Information Technologies: Where Does Russia Stand?
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Affecting all aspects of human life, information technology has also swept over Russia, emerging as a young but vibrant sector capable of advancing the national economy and rivaling the Western IT giants. We met with Ilya Anikin, Deputy Director General of the management company IQ One, to talk about nascent trends and the segments most susceptible to these snowballing developments.
Affecting all aspects of human life, information technology has also swept over Russia, emerging as a young but vibrant sector capable of advancing the national economy and rivaling the Western IT giants. We met with Ilya Anikin, Deputy Director General of the management company IQ One, to talk about nascent trends and the segments most susceptible to these snowballing developments.
We are already used to regular IT innovations that seem to pop up on the market daily. What is the current underlying trend and what technologies are likely to generate the most spectacular breakthroughs?
Online education is definitely an extremely dynamic sector, with approaches having basically changed overnight, especially in applied knowledge and sciences. Remember that for centuries, education was founded on the interpretation of books structured with a long tape-like text, something quite different to what we are seeing today. In order to find information, a reader had to utilize contents with as many as 30-50 or even 300-500 references if an alphabetical index was available. Hence, reading and singling out key points was a time-consuming process.
The education of today is extremely different, since we are learning not only from books, but rather from tiny information bits, each of them covering a specific area of knowledge.
The education of today is extremely different, since we are learning not only from books, but rather from tiny information bits, each of them covering a specific area of knowledge. This information could be easily structured in a tree-type rather than a tape-type structure, offering one the opportunity to gradually submerge into the appropriate area of knowledge with no distractions on the search for vital information in the mass of data. Therefore, both learning and fact-finding have become over ten times faster.
Another fast-growing area of education is video, which has recently acquired wider popularity through the emergence of high-speed Internet access. This technology allows for viewing without the need for pre-loading data. However, this development refers largely to applied rather than to fundamental education. The combination of the tree-like structure and video content has developed a new format for applied learning and borne attempts to create new education services. While these are basically not available in Russia, we are closely watching the online education market to identify firms that might develop a breakthrough in this field within the next five years.
However, there may be other nascent projects covering several hundred fields of knowledge, with the United States in the lead. An excellent example is Lynda.com, which boasts a huge library of knowledge beyond the sciences, i.e. how to make pancakes, screw a bolt in, or wash linen. Such libraries encompass a host of instructions based on users’ requests. At the same time, this service is aimed at satisfying public demand rather than providing a tool for serious and meaningful training.
One more significant area has been the resolution of the problem related to insufficient computer capacity for processing large volumes of data. Capable computers, though few in number and expensive, already exist for handling certain scientific tasks, for example the Lomonosov supercomputer installed at the Moscow State University which assists the work of 500 research teams, RAS institutes and other scientific institutions. This supercomputer runs 647 trillion operations per second and is part of the global Top-500. But this is not a solution for the wider public, since even many scientists and medium-level researchers are also deprived of access. As a result, we might see entire sectors, theories and ideas idling due to a lack of computation capacity.
As recently as several months ago, we found a solution that could be a game-changer: a local computer equipped with small software that could combine many computers within a single network operating in a torrent-like pattern. A central software platform distributes the tasks, while local computer programs solve them when their computers are idle and roughly 98 percent of the computer time is free.
Google has developed such software for BigQuery Google Analytics, its own platform. An independent database is hooked up to its servers, and BigQuery ensures the instantaneous execution of most complicated requests, that is, in several seconds as compared to the several weeks needed for a standard device. However, BigQuery is rather expensive because Google must pay the costs of thousands of computers engaged in this cluster.
One more significant area has been the resolution of the problem related to insufficient computer capacity for processing large volumes of data.
Our technology is practically free and will be more accessible for everyday use. Now it works mainly in the area of 3D graphics for rendering animated films. But rendering is just an isolated case, while the development of a similar program, say, for Matlab – the complex mathematical software used for numerous scientific computations – will make massive computer capacities more accessible and allow scientific research to expand its resources for future development.
One more area on everybody’s mind is customized Internet search. Everyone knows Yandex, the only major search engine in Runet. Yandex search is primitive, as users enter keywords, the engine exploits a giant index to find documents and pages where the keywords are set close to each other, and then results are given. This search method is far from practical in all cases, because one often has to look through and analyze millions of references before finding the target point.
Customized search is the key to finding goods. The Market section is definitely attempting to solve this problem, but suffers from a major weakness: the user has to become a kind of expert in the realm of unknown. A client has to adjust filters and select items with the help of certain criteria to limit search results.
Lomonosov supercomputer installed
It would be much easier to find an item more simply, for example just by entering a description of the target item, for example “I want a small, quiet refrigerator for my country house”. The system would then analyze a cloud of tags and comments on each item (preferably, using webpages from every shop online) and suggest description-based options. In other words, I do not have to become an expert to find a small, quiet fridge, because the job would have been done by others who had left their comments.
Would this work for all goods?
Oh yes. And the key is in the comments cloud. Hence, to make the system work, people must be motivated. For example, if the comments are good, every commenter who has written words used by the searcher should be given a small percentage of the item's cost. If somebody leaves an irrelevant comment and the item is not popular, the commenter gets nothing.
Thus, you can clearly see that customized search has a bright future because the current system is not nearly meeting demand.
Are there any other companies that are developing search engines?
One more area on everybody’s mind is customized Internet search.
No one in the world has a smoothly running system, while the farsighted are working hard to get the thing accomplished. The IQ One portfolio contains Utinet, a company that has been creating a goods exchange for customized search over the past two years and appears to be Russia's leader in the area.
One more field of customized search worth mentioning is fact finding. The standard search is definitely inappropriate for current needs, since if you want something specific, you need to spend a lot of time choosing among the results shown. The IQ One portfolio also includes a firm that is able to solve this problem in a manner more specialized than the one Yandex is currently offering. The engine analyzes the basics of the request immediately at the first input and compiles the list of the found content by grouping it in a tree-like rather than in the tape-like manner. If you enter the word white into the Yandex search box, the results will contain both the color and sclera and names and what-not. The software in question will discriminate amidst the content by parameters, spreading it over separate trees, i.e. the color, the eye structure and names. Each group will be also segregated to cut the search time from linear to logarithmic, which is essential for large data volumes.
One of IQ One products is reputation analysis in social media. What do you see as the future of social media amidst speculations about Facebook becoming obsolete? What kind of future is there for social networks?
that has been creating a goods exchange for
customized search over the past two years and
appears to be Russia's leader in the area
Social media appears to follow two basic trends. The first is connected to a type of customization, which means that each large network features a more targeted relationship with the user. Advertising will become more effective, since it will account for both the profile of the user or his group and his comments, likes, and discussions as well as the topics of interest to him/her at the moment.
We already have on hand IQBuzz – a technology for precision targeting of ads based on the comments, opinions and requests of users. This technology sweeps social media, forums and LiveJournal for new content in real time, indexing about 15 million posts a day. The results are used to stratify users by interests and offer targeted advertising. We expect sizeable growth in ads converted into clicks and buys. The VKontakte network is far behind the Yandex as far as ad-to-click conversion is concerned, 0.2-0.3 against up to 10 percent. Through better targeting, we can make advertising more effective and accordingly more expensive. The technology will not nearly be as expensive as Yandex, and we expect VKontakte to grow in monetization by 50-70 percent.
As for customization, the key breakthrough does not lie in the creation of specialized social networks but rather in reorienting them from mass to individual use. Local networks will emerge, although largely as single success stories. Today we cannot be sure that Facebook will die and then give rise to a host of smaller networks. It will probably follow the overall trend and become more targeted and receptive to users.
Each large network features a more targeted relationship with the user.
The second trend is globalization, with VKontakte adding two million posts daily, many of which are sales offers. In fact, the network is following the example of Avito, a sort of Internet-based flea market. But in contrast to the Avito, the buy-and-sell offers in the VKontakte are not at all structured. And here comes the social network size. When the VKontakte was small, the more specialized Avito with its solid content was obviously winning. But now VKontakte is expanding its reach to all of Runet, opening opportunities for proper utilization.
The creation of a new Avito is also not feasible because, first, you will need many ads, and two, many buyers. And these are two absolutely different streams. On the other hand, VKontakte generates an almost automatic stream of ads, which means that one needs only to solve the problem of content, i.e. to quickly find and properly demonstrate a sales proposal.
If the United States is ahead of Russia in Internet technology by three to five years, bear in mind that Russia has only just entered the market, which has been dominated by Americans for the past five years, with the gap extremely difficult to close.
Also of great importance are security-related solutions. For example, social media groups are scanned to identify certain words to create a blacklist that is made accessible to a piece of software installed on a user’s computer. It works as follows: as soon as a child enters a social network, the software cuts him off from the blacklisted groups. Of course, making a permanently relevant list is next to impossible, so the list must be updated in almost real time.
What prospects do you see for Russian-made IT-products on foreign markets?
Three areas of export appear feasible. One is the entire global market with no regional specificities. Russian engineers are more than capable for this job but have to pinpoint the right area of application. Can Russia create another Facebook? Unlikely, since it already exists. If the United States is ahead of Russia in Internet technology by three to five years, bear in mind that Russia has only just entered the market, which has been dominated by Americans for the past five years, with the gap extremely difficult to close. However, there are areas where the two countries are almost equal, for example, the customized search platform I have already mentioned.
The second sphere of export is somewhat different and covers specialized IT solutions of a sensitive nature in both countries, with Russia sometimes unable to employ American products, since in this case, it would depend heavily on the producers' policies. A good example is Palantir, an American-Israeli firm whose software was used by Edward Snowden.
Russian government institutions, banks and many companies cannot utilize European or American software for security reasons. And there are other countries in Central Asia, Latin America and Southeast Asia where this software is rejected or unwelcome under the same considerations, which means that Russian software may be quite competitive there.
Finally, we can speak of markets free from cutthroat competition. For instance, Russian exports to the U.S. seem like a pie in the sky because the five-year-old market has been saturated. It is much easier to enter Malaysia, Indonesia and similar countries where U.S. market share is less than 50 percent and consequently offers room for maneuver. Let me stress again that the problem is not in the poorer quality of Russian products, but in market saturation. Hence, opportunities should be sought in fast-growing and open markets, that is, those markets that are still undivided.
Do you see an opportunity to export Russian IT products to China?
My experience with China makes me think that these people are quite different from our other partners. Their firms are trying to enter foreign markets, but are barely letting in foreign engineers and investors. In contrast to other Southeast Asian countries, China tends to arrange deals by giving money in exchange for a share of their brand on the Russian market.
The Internet is definitely a tool for making businesses more efficient through marketing, sales, employment, etc. How are Russian firms using these tools in comparison with their foreign partners?
The problem is not in the poorer quality of Russian products, but in market saturation.
Much depends on the status of entrepreneurship and the economy, national infrastructure and global factors. In fact, comparing the effectiveness of the Internet use between Russian and foreign companies may be inappropriate. Russian infrastructure is less developed than that in the United States and Europe. We suffer from huge traffic jams, are just acquiring a culture of credit cards, cannot subscribe for regular payments, etc.
For example, virtually all Russian Internet shops have to deliver goods one or two days after the order has been placed, but not in three or more days. Otherwise, the client will not pay 30 percent of the supplied items, and the shop will have to store the goods and find other buyers. The problem is grave enough for an Internet outlet to go bankrupt. At the same time, Americans are almost unaware of this problem, since most buyers use credit cards immediately and cannot reject the deals later.
One more difficulty in Russia is in the lower overall level of business. For example, many companies are suffering from a heavy and rapid outflow of customers. Some have 100 clients, which after one month fall by as many as four percent. The figure is too high by American standards, which fluctuates at 1.5-2.0 percent. Russia is more dynamic, with companies declining more frequently and featuring more in-house movement. This is why such mobile products as Saas services rarely feature outflows under the four percent level.
One more example is e-commerce, which is unquestionably booming in Russia. Yandex boasts average revenue per user several times higher than Google, i.e. 25 versus 6 dollars. However, this does not mean that the Yandex is more efficient. The answer lies in the e-commerce outburst, a time-specific trait rather than an indicator of the company's effectiveness.
Interviewer: RIAC Program Assistant Maria Gurova
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