Sergey Aslanian: Оmnipresent magic crystal
Interview with Sergey Aslanian, President of Sitronics
Sitronics, a high technology company, stopped consumer electronics production in 2008, thus winding up its direct relationship with the mass consumer. As a matter of fact, the Company stayed close to the masses nonetheless. Sitronics has staked its future on relationships with public authorities, corporate bodies, regional and municipal governments, and managed to secure major contracts, under which the end-consumer of services and products is the Russian general public.
Sergey Aslanian relates to Expert magazine the challenges and risks, which members of the high technology market will confront within the next 10 years.
What impact will information technologies and communications technologies have on business competitiveness by 2020? Major companies have already automated their accounting functions, so what does the future have in store next?
Accounting is the key component of any business. It lays the foundation for corporate governance and analysis of cash flows and expenses. IT solutions for these purposes are a prerequisite for every company. Today one can hardly name an esteemed company which goes without IT solutions to automate financial and logistics processes, as well as supply chain and budget management.
Systems for customer relationship management (CRM) integrated with existing accounting and BI systems are taking on more and more importance in this day and age. A complete record of transactions with this or that customer plays a crucial role in understanding what other information or services the customer may need. Perhaps, the most successful in this respect are banks and telecommunications operators, seeing as they work directly with the mass segment and are riding on the wave of technological progress. Telecommunications companies in Russia have implemented data warehouse systems to analyse their customer bases on different levels and model expected customer behaviour. It has become particularly critical, because in Russia, like in many countries, the total number of SIM cards is larger than the whole population, so telecom operators seek primarily to retain existing customers rather than attract new ones. They have to constantly offer new services, tariffs, etc., to prevent subscribers from changing to another operator. The growing competitiveness suggests that CRM and BI systems are becoming more and more in demand among the companies that deal with corporate clients.
Does it play any role in creating a competitive edge for our major companies whether they implement domestic or foreign systems?
When it comes to the engineering, distribution and application of IT solutions, Russia is a fully-fledged player in the international market. As a leading system integrator, we must offer only tried and true, best-in-class products to our customers. And customers should have choices: that's why we in due course switched from the mono-vendor business model. The key task for service-oriented companies is customer confidence. Only then will an IT project result in higher business process efficiency and added value for the customer.
We offer solutions which are de facto standard in various industries: Oracle in telecommunications and banking, SAP in the fuel and energy sector. At the same time, we have been developing our own proprietary billing solution for more than 10 years, which is capable of processing a large amount of data, and which now fully addresses our customers' needs.
We shouldn't neglect the work that has already been done by our foreign counterparts in our quest for automation. We have to build up our own expertise by adopting the world's best practices. End customers that take actions such as implementing these systems and spending their money on them, will only gain from it. However, one cannot but admit that we are still lagging behind in software engineering, although historically Russia has always been able to boast of competent developers.
How does Sitronics see specific segments, such as telecommunications, IT and microelectronics, developing over the next 10 years?
10 years is a very long-term perspective in our industry. Every year we prepare a technology forecast for the next 5 years to keep track of key trends. Our technology strategy, which is mainly based on the technology forecasts, takes into account these factors and our position in the industry. In some areas we would like to act as a niche player, in others we would prefer to be a main contractor and designer, while in the rest we would rather be an associate contractor. With regard to wireless data transfer and access systems, Sitronics, being a niche player, quite a large one though, possesses a number of unique competencies that contribute to our plans of launching several brand new products in accordance with the latest global trends, including those related to millimetre-wave active antennas and radio access for convergence. It should be noted that we are developing these products in cooperation with our partners. And with respect to chip cards, Sitronics, as the leader in the Russian market, is planning to further expand its product portfolio and increase the level of localisation, which involves large-scale engineering activities not only on chips, but also on software installed on our processors (because a smart card is a processor per se), including operating systems, applications and means of cryptographic protection.
At the same time, we participate in venture projects, in fields such as telemedicine, thus creating new market niches for Sitronics. It stands to reason that we'll lose our competitive advantages in 5 years if we fail to offer new products and solutions.
What effects will cloud computing have on IT?
Cloud computing, as a matter of fact, is eliminating the need for system integrators in a big way. Why? Because the vendor, being a hardware or software manufacturer, takes a considerable part in providing IT as a service. Cloud computing deals with a notion of right-sizing, in other words paying for the exact amount used. On top of that, you don't even know what hardware is involved in processing your data. There is no doubt that this will change the whole chain of business for telecom operators, IT vendors and system integrators. Cloud computing will definitely help take a competitive advantage away from integrators and give it to manufacturers. This is inevitable.
Our task is to help customers save money on hardware infrastructure, networks and licensed components, as well as to render high quality services. As a system integrator, we have an edge over vendors/manufacturers, which are usually not so well acquainted with their customers' businesses. Selling servers is one thing, implementing and maintaining IT systems, integrating software with legacy systems and training users is another thing.
What are your expectations for the M2M (machine-to-machine) market?
We are not fully aware of it, but many aspects of our life are already automated. Over the past 5 years, the number of SIM cards that are not intended for subscribers, but rather for enabling communication between devices or machines, has been increasingly growing. That is, machine-to-machine communication without human intervention is becoming more and more popular, and significant progress is expected over the course of the next 5 years. With regard to M2M, Sitronics is actively involved in fields such as security, and is participating in the creation of the Intelligent Transport System.
Market penetration for M2M solutions is extremely low in Russia at present. The M2M technology will be mostly adopted through the private sector rather than the public sector. Intelligent devices, such as those intended for taking meter readings in apartments and sending the data to the payment centre to bill the customer, have really good prospects. If you fail to pay, then your electricity will be cut off automatically. Human intervention is not required in this process.
On the other hand, this helps optimise electricity consumption, solve issues related to the collection of payments and offer higher quality services. Large corporations are getting interested in such solutions, so they will begin to implement them more and more.
How much does Sitronics spend on R&D?
Global companies spend from 3% to 10% on R&D. This year, Sitronics has increased funding by 30%, so these costs now make up approximately 5%. As long as another crisis doesn't come along, we plan on further increase outlays for R&D, as it is the keystone of our company.
Our main R&D activities are in microelectronics. As of now, we are behind the west in terms of feature sizes, but we're placing more focus on adding value to our products: IC designs for GLONASS or the universal electronic card, which will combine numerous features, such as a means of payment, travel card and ID. We are very interested not only in manufacturing a Russian product, but also in controlling it as an intellectual property. We have formed a strong team of designers and recently opened a dedicated design centre, or, in other words, engineering office, on the premises of the Mikron plant in Zelenograd. We are going to realise more and more complex projects and launch them in the Russian market and, perhaps, even offer them on the western market in the future. Although in some segments, such as radio relay equipment, we are highly competitive with global manufacturers.
In general, we have a clear understanding that our profitability depends on market volume, our innovativeness and R&D growth.
How is the Store of the Future, your joint project with Rosnano and X5, progressing?
By mid-2013, we will launch a pilot store offering the full range of new technologies we have tested. Sitronics is now carrying out extensive R&D activities together with Rosnano and X5.
There are several areas of application for RFID (Radio Frequency Identification) technology in the retail sector. The first is warehousing where palettes are tagged rather than single items. The second concerns product groups, the tags for which may differ significantly. For example, the RFID tag for yoghurt needs to be able to function at low temperatures, because yoghurt is stored in the fridge. For other product groups, the radio frequency and the read range of the tag are important, seeing as the noise immunity level and the influence, which the product packaging, surrounding objects and other tags produce on the reading reliability, may vary depending on the frequency and data exchange protocols. The tag antenna configuration and the way the tag is fixed to the product surface also play an important role.
We are also involved in the development of automatic cashier stations which will allow for the elimination of long queues. Due to the automatic scanning of products or their samples right on the shelves, you don't have to put them in the trolley. You'll be able to collect the scanned items as you leave, and subject to biometric identification or identification with your mobile phone, your credit card will be debited.
And it's not the complete range of possible applications. By 2013 we'll have the idea as to which of them are feasible and which are not. For instance, it may turn out that for certain product groups tags can't be used or are too expensive. Let me cite an example: we have examined the possibility of RFID tagging logs transported by rail. We spent a couple of months on R&D to come to the conclusion that it is not possible, because logs on top of others shielded those inside the bundle, and as a result, the tag couldn't be read.
How will the UEC project be developed?
Sitronics has acquired a share in UEC's capital. Now we act both as a technological partner, and as a shareholder. According to the plan, the cards will be manufactured at our facilities. This is the case when domestic manufacture is extremely desirable, because a lot of applications will be developed for the universal ID card. And all identification data stored in the UEC will be protected using our unique proprietary encryption core. That is, even if the information is intercepted, it will be completely useless due to the encryption. We don't see any risks connected with data leakage in everyday life either, because if a card is lost or stolen, because it can't be used without any identification or authentication tools. Forgery is also ruled out, seeing as it's hardly possible even using high technology industrial production facilities, and even less so using primitive tools.
We are talking potentially 150 million cards, which are to be issued over the next 5 years. This presents huge business opportunities. We understand that it's not just about issuing the card. There's also a requirement to create infrastructure for readers and downloading new applications. As you know, the UEC can be also used as a credit card, medical card, travel card, etc. This will improve the quality of life for people significantly.