Andrey Filatov: “Digitalization is a survival tool”

The director of SAP for our country and the CIS spoke about how the digital transformation of a business in a matter of weeks turned from a competitive advantage into a tool for survival and a guarantee of further prosperity

“We live in the era of the strongest trend that is rapidly and very effectively changing the global picture of the world.” With this phrase, in which everyone can now easily guess the coronavirus under the “strongest trend”, our conversation began with Andrey Filatov, CEO of SAP in our country and the CIS. We still had time to meet in person, before the introduction of the home regime in Moscow, but we preferred not to shake hands and talked at a decent distance from each other. The main topic of the interview was digitalization in the face of a changing world – why right now it has become such a “powerful tool for survival, salvation, further development and competitive advantage.”

Audio version of the material:

— Having such extensive experience in the IT market, can you assess the level of digitalization in our country? Are we ready for the transformation urgently demanded by the coronavirus?

– On the one hand, there are a lot of companies in our country – both large corporations and representatives of medium and small businesses that pay serious attention to innovation. An example is the penetration of cellular communications, or, even better, the development of taxis: Yandex, Uber, Gett, and so on. And let’s compare, for example, with Germany, where there is nothing of the kind at all. In Germany, Uber is banned in many states and traditionally there is a regular taxi, which can be taken either at special parking lots or ordered by phone.

Our online stores have developed very well in recent years, the same Wildberries or Ozon. We have the Yandex company, Mail.ru, and other digital business leaders who, in principle, are not inferior to world leaders in terms of the level of their services and approaches. And from this point of view, we can say that everything is very advanced with us.

On the other hand, if we look at the use of cloud technologies for business (namely, they provide rapid deployment of solutions and business continuity in a rapidly changing environment), we will see that we are significantly behind even, for example, Central and Eastern Europe, a region that seems to be comparable to us in terms of economic development (we are especially fond of being compared with Poland). And one of the reasons for the lag is the conservative policy of large corporations, which have a rather tough position not to use cloud technologies. And because of this, it seems to me, during the crisis they have a hard time. When you sent all your employees to work remotely, and there are no means for remote work, when your system cannot be supported remotely and you cannot interact with your clients, in my opinion, this is a serious problem that everyone will now solve.

And I hope that all this negative situation with the development of the coronavirus will lead to the fact that cloud technologies will receive an additional impetus for growth, because they allow you to quickly deploy new solutions for tasks that have suddenly become relevant.

– Will the coronavirus help overcome the fears that hinder the development of cloud technologies?

– We hope so, because, on the one hand, there is a certain conservatism, but, on the other hand, we see that those who were not afraid and invested in cloud technologies now feel much more confident. They don’t have any insurmountable business problems right now.

— How do you debunk the myths associated with the cloud?

– Let’s see what are the traditional fears of cloud technologies. The first is “I don’t know where my data is, who can access it, and what harm it will do to me.” This is one of the biggest fears, which is solved by the fact that most cloud providers do not get access to data. Access remains only with you, this is your data, and you work with it. With us, any actions in the system are registered and fixed, you can always check who got access to what. And this is a non-disableable function, it cannot be bypassed. Plus, a data encryption system is introduced when they cannot be simply copied. And, even if someone tries to read the data at the physical level, he will still not be able to understand anything, because everything is encrypted there.

In general, as we know, the most serious cybercrimes are committed from the inside, when someone from the personnel with access to data uses this authority for personal interests. There are also stories when employees caused damage to the enterprise simply out of revenge.

The second point is data availability: “What if something breaks there and I can’t use the system?” Indeed, we observed failures at different providers, there were many reports that somewhere some services became unavailable from large well-known companies. This is inevitable: IT systems sometimes fail for various reasons. But a company that professionally organizes such services, of course, defends itself, and it can do it much more efficiently than those who do it in their data center. It’s just that no one knows about failures in internal data storages, journalists don’t write about it, and it doesn’t become public information. But there are statistics that show that serious failures in internal corporate IT systems occur more often than failures in cloud services. We have the maximum redundancy, a backup data center (DPC), remote from the main one.

There is a third moment when the customer says: “I figured it would be cheaper for me to do everything myself than to pay for your cloud.” He estimates the cost over five years: how much it will cost to buy the hardware and deploy the software on it. And this is a fairly common problem in the development of cloud technologies, because they are considered expensive.

“But you yourself said that it’s cheaper to do everything yourself…”

– In such calculations, some customers miss significant components of the costs that relate to maintenance – they simply do not take into account the costs associated with the maintenance of IT systems. And there is also the cost of changes: to make changes to the system that is inside you, or to the system that is on the provider’s side, the amount of costs can vary greatly. We once thought that more than 50 thousand changes to the systems are made in the data center per year. If the provider may not cost you anything – you just add capacity, and then the operator’s head hurts about everything, then if you perform the task yourself, you will again have to conduct procurement operations, the risks of adding new elements to the IT system, loss of time, money and downtime.

— As the current situation has shown, speed really matters.

“Time and speed are of the utmost importance. This is one of the main trends of the current world. The speed in the clouds is much higher, and this is very valuable in itself, because, as they say, a spoonful for dinner is expensive. Now there is a crisis associated with the coronavirus. You see that there is an increased demand for online delivery of products, and companies need to implement a new service right now.

– Yes, the products could be ordered for tomorrow, and then only a week later.

By the way, this is temporary. I also encountered one large operator and actually waited a week for the order to be delivered to me. And immediately, when they brought it to me, I think: I’ll order it right in advance. And I ordered a week in advance, and they brought it to me the next day.

– Adapted quickly.

— Of course, because this company specializes in online sales. She had a peak surge that put her in a difficult position. But she coped with it, quickly pulled up her reserves and restructured her work.

A company that did not do this or did it optionally is much more difficult and will need more time to get supplies up and running. Plus, this is relevant now, but in two to four months the epidemic will subside and interest in online delivery will subside, and only at that moment everything will work in a new way. And it turns out that you missed the main demand peak. Many customers do not consider speed: if you do something quickly, you will earn more money. If you are trying to choose the cheapest solution, save money, launch endless cycles of tenders, compare suppliers, choose solutions, then it will take so much time that the savings will be many times less than the lost profit that you could get for this whole process.

Therefore, when I talk to many of our customers, I try to draw their attention to the fact that speed and time are now more expensive than before.

— Which industries, according to your observations, are the most open to digitalization?

– Of those who are rapidly and actively developing in this direction, I would first of all name the largest metallurgical companies: Severstal, NLMK, Norilsk Nickel. I will tell you a seditious thought: in my opinion, metallurgists today are even more innovative than, for example, bankers, who in public opinion are the flagships of digitalization.

But oil and gas companies have a conservative attitude towards cloud technologies, although in the CIS countries, such as Kazakhstan, Azerbaijan, there are many more cloud projects in this sector. Perhaps this is due to the fact that many international oil and gas companies operate in our neighbors in the form of joint ventures, for which cloud technologies do not cause any concern at all.

Retail, telecom, and chemistry are being actively digitized. In general, private businesses are more receptive to innovation and are happy to use cloud technologies. Everything is more difficult for state-owned companies, but we see movement in this direction here too. Rostelecom, with which we have a partnership, plays an active role in promoting cloud technologies in the public sector, and our own data center is located in Rostelecom. Together with Rosseti, we have created an interesting blockchain prototype for managing mutual settlements with consumers, and we hope that it will eventually reach productive use. The goals of the project are to increase the transparency of settlements between consumers, grid and distribution companies, as well as to reduce debts for electricity transmission services.

— Are there any legislative obstacles for the development of digitalization? Does the state have time to prepare the regulatory framework for the introduction of innovative technologies?

— Many digital stories still require the approval of the regulator. Legislation, unfortunately, does not keep pace with the development of technology, although I see that in our country the state is making great efforts to support innovation. In particular, this applies to unmanned vehicles or cryptocurrencies. Now is just the moment when everyone is trying, studying. And at some point, a breakthrough has to happen. But if we look at the world experience, for example, the experience of Singapore, Switzerland or even Estonia, we can see that we are a little behind: we lack concrete legislative steps. As soon as they happen, the introduction and development of new technologies will immediately begin. I am sure that many market players are ready to launch something and do something, but they are holding back investments and slowing down projects.

The coronavirus has forced governments around the world to act faster. See how they are fighting and solving the problems of the pandemic in different ways, including issues related to, for example, repatriation. There are many citizens all over the world. How to identify them, how to build a process for managing this repatriation, how to help fellow citizens return to their homeland? The state should take care of this.

And we are working on it too. For the German government, we made a decision to manage the repatriation of citizens. It is very light, cloudy, allows you to quickly start this process. It is possible that an alternative solution is being developed in our country, I do not have such information. But we would be happy to offer our help.

What other solutions relevant to the current situation do you propose?

“People now have more free time — at least they don’t have to travel to and from work. We offer our technologies so that customers can organize training for their employees. Perhaps this will help companies, after the crisis is over, to get more trained specialists who will be able to increase their efficiency and solve new problems. We have launched a series of webinars for clients on various technologies. If earlier they were visited by 15-20 people, then in remote conditions – more than 150. We organized free Data Science courses.

Separately, we have organized a hotline for customers so that they always know where to turn during quarantine if they have questions about our solutions or their support. We have developed special quick scenarios for business – from risk monitoring to organizing remote closing of reporting.

— Do you support startups and use their developments? Can they offer something new to a giant like SAP?

— As part of the combined task of growing Russian developers and exporting technologies, we, together with one of the departments of the Ministry of Digital Development, created an accelerator and launched it at the end of last year. We have already selected ten companies that we will certify, and through our cloud platform, their solutions will be integrated with the entire landscape.

Startups in our country have several classic problems that have not yet been systematically resolved. Let’s take a typical developer. As a rule, this is a small team that has a great business idea. It has both innovativeness and some potential attractiveness. The next step is to find a client. If the client is a large corporation, the startup has a problem how to get through the requirements for suppliers. This is the age of the company, and turnover, and other basic parameters that are very difficult for a young business to meet. Why are large corporations so demanding? They try to avoid one-day firms. But how to determine that a startup that is less than a year old is not a one-day business, but a good, serious company? This is the first problem.

The second is that startups have no experience in contracting. They, as a rule, do not have their own lawyers who protect their interests. There are no financiers who calculate the risks that must be included in the price so as not to lose money. As a result, they are forced to agree to those contracts that customers offer them, and in all such contracts, quite draconian penalties are sewn up. Since startups have little experience, they face some problems during implementation that they did not take into account. As a result, they are knocked out of the schedule and fly into penalties. It turns out that they have almost no chance of escaping.

Let’s look at it from the perspective of large corporations. A startup comes to them with a good business idea, but there are no guarantees that the solution is not leaky in terms of cybersecurity, that it has passed load tests, and so on.

Why are cloud platforms good and why are startups landing on them now? These platforms remove all of the above problems from them: issues of load, scaling, cybersecurity. And the developers don’t have a headache at all, they just implement their idea on this platform. Then they come to the client and say: here I have an industrial platform, here I have a certificate from the owner of the platform, everything meets their criteria. Naturally, the confidence of big business in such a development is much higher. And now we are trying to invest in this story and expand on a large scale, because I really believe in this symbiosis, that we are very beneficial to each other.

— I understood the benefits for a startup in such a platform. And what does it give you?

— Startups can close those tasks that we do not solve ourselves. No company can meet all the needs of the market in all solutions. There are always some open questions that reduce the value of the original solution. Let’s say I come to you with the solution of eight out of ten tasks. And this is good, but the other two tasks should also be solved, and preferably inexpensively. Let other developers do it, but do it in such a way that it will be most convenient for you as a customer, so that everything is compatible, so that you do not have to think about integration and how to further support and develop. In this way, we increase the attractiveness of our systems for the customer.

— What can you advise young people to become successful in the IT field?

— There are two approaches: either deep or wide. The first is to become a super-deep expert in some subject area, to become the best. Even if some of the functions are robotized, experts will still be needed – someone should teach, develop and support these robots. If you deeply know some industry, most likely nothing threatens you as a professional, you will still be in demand.

The second approach is to have a broad outlook and be able to adapt very quickly and switch from topic to topic in order to pick up the tasks that appear and quickly delve into them, understand and find application for yourself.

— What professions in IT are most in demand now, where there is not enough staff?

– Now, in general, in principle, there are not enough personnel for all digital technologies. Take, for example, artificial intelligence. There is a huge number of tasks here that can be very loosely related to each other or not connected at all, but, nevertheless, there are very few real specialists who understand this. Starting from machine learning and ending with robotization and robot training.

The Internet of Things, augmented reality, digital twins – everywhere there is a shortage of specialists. What about cybersecurity? There are more and more new threats related to online and cloud technologies, and, of course, it is very important that specialists in this field are always on the cutting edge. I can express my highest respect to the Sberbank team, which has probably built one of the best cybersecurity centers in the world.

Digital systems architecture, digital marketplaces, digital engagement lawyers. There are many lawyers, but few of those who can explain to you how to implement some kind of digital interaction in the blockchain system so that it does not contradict the law when your contract is completely digital and not paper, and how it is then decided in the courts if you have a dispute.

Digitalization has given rise to a huge number of questions and tasks that cause a need for specialists, which are now scarce.

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