Torben Majgaard Age: 42. Position: Owner/CEO of Ciklum Citizenship: Denmark. Years in Ukraine: 15. Tips for succeeding in Ukraine: “Don’t take ‘no’ for an answer.”
Torben Majgaard has been an expat to watch for several years, at least within Ukraine’s world of information technology.
Ciklum, the company that the Danish citizen founded in 2002, has had astounding revenue growth in the past five years. The IT outsourcing company specializing in software development posted revenue of $101 million in 2012 – nearly 10 times the $11.5 million as recently as 2007. Majgaard owns 80 percent of Ciklum with Kyiv-based Horizon Capital acquiring the remaining 20 percent last year. The company employs nearly 2,500 people in several countries.
Majgaard’s success has vaulted Ciklum among the ranks of other major IT outsourcing companies in the nation, including GlobalLogic, SoftServe, Luxoft and EPAM Systems, whose regional president, Karl Robb, is counted as one of Majgaard’s closest friends.
It’s an impressive leap for a man who doesn’t speak Russian or Ukrainian fluently, and who first came to Russia in the early 1990s before settling on Ukraine in 1998. His interest in computers, which began as a teenager, led him to sell them, he explained during an interview in his 19th-floor office with an expansive view of Kyiv’s skyline.
“I fell a little bit in love with things over here,” Majgaard said of his first impressions of the former Soviet Union. “It was a world you could influence and change, especially for a kid in his early 20s, coming from overregulated Denmark.”
But by 2001, Ukraine’s legendary corruption and bureaucracy forced him to change course. He was feeling “the pain of moving around physical products where everyone wanted to get a share of your container.” He switched from hardware to software sales, making it easier to avoid the authorities. He cashed out of his second-hand computer sales business for $10,000, which he used to buy a Kyiv apartment.
In 2002, Ciklum was born.
The genius of Ciklum, if it can be described that way, is Majgaard’s approach to outsourcing. He also said he knows his Western European customers well and can help them better because of his presence in Ukraine, the source of most of his employees.
“Our customers don’t see us as a quick fix. They see us as a long-term partner,” he said.
The client sets the employee’s salary, with Ciklum adding services to the invoice – such as human resources help, equipment, workspace or legal assistance. “We have a basic package and then you buy extra things on top of that,” he said.
If a customer is looking to hire Java programmers, for instance, Ciklum recruits the best and then matches them with the client. “We don’t have people sitting on the bench,” he said.
One of the big joys of the last decade is the improved skills of Ukrainian programmers, he said, reflected in average monthly salaries that have risen five times – from $500 in 2002 to $2,500 in today’s globalized market.
Denis Tafintsev, a partner with Horizon Capital, said the investment firm bought a 20 percent stake in Ciklum because “the company is growing quicker than the IT outsourcing market, which is growing at a healthy 25-30 percent rate annually. We think it’s got a unique business model and a strong management team and will continue to grow quicker than the market itself. Torben is a very energetic and exciting entrepreneur.”
Majgaard, a married father of two children, is also a venture capitalist with several other smaller investments. One fast-growing one, with revenues of $15 million last year, sells applications for mobile phone advertising.
Majgaard, whose company also has operations in Pakistan and Belarus, thinks Ukraine’s government should do more to develop its IT industry with tax and other incentives. Instead, he said, Ukrainian authorities are talking about hiking taxes. Most programmers are part of Ukraine’s private entrepreneur system and pay only five percent of their income in taxes.
Ukraine, he said, should try to increase the size of its IT workforce, now estimated at 30,000 people in the nation. One way to do that is for industry and government to partner in overhauling outdated curriculum.
“In reality, the schools are of poor quality,” Majgaard said. “The universities are not that good and need to have a closer connection with industry needs.”
Having a first-rate IT industry can help Ukraine “to retain brains” and create pride in the nation.
His immediate plans are to keep running Ciklum from Kyiv and to look for new investment opportunities. But he doesn’t rule out leaving Ukraine if conditions do not improve.
“In the time I’ve been doing business here, I really haven’t seen things improve a lot, unfortunately,” Majgaard said. “I’m also not fantastically optimistic about how things are going to improve in the near future. These things influence my considerations.”
Kyiv Post chief editor Brian Bonner can be reached at [email protected].
