Clare Nuttall in Astana -
Kazakhstani IT companies have had to struggle against a bias in favour of international firms over homegrown rivals. Astana-based software company Arta has managed to overcome this prejudice, and now plans to expand across the Customs Union.
Founder and CEO Bolat Basheyev says he didn't originally plan to become an entrepreneur; he set up the business simply because he needed to feed himself.
Despite winning a programming competition that gave him a university scholarship, Basheyev had to take a job to support himself when he came to Astana, resulting in a disastrous chain of events that ended in him living rough at the city's railway station. "I was expelled from university and my dormitory room was taken away because of my low attendance. At work, I didn't receive my salary for three months, so I resigned. I had to sleep for three days at the railway station," he tells bne in an interview.
Basheyev's big break came when a friend suggested that he work on a management system for their university. "Barely holding in my emotions, I said of course."
To sign the contract, Basheyev had to register a company, which is how Arta was founded. The system he and his team developed was successful, and subsequently adopted by 50% of Kazakh universities within a few years. At the same time, the company developed a process management product for schools that was eventually installed in 45% of schools in Kazakhstan.
Since then Arta has developed more products and branched out from education into the corporate market. "We saw that companies were all buying the same three to five products such as content management, workflow and performance management, so we decided to bring them all together into a single product," says Basheyev. Arta works mainly with medium-sized and large companies with over 50 employees, and around 25% of its business is with government and state-owned enterprises.
Across the union
It's not all been plain sailing. When the craze for iPads took off in Kazakhstan, with former prime minister Karim Massimov urging government officials to invest in the devices, Basheyev decided to put Arta's software onto a tablet computer so that its customers could be permanently connected. Arta developed new mobile software and entered talks with Hong Kong-based Archos in 2010 to produce the "Kazakh iPad", as its tablet was dubbed in the local press. But the volume of tablets Arta needed was too low for the planned cooperation with Archos to be commercially viable, and the project was dropped.
Even so, Arta has steadily expanded its business; the company and its affiliates have turnover of around $6m, which has been growing by around 100% a year since 2008. Basheyev forecasts that Kazakhstan and its fellow Customs Union states, Russia and Belarus, will be one of the world's fastest growing markets for business software in the next five to 10 years. "Europe and the US have many companies that have been established for 30 years or more. Here is a new market so there are more opportunities," he tells bne. This is particularly true at present, as many local companies are replacing their first software packages bought around 2004.
However, he admits that Arta has had to fight the perception among potential customers, prevalent until at least the mid-2000s, that international software is intrinsically better than locally produced stuff. "People said companies were unreliable, and clients chose to work with global and Russian software companies. It made our job more complex, and often we didn't mention to potential clients that we were a local company."
Arta currently has around 150 partner companies across Kazakhstan, and since the launch of the Customs Union has been planning to expand into Russia. By 2015, the company aims to have partners in all 89 regions of the Russian Federation. The current focus is on marketing and expanding the partner network, after which Arta will seek external funding to allow it to develop a new generation of products.
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