Mmodernization efforts have given way to a sharp rise in orders for companies offering information technology systems integration services in the country.
Several years of solid economic growth have translated into sizeable profits for many Ukrainian companies. Rather than
sending profits offshore, manycompanies are taking a long-term view, opting to reinvest earnings, modernizing operations in order to increase competitiveness on local and foreign markets.
It is precisely such modernization efforts that have given way to a sharp rise in orders for companies offering information technology systems integration services in the country. Such services often involve design and installation of turnkey IT solutions. This can involve the installation of an office local area network, or LAN, complete with hardware and software; or it can involve the creation of specially tailored hardware and software packages for call centers. It can also mean installation of nationwide ATM networks for banks.
Anton Dikan, business development director of Incom, a Ukrainian firm established in 1990, said the domestic systems integration market, which includes computer sales, hardware, and network and software design and installation, has grown between 30 percent and 40 percent annually in recent years, and should reach $1 billion in sales this year.
“There was a boom in the systems integration business in the last year or two,” Dikan said. “Our turnover in 2002 was about $65 million. We expect it to increase this year by up to 40 percent.”
According to Dikan, 400,000 Together with computer sales, installation of complex information networks that involve custom-made software, fiber-optic cable networks and even satellites accounted for hundreds of millions of dollars, he added.
Dikan said that about 30 companies control 80 percent of the market, though Ukraine has hundreds of firms that call themselves systems integrators. Incom, S&T Soft-Tronik, Kvazar-Micro, BMS Consulting and Atlas are among the industry’s major players – companies whose sheer size and expertise permit them to offer the range of services needed to handle large contracts. As a result, the firms stand out from their smaller competitors and gobble up a majority of the orders.
Maksym Ageev, vice president of Kvazar-Micro, said his company controls about 17 percent of Ukraine’s systems integration market. If the market tallies to about $1 billion this year, as Dikan predicts it will, that equates to $200 million in turnover for Kvazar-Micro.
Kyiv’s S&T Soft-Tronik, a subsidiary of Austria’s S&T Systems Integration & Technology Distribution, is another leading provider of systems integration services in Ukraine. Dikan said it is one of only a few systems integrators in Ukraine that are backed by foreign capital. The majority, like Incom and Kvazar-Micro, are homegrown firms.
The growth on Ukraine’s systems integration market has made waves abroad.
Foreign suppliers of high-tech equipment have benefited from the industry’s growth, as Ukrainian systems integrators typically rely on imported software and hardware from providers including Cisco Systems, Sun Microsystems, Microsoft, Intel, Nortel Networks and Siemens. As a result, these firms have opened up representative offices in Ukraine in the past several years, and increased spending on advertising.
Fat contracts
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| “[The market] traces its roots to the early 1990s and began growing in mid-2000, just as Ukraine’s economy began to rebound.” – Yury Lisetsky,S&T Soft-Tronik. |
Yury Lisetsky, general director of Kyiv-based S&T Soft-Tronik, said his company has grown tremendously since it was established in 1993. The company’s 100 employees currently serve clients including the National Bank of Ukraine, Ukreximbank, Ukrsotsbank, Prominvestbank, VABank, Pravex-Bank, Ukrtelecom, Kyivstar GSM, UMC, electricity utilities Zhytomyroblenergo and Odessaoblenergo, Coca-Cola Ukraine, Slavutych Brewery, Ilichivsky Sea Port, Boryspil International Airport and Ukrzaliznytsya, the state railway.
Dikan said his company’s client base includes banks like Aval Bank, Privatbank and First Ukrainian International Bank; telecoms such as Kyivstar GSM; energy firms and retailers. Typical orders include installation of local area networks, ATM systems, cashier networks and call centers.
“We are oriented entirely on corporate clients,” he added.
The company also has lucrative government contracts, installing IT networks in schools, parliament and government offices.
Incom specializes in serving Ukrainian companies, but has done work for foreign investors, including Sun Interbrew, Adidas and Baker & McKenzie.
“For the most part, we do big contracts only. Contracts worth $1 million are the size we are most interested in. We consider such contracts to be attractive and challenging,” Dikan added.
Kvazar-Micro’s Ageev said that market growth is being fueled by private enterprise, rather than government contracts.
“The most traditional clients today are [privately-owned] banks, dynamically developing medium- to large-sized industrial firms, retail and service chains,” Ageev added. “But it’s worth noting that privately owned companies in these sectors, with management interested in maximizing efficiency, transparency and management, account for most of the orders.”
While most systems integrators contacted by the Post claimed to be market leaders, they refused to provide figures related to their market share.
“We consider ourselves the oldest and largest on the Ukrainian market,” Incom’s Dikan said. “We are the only company on the Ukrainian market to provide complete solutions in all main sectors of systems integration, including satellite solutions, the Internet and standard computer solutions. We are in the top three in all major sectors.”
Incom’s growth is evident. This fall, the company moved into a new 16,000-square meter, seven-story mirror-windowed office building in Kyiv. The building is reminiscent of a typical Silicon Valley office center. Incom owns the building, which includes sales and technical departments, testing laboratories and management offices. Dikan would not say how much his company invested in the new facility, which is decorated with aquariums that house exotic sea life.
Incom’s decision to invest in its office center reflects the confidence corporate managers have in the company’s future and its long-term strategy.
High-tech growth
S&T Soft-Tronik’s Lisetsky credits the industry’s growth with Ukraine’s economic turnaround. Strong economic growth, he said, has fueled customer demand.
“The systems integration market in Ukraine traces its roots to the early 1990s and began growing in mid-2000, just as Ukraine’s economy began to rebound,” Lisetsky said, adding that his company’s business grew most aggressively in the past couple of years.
“Our annual turnover in 2001 was about 11 million euros. In 2002 it grew to 16.5 million euros. The growth of the systems integration market is a direct consequence of the economic growth in Ukraine overall,” he added.
Lisetsky anticipates continued growth fueled by rising demand from clients.
“As Ukraine’s economy grows, so will demand for systems integration services,” he said.
“Domestic factories are in desperate need of contemporary technologies. They recognize them as an effective instrument for increasing the competitiveness of their business.”
S&T Soft-Tronik is the only major Ukrainian systems integrator backed by a major foreign firm. Yet foreign players to the north are beginning to take notice of the growth and potential in Ukraine.
“The majority of companies operating in Ukraine as systems integrators are of Ukrainian origin,” Lisetsky said. “However, lately there are signs that big Russian players are ready to expand onto the market. This serves as evidence of the attractiveness of the dynamically growing Ukrainian market.”
