THE FLIGHT OF THE ‘ENTERPRISE’: how the Ukrainians has won their market share from SAP and Oracle, and taught the ‘Google Glass’ to see the main point
What would you say if your equipment were repaired not after its breakdown, but before? Yes, now the machine is working properly, but in the future, it is already out of order. When and what exactly will fail is monitored by sensors which analyze the ‘health’ of the equipment in question and prevent its disorder.
Alternatively, let’s take a metallurgical plant. In a difficult situation, a foreman in a noisy room is trying to be heard by his boss. It is a different thing when the boss can see the problem the same moment with the eyes of his subordinate. More precisely, with the help of ‘Google Glass’ on the head of an employee.
This is only part of the technologies that ‘IT-Enterprise’ company of Oleg Shcherbatenko is doing. The company is among the pioneers in the Ukrainian high-tech market. Shcherbatenko and his associates began working at the first enterprise control programs at the time when each of these words was a neologism – in the mid-1980s.
Your own ocean
How does the reader of this article imagine Soviet computers? Huge silver cabinets and Soviet engineers in white coats ‘dancing around them’. “How are the devices there?” – “Fifteen!” – “What do you mean by fifteen?” – “And what do you mean by devices?” A perpetual dialogue is heard. There plays the melody from the movie ‘Through thorns to the stars’, a close-up – and you see a cabinet with a disc spinning in it. The absence of obscene words scratched on the cabinet indicates that this is the computer, an object of worship of all tech guys.
Yes, indeed, this picture is not far from reality. Computation halls with huge (especially in comparison with modern computers) Mainframe system cabinets worked as separate enterprises and provided computation services to Soviet industrial facilities. In the 1980s, companies sent the collected data files to common-use computer centers, where people in white coats prepared analytics for the industry. Having received this, the enterprises calculated their work for the next month.
‘IT-ENTERPRISE’ HAS TAKEN THE NICHE OF LARGE ENTERPRISES AUTOMATION
A design bureau, where Oleg Shcherbatenko was working after graduation from the Kyiv Polytechnic Institute, was engaged in the development of such programs. “In the 1990s I defended my thesis, ‘shoveled’ a huge number of foreign sources. Even then, world science was actively sharing information. To learn innovative experience was important then and is important today. Year after year, we are developing, looking at what is happening in the world, what approaches are used,” he recalls how it all began.
The situation in the industry has changed with the advent of personal computers in the early 1990s. Desktop computers, winning in size and performance, quickly became an indispensable element of any office. In addition, the technical re-equipment of enterprises was driven by a changed paradigm of the relations in the market. Post-Soviet enterprises gradually moved from mass production to work on specific orders.
Mass production, by virtue of its stability, did not require operational analytics, but contracts on order from different customers and with different parameters needed quick reports. “Computers were put not only in offices but also in manufacturing and warehouses, a network was formed. Engineers, technologists, economists, accountants, and managers were connected in one system. And, of course, then there was the first revolution. This revolution was in the approaches,” Shcherbatenko recalls.
“A lot of IT-companies were engaged in trade and accounting, and we were engaged in production”
The development team did not start from scratch, and this soon became its biggest advantage. For example, after the collapse of the Soviet Union, most of the techies went to trade in the market places, but Shcherbatenko and the team decided to continue their work. They had everything for a successful reboot: experience in the system design bureau and the client base of large companies with which they cooperated in the late 1990s.
It was the choice of the niche, which was a modernization of large industrial manufacturers that became a strategic factor for the success of the Shcherbatenko team. While the majority of business software developers focused on fast-growing trade enterprises, innovators from KPI were surfing their own ‘blue’ ocean. “A lot of IT-companies were engaged in trade and accounting, and we were engaged in production. Therefore, the majority looked at us as if we were nuts,” Shcherbatenko says.
The rumors about the death of the industry of post-Soviet Ukraine turned out to be somewhat exaggerated. Many large plans had stopped operations. Only the few that were truly solvent remained working: some of them had already been trading with foreign countries; some had received long but profitable government contracts. It became increasingly difficult to work with no business processes automation.
The 45th experimental mechanical plant in Vinnitsa, a leading manufacturer of transportation, refueling, pumping and storage of petroleum products was one of the first customers to implements an automatic control system. The plant was solvent even during the crisis of the 1990s. “Our target was not to sell our program to 1000 kiosks. One customer with 1000 workstations was the priority. In this case, the cost of the project is much higher, and the project is more interesting,” Oleg Shcherbatenko figured out.
Permanent crises were changing the relief of the Ukrainian market almost every month. The average life span of similar companies barely reached several years. The main problem was the following: if you had one large customer, you were taking a risk to die with this enterprise or to merge with it and become an IT department. Oleg Shcherbatenko had a clear understanding: the business should be diversified. He moved away from a narrow-purpose system and created a universal system adaptable to any customer requirements.
By that time, the Ukrainian team had already a competition. The Russian companies, the developers of ‘Parus’, ‘Galaktika’, ‘1C’, were active at the market, and emissaries from the world giants SAP and Oracle came to Kyiv from the West. “We used to install the systems of our competitors and put them to pieces, studied algorithms,” Shcherbatenko says. “They were good, but they were lacking the knowledge of the local market we had. We have learned to think like our customers, understand their problems and offer the product they need. Improving the quality of products, you conquer the market.”
“WE HAVE LEARNED TO THINK AS OUR CUSTOMERS”
This allowed ‘IT-Enterprise’ to implement more than 300 large projects. For example, the system of ‘smart production’ – ‘SmartFactory’ – was launched at the Ukrainian industrial giants: ‘INTERPAIP’, ‘Zorya’ plant – ‘Mashproject’, and at ‘FED’, an innovative enterprise in Kharkov, which produced unique components for the aerospace industry. The ‘IT-Enterprise’ system regulates all aspects of enterprise operations, from production to HR.
Implementation of the failure forecast system at the ‘Nizhne-Dneprovsk Pipe-rolling Plant’ of the ‘INTERPAIP’ holding had allowed decreasing expenditures on the scheduled repairs by $2 per 1 ton of products – millions of savings in scale production volume.
HAVING STRENGTHENED ITS POSITION IN ITS OWN MARKET, THE COMPANY BEGAN TO ENTER ADJACENT MARKETS
The project with ‘FED Plant’ in Kharkov, a business customer of ‘IT-Enterprise’ since 2011 has become even more revealing. During the last five years, ‘FED Plant’ has been actively developing; the annual turnover growth has reached 30–70%. The plant is now operating in three shifts. The implementation of new technologies has made this possible. The new technologies allowed solving the problems with the deadlines of orders’ fulfilment and the decreased products’ quality. At present, all processes at the company are automated; and all key indicators are monitored in real time. The system is tuned to find and optimize the bottlenecks. As a result, the production cycle has decreased by 25%; the last year’s turnover has amounted to 1.5 billion hryvnias, and the company has saved about $ 400,000 of credit funds to purchase new equipment. The effect of timely deliveries is even greater – FED managed to attract orders from world aircraft manufacturers for $ 90 mln. “The number of orders for new types of products is constantly growing. Without a production management system (that is, in manual mode), we simply would not be able to plan so many operations,” says Dmitry Shigalevsky, ‘FED’ technical director.
A customer’s recommendations and results are the best advertising for a large b2b business. Word of mouth helped to attract new projects to ‘IT-Enterprise’ and withstand the 2009 crisis. According to Shcherbatenko, the crisis had taught business to save money and time. It forced many (businesses) to automate their processes as much as possible. “When in 2009 the companies switched to a two-day working week, business seriously started to consider the implementation of control systems. People used to think, we had a margin of 20% margin, now it reduced to 3%. What should be done to survive? We need a system! ” — the CEO of the Ukrainian company translates the thoughts of his clients.
As a result, during the crisis, the demand for ‘IT-Enterprise’ products has tripled. The crisis not only had increased the number of orders but also had cleared out the market of competitors. When the waves of turbulence subsided, it turned out that there were exactly 15 companies less in the market.
According to IDC research, in 2010 ‘IT-Enterprise’ became the second in the market of ERP-systems in Ukraine, occupying 15.7% and passing ahead only SAP with a share of 43.4%. The remaining players were content with little shares – 1C (13.9%), Oracle (11.7%) and Microsoft (6.1%).
Having strengthened its position in ITS OWN the market, the company began to enter adjacent markets. In 2011, the first release of the ‘SmartTender.biz’ platform for tender purchases was issued. By 2018, this ‘IT-Enterprise’ product has become the largest online trading platform for electronic commerce in Ukraine. More than 90,000 companies operate at the site, and the annual turnover of trades on ‘SmartTender’ is measured in hundreds of billions of hryvnias. ‘SmartTender.biz’ is also the official tender platform for the ProZorro electronic public procurement system.
Last year, the company released the ‘MASTER’ accounting program. The premiere of the Ukrainian product was the ‘IT-Enterprise’s response to the ban on a similar Russian – ‘1C: Accounting’. The market for accounting products is very complicated. According to Oleg Shcherbatenko, all commercial companies that were using ‘1C’ were in no hurry to part with the old habits: “We were optimistic that after the ban on ‘1C’, everyone would urgently start looking for and introduce Ukrainian products, but this did not happen. We are fighting for the market with our quality. ”
Apparently, he is succeeding: now the ‘MASTER’ solutions have over 1000 users.
Overtaking the world
It is good to follow the trends. It is much better to stay ahead. This is approximately the way to describe the current work of the company’s team. This slogan is one of two motivation components in ‘IT-Enterprise’. “Money, certainly, is the first motivator: IT specialists are now very expensive. A value-based motivation is the second one. If you have made a product that is ahead of the whole world, this is a very strong motivation,” says Oleg Shcherbatenko.
In 2018, the Ukrainians became partners of Google in the development of production solutions on the base of the ‘Google Glass Enterprise Edition headset’ among just 30 other companies in the world. In Kyiv, it took little time to find an application of innovation of Sergey Brin, their compatriot. Now, this technology helps to solve problems in the plant workshops of ‘FED’.
“Imagine, you see a problem; you fixed it with Google Glass. At the same time, your senior manager sees the problem. If necessary, he begins to direct your actions through ‘Google Glass’ — Oleg Shcherbatenko explains how it works. “Nowadays, the world is changing so that you do not know what will happen tomorrow. We must stay ahead of the trends.”
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