CIS - The New Superhighway
opening up for
Indian IT firms

The Commonwealth of Independent States (CIS), a conglomeration of nations in a hurry to catch up with globalization, offers the right opportunity for the Indian Information and Technology (IT) sector for expansion into newer markets.
Information Technology or IT as it is commonly known, is growing at a phenomenal rate in India, throwing continuous challenge to the Indian entrepreneurs to look for expansion in the newer markets.

Fast developing region
Estimated to grow into a market size of $400m, the CIS holds massive potential for investment from companies which are keen to maximize their share in developing markets.
Immediately after the collapse of the Soviet Union in the early 1990s, almost11 markets in Central Asia opened to free trade. Although these countries are still in the early stages of building independent infrastructures, their keenness to adopt new technologies shows a positive attitude towards growth, presenting an exciting opportunity for IT companies poised for a high growth.
Of course, each of the countries have their unique socio-political make up making it difficult to be treated as one homogenous market. These countries also vary dramatically in their economic growth and development, their addressable market size and its openness to outside traders.
Factors such as oil wealth affect the purchasing power of the CIS countries and Kazakhstan and Azerbaijan have more developed IT sectors because of their oil rich status. Ukraine, although being the most populous country continue to be a volatile market because of its unstable and fragile political situation.
“Turkmenistan and Tajikistan are very late developers, and I compare their markets to that of Kyrgyzstan five years ago or Kazakhstan seven years ago. Kazakhstan is the most developed and stable market with the highest standard of living,” says Vladislav Rogovoy, managing director at CIS specialist distributor Lightspeed, which also has operations in Kazakhstan and Kyrgyzstan.
Lightspeed has grown rapidly since setting up shop in 2001, and now employs a 15 member strong team that has picked up the rights to a number of high profile vendors including Foxconn, Asus, ECS Elitegroup and Micronet along the way.

Strongest markets
With a population of 15 million, a stable political structure and a healthy GDP per capita of $2,180, the Kazakhstan market continues to remain the most favoured entry point into the CIS for most entrepreneurs. The government has allocated a good amount towards the development of its country's IT sector, which has in turn encouraged vendors such as Fujitsu Siemens Computers (FSC) to make more solid investments in the country.
“Ukraine may be the biggest overall market in the CIS, but Kazakhstan is more politically stable and has more business opportunities and growth. We opened an official representative office in Kazakhstan in Autumn 2005. We have had presence in the country since 1999 and will continue to invest in people and business development in Kazakhstan,” says Ekaterina Krymova, PR manager for CIS and Russia at Fujitsu Siemens Computers.
Other A-brand vendors present in Kazakhstan include HP, IBM, Dell, Intel, Microsoft, Oracle, Sun Microsystems and SAP. Hence it makes sense for the Indian IT companies to tap the growing market now when it is opening up for the world.



Driven by its oil wealth and government's strong investment programmes to develop its economy, the third largest market in the CIS, is Azerbaijan where vendors from HP, Acer, Fujitsu-Siemens Computers, MGE and Tripplite have taken advantage of their thriving operations to leverage their business into the country.
“We have been established since 1995 and now have six shops and two service centres. In some countries we estimate the annual growth at 20 percent to 30 percent. The Azerbaijani market for our products is around $40 million to $50 million a year. In 2006 we are aiming to boost our sales in the other countries of the CIS where we don't already have business,” says Saleh Hasanov, service manager at BestComp Group.

Oil wealth
Interestingly it is common to find resellers operating in the CIS dealing with their neighbouring countries, particularly those in the larger nations dealing to their smaller neighbours. The larger resellers in the Ukraine often resell in the markets of Belarus or Moldova, and the resellers in Uzbekistan deal in Kyrgyzstan or Tajikistan.
In fact, West Asian countries have been having thriving relationship with the CIS countries for a long time. Lightspeed, Empa, Asbis and FDC are the most prominent. As an indication of the level of growth that distributors can enjoy, Lightspeed claims it has been doubling its CIS business year-on-year.
Doing business in Central Asia is not simply a case of turning up with a shipment of stock. An operation needs to be carefully planned before it is put into practice. The first pre-requisite is to be able to speak Russian. The CIS countries have their own languages and the common second language of the region is Russian, rather than English, and this is essential for doing business. Planning on the part of any importer is important, as are a number of factors involved in the physical movement of goods into and between CIS countries. However, given the linguistic abilities of Indians and their ability to adapt to various working conditions, doing business in CIS has bright prospects.

Region to region links
“Some countries have regulations which forbid the transfer or exchange of currency, so only large, approved companies can make import and export transactions,” says Mami at Empa. “Only the companies that have been there for a long time can handle logistics issues, we have certain selected forwarders who have been working in CIS logistics for a long time and know the difficulties of the region regarding borders and clearance of products.”
The successful distributors in the CIS have been cultivating their links into its countries for a long time. Setting up a distribution chain into the CIS will involve cultivating native links into it. Help may come from A-brand vendors that are present in the region, but this isn't always the case.

Import driven market
Major vendor investment in the CIS is low. Consumer electronics vendors Samsung and LG have set up factories, and sources in the region say that they believe HP will be one of the first to make a major commitment to the area, but at present there are no major vendors with PC production facilities in the CIS, leaving most stock to be imported to the region.
This can become a confusing issue, affected by the central location of the CIS. There is easy access to the region from Europe, particularly through the Ukraine and Armenia. From the East side, there is a route through to the CIS from China and the Far East, and from the North are links with Russia. Takabaev at Asbis breaks down the product coming into Kazakhstan where the Asbis operation is based as 50 percent coming from the Middle East, 30 percent directly from the Far East and 20 percent from Europe. This means there is product flow from nearly every different pricing area that major vendors operate; making a grey market inevitable. Lightspeed says that it cannot deal in peripherals such as casings, keyboards and speakers as they are undercut by products flowing in from China; though similarly, it has the edge on other distributors when it comes to hard drives, optical drives, VGA cards and motherboards.
Another way into the CIS is through the growing solutions sector. Enterprise solutions vendors SAP and Oracle have had success in the region and projects have been kick-started by interest in electronic government. Azerbaijan has been the first country in the region to commit to e-government, and is in the process of developing and introducing its first e-government portal, with Kazakhstan following closely behind.
“The government of Kazakhstan has a need for automation of its financial and educational institutions, customs agencies, and ministries. In this regard, in 2004, Kazakhstan's government adopted a program of formation of an electronic government in Kazakhstan for 2005-2007 and allocated $400m to this project,” states a report on Kazakhstan titled “Information and Communication Technologies (ICT) Overview 2005” by the Business Information Service for Newly Independent States (BISNIS).
The 13th annual Kazakhstan International Telecommunications Show (KITEL), which incorporates the Central Asian International Exhibition on Telecommunications and Computer Technologies was held from 30 May to 2 June, 2006, which provided a great springboard for distributors interested in breaking into the CIS markets. The previous year's show attracted 20,000 visitors and had attendees from 180 countries.