G20 YES: Russian entrepreneurship with Lean4systems Group

Modern Russia spoke with several young Russian entrepreneurs who are driving the innovation and modernization of the Russian economy at the G20 Young Entrepreneur Summit in Nice, France.  

Below is an interview with Maxim Gvozdev, chief executive officer of Lean4systems Group, an information systems company that works with companies in the U.S., Western and Eastern Europe to develop, support and upgrade corporate information systems as well as develop custom software.  

Tell us about your company.  What inspired you to start your own business and how do you view the role of Russian entrepreneurship?

I founded Lean4systems Group in 2002 when I was 32 years old, but I have wanted to start my own business since the start of Perestroika, which brought with it the opportunity to create private enterprises in Russia.  My desire to start a company is driven by the belief that when things are not “perfect” something can be done to make it better.  I believe that entrepreneurship is the act of taking full responsibility for making the world around you better.  In my mind, there is no other way.  

After having been a top manager – CFO, sales and CEO – at a number of mid-sized Russian companies, it was not until 2002 that I was ready to start my own enterprise and take on the responsibility of doing this, not only for my family, but for all of the people who work for my business.  I finally had the team, capital, market understanding and professional knowledge for starting a corporate IT company. 

Today, Lean4systems is a group of companies in Russia, the U.S. and in Europe, with more than 30 people on staff, a good portfolio of customers and great potential for future growth.  The name of the company unites the words “lean” and “information systems.” This name reflects our desire to become the Toyota in the world of information technology, as “lean manufacturing” is the name for the Toyota production system.  This name symbolizes our commitment to provide our clients with the value of modern information systems in the fastest and most reliable way.

What is the information systems market like in Russia?  What are the prospects for growth in this area in Russia?

I can’t speak for the whole IT market in Russia. Lean4systems Group operates only in a rather moderate segment of it: ERP (enterprise resource planning) and accounting solutions implementation and support on Microsoft and local 1C platforms for SMEs.  From my point of view, the market is in the process of transformation from initial to active growth stage. It can be seen from different points of view. 

• Variations in technology awareness and readiness to invest:   In the SME market, IT awareness is still rather low with only the simplest technologies – email, internet, simple accounting and warehouse management – being used today.  The next level of technologies -- electronic documents exchange, common IT resources, virtualization and cloud computing, ERP, mobile staff -- are not recognized as opportunities that can make business more effective.  This kind of situation sets us up to realize huge future growth: as soon as early adopters start to win business systematically because of their technology excellence, they will be followed by the mass of other businesses.

• Lack of educated staff availability:  This relates more to service providers’ staff, than to users, because modern IT is developed so that the requirements for users are trivial.  Today there is a lack of qualified IT personnel in Russia, and payroll requirements in Moscow often exceed what is required for personnel in eastern European countries. Lack of qualified personnel will be one of the main limiting factors for fast market growth in corporate IT in the near future, but I believe it can be somewhat neutralized by more effective processes.

• Transition to teamwork:  Russia was able to create very complex technological solutions that are still required in high-tech markets – arms systems are one example. Russian people are very smart but the Russian tradition in IT from Soviet times is not a tradition of managed teamwork, but a tradition of individual “breakthroughs.” That model is not effective in the corporate IT market where scalable and effective processes must involve different people: consultants, programmers, managers and users. In Russia, this side of the IT business is still underestimated and has great potential for growth.  

Why should someone invest in your company?

My company will be ready for direct investment in the next one to two years.  When my plans are realized, Lean4systems Group will be ready for great growth with the best processes, delivery network and staff at market.  The big picture is that with 140 million people in a country with rich resources and a high level of consumption and technology understanding, the potential for growth in the Russian IT market is huge.  

As a young entrepreneur, how have you experienced the modernization of the Russian economy?

As I see it, the Russian economy has two parts. The larger one includes major infrastructure companies with or without state share, mostly operating in natural resources mining, transportation and energy. The smaller but very significant part is SMEs that create value for both the big sector of the economy and for the general population.

Much of the modernization efforts from the state side are directed at the big sector and this makes sense.  For SMEs the owner is usually very close to operations management and owners always do their best to move companies to the peak of competition. Speaking about Lean4systems, we are not big, but we have even international giants like Microsoft among our customers.  That means that from a professional qualification point of view we are operating at an international level.

It is a very different picture in the big sector.   Most of these enterprises started during Soviet times and are still in transformation from a socialist to capitalist management approach. In developed countries the system of goals definition and effectiveness control for infrastructure companies has been perfected for ages and here in Russia we have started on this track from total state planning and control only 20 years ago. That’s why I think modernization is mostly the process of development and the realization of mechanisms for goals definition and effectiveness control for big infrastructure companies and state services. 

From my point of view, here are some changes in the modernization of the economy that have affected Russian entrepreneurship: 

• It has become simpler to create a new company. The procedure is clear, simple and cheap.

• A simplified taxation system and simplified accounting rules were created for small businesses. Small business taxation in Russia is lower compared to Europe or the U.S. 

• The system of state purchases is becoming clearer. My company does not work with government agencies as a supplier, but I know entrepreneurs from the SME sector who successfully participate in tenders for government agencies according to the new rules.

• Entrepreneurs have less fear of criminal prosecution. Criminal law has become more liberal for entrepreneurs.

• We hear less about corporate raids lately. I believe that this is the result of real and radical state measures against corporate raids.

• Interest for loans has decreased. Every week I receive one or two proposals for bank loans – this is definitely a new situation.  

What do you see as the next steps for continued modernization of the Russian economy?

Based on my understanding of economic modernization goals, here are the three next steps as I see them: 

• Privatization and the creation of independent boards of directors for major infrastructure companies. These boards should include representatives of different institutions that will ensure development and control of goals and effectiveness criteria for the company.  

• An increase in the independence of the judicial system.  This will help address the struggle against corruption in the courts.  

• Continue a more active policy of support for new and growing companies to drive entrepreneurship.