growing investments, similarly to radioactive background, yield more changes.  However not all changes will be for the better. When there is a lot of money on the market, investments, sometimes, become chaotic.

I remember am episode that is worth mentioning in this context. It dates back to the years of high-investment environment. In the end of 1997 or in the very beginning of 1998 we ran benchmark tests to compare equipment of different manufacturers. Being suspicious to a universal benchmark, we used an application system. Upon our request, Hewlett-Packard granted us access to its T-500 server, owned by some bank. The server, installed at the datacenter of the bank was in our exclusive disposal, doing nothing but our tasks. It was a 4-CPU RISC server of considerable dimensions and worth a solid investment too. The tests we were running emulated a serious workload. While we were waiting for the results we had a dialog with the director of the datacenter who turned to be around and asked us about our plans.

— We are testing your equipment, - was the reply.

— Mmm… testing? It is in order… works OK.

— Sure it works. This is a benchmark, performance testing.

— A benchmark?

— Exactly. We are running a special program, benchmarking computer performance.

At that moment the head of datacenter puts his killer-question: «Does it really matter how long the computer thinks over a task?» We were short of breath for a moment…

This is an example of overkilling investments that exceed the required level of financing. Such situation was possible in the environment with high level of investments. I have no information what happened to the bank after the 1998 crisis, but there are reasons to expect that it may have encountered some problems.

Cnews.ru: Do you think the situation will remain stable in 2003?

Andrey Morozov: Most probably yes. However it depends, primarily, on the situation on the energy resources market. Nothing to be proud of, on the one hand. On the other hand, there will be those who will manage to establish a structural and technological reserve for further stable development and well-being, and those who will fail to make it.

I would like to emphasize again that the customer who purchases an efficient solution and its provider will be among the winners.

Cnews.ru: Thank you for your answers.