INTERVIEW: Azel pioneers IT market in Azerbaijan

By bne IntelliNews November 20, 2009

Ben Aris in Baku -

The first time Igor Yakovenko, founder of Azerbaijan Electronics (Azel), met Bill Gates, it was as a dynamic businessman in a new market. The second time he met him in 2007, it was as the head of the biggest distributor of Microsoft products in the Caucasus.

Born in 1961, Yakovenko was a math whizz at school and went on to graduate from the Azerbaijan State Oil Academy with a degree in automated systems. He had just finished a PhD in artificial intelligence and knowledge-based systems when the Soviet Union collapsed.

"When I was a student, I was paid RUB150. And when I finished my studies the state offered me a job for RUB165. It was the difference of about $1 and for this extra money I was supposed to get an apartment, buy a car and support myself. So I decided to go into business," he says.

Yakovenko joined forces with three other students from his institute and they contributed $50 each to found Azel, which today has an annual turnover of $20m and is the leading software developer in Azerbaijan and distributor of computers and office equipment.

Computers were still a relatively new thing in the region and the four began work setting up systems for companies and government ministries, where most of the staff were clueless about how to operate the new machines. "At first we were like employees in other people's companies, but it was useful as we built contacts and could develop our business," says Yakovenko.

As the business grew, the partners went into the distribution of machines as well as developing the consulting services and support services for company IT systems. "We used to offer four or five linked machines: for HR, the accountant, banking and for the general manager to run the company," says Yakovenko.

Today, Azel counts amongst its staff BP, many leading Azerbaijani companies and several ministries to whom it provides turnkey IT solutions and support. It is also a premium distributor for most of the major manufacturers of machines and software such as Hewlett Packard, Cisco, Microsoft and others.

Like a Lazer

Azerbaijan's retail sector is still in the early stages of development. After a population has covered their food and clothing needs, the next products they buy are TVs and phones. In this evolutionary tree of consumption, computers can also be found on the low hanging branches, but the market in the Caucasus hasn't developed very far beyond this. "It is a competitive market in the early days of development. Customers are very price sensitive, but they are moving slowly towards demanding better quality and more services," says Yakovenko.

The crisis has impacted sales in Azerbaijan, which are down by about 10% on year, but nothing like in other countries in the region. "Sales were still growing in 2008, they stopped at the start of this year and now they are still growing, but at a much slower pace. Still, our market has not been hurt like other markets in the region; in places like Ukraine, the computer market has completely collapsed.

To deal with punters' price sensitivity, Azel has produced its own computer call Lazer since 2003. They are assembled in Azerbaijan using imported components from international producers and the price starts at AZM245 ($305). The sale of the Lazer is still a small business with annual sales of between 1,000 and 2,000 machines a year, but the quality of their machines is on a par with the foreign-made computers and have an ISO certificate. "Azerbaijan is a good market. It is stable and thanks to the fact that the external borrowing of the whole country was less than $2bn, the international crisis has a limited impact here. There was no panic and we still have a stable macroeconomic situation," says Yakovenko.

As one of the most dynamic companies outside of the country's oil and gas sector, Azel has also been an active player on the nascent corporate bond market, issuing bonds every year for the last four years. Its bonds are included in the country's bond index of blue chips, despite the fact it is dwarfed by some of the oil producing companies. In August, the company successfully offered its latest $3m two-year bonds and plans to go back the market with another issue in the start of next year. "The market is still in the early days of development but despite the crisis the prospects here are good. Our ultimate goal is to list on the AIM market in London in 2012," says Yakovenko.

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