Between Asia and the East: where to go for Russian business

The economic restrictions imposed on our country, the disruption of supply chains, the reorientation of export and financial flows are forcing Russian businesses to look for new opportunities in the markets of the Middle East and Central Asia. Most entrepreneurs see Turkiye as a promising destination for relocation or scaling. Convenient geography, strengthening trade and economic ties, a mature market — all this attracts entrepreneurs and start-ups from Russia. But not everything is as simple as it might seem at first glance.

As an IT distributor, we develop business in Kazakhstan, Uzbekistan, Kyrgyzstan, Turkiye and Vietnam. These are rather specific regions where the cultural pattern of each country strongly influences the business environment. Those ways of developing and doing business that you are used to do not work here, even communication is built differently. Therefore, entrepreneurs who are just starting to develop a new country often do not have expectations and reality.

Evgeny Kurtukov, Director of Strategic Development at Axoft, spoke about the experience of bringing IT businesses to the Turkish market and possible "pitfalls", and Pavel Kuvyazev, Sales Director of Axoft EECA, shared new opportunities for developers and technology companies in Central Asia.

Get ready for high competition

Turkish Market — the quintessence of global business. All kinds of IT corporations and technology companies from Europe, the USA, the Middle East, and Asia are represented here. In addition, in Turkiye there is protection of the domestic market, local companies prefer the local manufacturer. There are vendors and developers who have a good market share. According to BThaber, the total turnover of software developers amounted to 5.5 billion liras in 2020. If you look at the areas of software, then, for example, among ERP solutions, the share of local developers is 30%, and among business applications — more than 50%. Serious competition, greater trust in well-known brands, protectionism become an obstacle to entering the local market.

But the good news is that Turkiye has a minimum of restrictions from regulators, it is a free market, and the demand for technology, especially in information security, is quite high here.

Don't waste time on analytics, just act

In 2019, we decided to open an office in Turkiye. For six months, we intensively collected reports, market analytics, studied research and carefully prepared for the release. But it turned out to be all in vain, wasted time. A week spent in Istanbul brought more results and insights than 6 months in Moscow with numbers and forecasts.

In the first year of operation, we completely changed the team. Interview, as well as business negotiations in the East, — theater, they are very good at selling themselves, but it is difficult to understand what a person really knows how to do. This becomes clear already in the process of work, which is slowed down or not done. Therefore, it is important to collect recommendations for the specific person you plan to hire, and be sure to check them through local channels. References are also important in relation to business partners. One of the first people we hired, after the director of the office, was a financial manager, he checked counterparties for trustworthiness — can they be trusted, give a deferral of payments and for how long. Further, we developed the business according to the model of the distributor — built a partner channel and at the same time communicated with customers, identifying their main needs.

Now we have a fairly strong position in the country, the team is focused on promoting solutions and technical expertise in the field of information security and DevSecOps. In addition, we work with domestic developers from an educational point of view, we help the guys navigate the local market. Therefore, for those who are just planning to start a business in Turkiye, here are some tips:

• Get ready to make your first project for free — it is an investment in your own reputation, which is more important in the local market than the innovativeness of your product
  Clearly articulate the benefits of the solution. Turkiye — a country about money, they seriously evaluate the profitability of the project, so get ready to answer the question "how much can you earn on this."
• Enlist the support of a local partner who knows the requirements of local laws, will help with legal issues, and at the same time will be the guarantor of the quality of your work with the customer.
• Get ready to walk a lot, communicate personally and do not forget to collect recommendations about potential partners, employees and contractors.

Strengthen your business reputation and take into account the specifics of Eastern business culture

Over the years of work in the region of Eastern Europe and Central Asia, we have deduced the following rule for ourselves: in the West, IT solutions and products are primary, in the East — human relations. Therefore, it is important, first of all, to establish trusting cooperation with partners through a personalized approach. It can be expressed in special conditions, discounts, free technical support. Thus, you not only increase loyalty, but also strengthen your business reputation. It is worth remembering that in the East they trust word of mouth. Even a large and well-known company in its homeland that makes a cool product will find it very difficult to break through if no one has heard of it in the local market. Therefore, investing in “brand awareness” and patiently build long-term relationships — necessary.

One of the features of communication in the region is the absence of the word "no", that is, you will never be told directly — "We are not interested in your project." They may "disappear from the radar", stop responding to calls and mail. But if you heard the phrase "we will do everything" — it means that no one will do anything, and you were definitely refused.

Therefore, at the first stages it may even seem that everyone is ready to work with you. And it works both ways. For example, once, while working with a customer in Uzbekistan, we were asked to change a technical specialist. When they began to understand the reasons, they found out that the whole thing is in the "open" the straightforwardness of an employee who answered negatively to ordinary work questions or asked to fill out a special form, without which it is impossible to start working on a pilot. Therefore, we have learned to carefully approach any negotiation process, even the "language of techies" now extremely delicate.

Friend or foe

One of the most promising markets in Central Asia now is Uzbekistan. Five years ago it was a closed economy, and in a short period of time the country has gone through a path that many have mastered for decades. According to the State Statistics Committee of the Republic of Uzbekistan, the country's GDP in the first quarter of this year grew by 5.8%. In addition, within the framework of the "Development Strategy for the New Uzbekistan for 2022" minus 2026 " "digital economy" designated as the main driver of development. Over the next five years, the country plans to increase the level of digital maturity of the real sector of the economy to 70%. There is a great need for the transformation of the banking sector, retail, government agencies, high demand for information security solutions, automation and complex IT systems. However, at the moment, the demand in the Uzbek market for digital transformation is overtaking the capabilities of the IT industry.

Unlike Turkiye, there is no tough competition here yet, the entry threshold is low. But, on the other hand, there are some features that need to be taken into account. Firstly, customers rather scrupulously evaluate new companies on the basis of "friend or foe", so external manufacturers and integrators will lose to local players solely because of connections. Secondly, the speed of decision-making is reduced by a doubling / three times compared to Russia. You can achieve results only by offering a unique service or product, while you must be prepared for the opacity of processes and the formation of the final cost of the product or solution for the customer. Yes, there is a demand for expertise, but they are not ready to pay for it. Often, customers expect to receive it for free as part of the supply of equipment, software, or ask for a discount. It is also important to understand that the cost of operating expenses here is quite high, so you need to be prepared to reduce the requirements for office space and services.

As for the language barrier, at first glance, it does not exist. However, it is better to have a team member who knows the local language and English, otherwise there is a risk of losing the deal or the project.