Valentina Kulagina: "Replacing up to 60% of Western Solutions by 2024 is Only Possible Through the Creation of an IT Consortium..."

— Valentina, how much was the important substitution trend apparent to you in the last 2-3 years? How has your company’s product portfolio changed to keep in line with this trend? Can we say that the percentage of domestic and foreign products in your product portfolio has changed?
— The import substitution trend is quite long-standing — it dates back to 2014. The process was going smoothly and was aimed at replacing raw materials, equipment, electronics, and software. The Russian government did not follow the principle of a sharp and rigid ban of all foreign suppliers, but increased state support measures, thanks to which many Russian solutions appeared in the domestic software Registry from year to year. ICL Services has been carefully monitoring the vector of the regulator’s activity, promptly diversifying its product portfolio. For instance, the share of products from Russian manufacturers now stands at about 45% in the information security direction alone. We have trained specialists and the experience needed for the implementation of all these solutions.

In the direction of custom development and implementation of complex corporate solutions for import substitution, we use free software (open source) and the platform of the Russian company 1C. We’re constantly increasing our team’s expertise, especially with regard to the solutions used in the Russian industry and trade.

— How do you assess the readiness of domestic IT manufacturers to provide comprehensive import substitution solutions? In which segments of software and hardware solutions do our manufacturers have achievements, and in which we are still stumbling?
— I’d say that the readiness of our domestic IT manufacturers to provide complex import substitution solutions is high. We know a number of leading Russian companies that offer outstanding products in the segment of cryptography and communications channel protection, capable of withstanding competition with foreign counteractants.

As mentioned above, a large number of Russian solutions are registered in the Registry of domestic software, but the question is how easily they can be scaled.

Foreign competitors had no problems with scalability, they spent a lot of money on promotion, invested in pilot projects to form an evidential base in terms of product efficiency, so that their solutions were constantly on the radar. Thus, even if someone in the country produces a cheap and high-quality product, they may not have enough resources to promote and persuade customers to change manufacturers or choose Russian counterparts. And here’s why. For instance, you could rely on a single vendor’s product line, such as Check Point or Cisco, to provide remote user access to the infrastructure when using Western vendors. These products were compatible. In the case of import substitution, this task would require the integration of several solutions from domestic manufacturers — CryptoPro, Security Code, Sakura — and the assembly of booths for the preliminary testing of these solutions’ compatibility. And not only that — the implementation phase would require high competence of the team. So it turns out that while import substitution is possible, it brings about an inevitable increase in the amount of computing resources and labor costs at the implementation stage.

Import substitution is currently stumbling in the creation and implementation of Russian software in the backbone industries, in particular in the oil and gas complex, mining, and chemical industries. Not one system integrator will be able to replace or make the migration from foreign to Russian software on their own if all the SCADA systems, fire control systems, MES, ERP, ECM and MRO are tied to foreign software products. They comprise 90% of the oil production IT infrastructure and up to 98% in refining.
We believe that in the near future, it’ll be possible to implement sophisticated domestic solutions and achieve the country’s goals (to replace up to 60% of Western solutions by 2024) only through the establishment of an IT consortium with regulation and support measures from the state.

— How does your import substitution portfolio look now? Are you planning to increase it in the near future?
— The company has no aggressive plans regarding the expansion of its portfolio and product line at the moment. The ICL Services website has a section dedicated to crisis solutions offered by the company in the current environment. Presently, it contains the Russian analogues of foreign solutions in the field of multimedia and ERP systems, but soon the section will also include a memo on import substitution in the field of information security. Migration plans and import substitution packages have already been prepared.

We see that it’s not just individual solutions and small implementation teams that our customers require now. They seek competent teams of experts — «rapid response teams» if you will — in both software issues of infrastructure optimization and information protection. The company has a 30-year experience of working with a wide range of Western and domestic solutions. It has gone through several crisis waves in 2008, 2014, and 2020 — we are therefore ready to share our deep expertise, perform migration work and provide further technical support.

Our projects have been using solutions based on 1C for many years now — they allow the widest possible coverage of the needs of industrial enterprise, while not being inferior in functionality to the imported solutions. The conventional wisdom has it that many domestic developments are inferior to their foreign counterparts (SAP, MS DAX), but the growing number of 1C implementation projects and migrations from SAP to 1C, as well as the increasing number of partner companies, serve only to prove that the 1C: ERP.UH, 1C:UH, 1C: ERP, 1C:EDO, 1C:TOiR, 1C:WMC platforms proved its reliability and functionality.

— How do you assess the digital maturity of Russian companies and public sector organizations and their readiness for digital transformation — including the transition to Russian solutions? How helpful are state support measures (subsidies, grants, tax maneuvering)?
— We expect that the introduction of personal responsibility for the heads of state corporations, state-owned companies, and organizations with state participation, which will come into effect on May 1, 2022, and the plans of the Ministry of Digital Development of the Russian Federation will radically change the situation in the country. We support the ideology put forward by the Russian Ministry of Digital Development. It postulates that it’s necessary to promptly form joint teams of IT specialists, unite competitors and channel all their experience and knowledge into the creation of import substitution solutions for critical areas of application in the fields which ensure the country’s information security and technological independence. Our company has experienced such an interaction, with IT giants uniting and implementing IT products for the Universiade and the Pension Fund of the Russian Federation, complementing each other with expertise in different areas. This speeded up the solutions’ entry into the market.

Additional tax maneuvering also stimulates companies to undergo digital transformation. Tax incentive measures: the first comes into effect if a company implements Russian solutions based on AI, allowing it to enter the costs into the expense item with a 1.5 coefficient, thus reducing the profit tax. The second one provides an accelerated depreciation process for Russian-made PACs. Businesses will be able to write off domestic solutions three times faster than their foreign counterparts. The third measure stipulates the possibility of introducing a tax deduction by regions for companies that use Russian solutions and PACs.

— How do you assess the risk for the Russian IT market due to the (temporary?) departure of foreign IT vendors — Intel, IBM, VMware, Microsoft, Cisco, and others? What is the thing to be most afraid of, and what to do? Your advice to corporate users of software and hardware, telecom equipment, IS solutions, etc. of those companies that have announced the suspension of their operations in Russia?
— First and foremost, it’s necessary to maintain stable operations in the face of the license revocations for the solutions of Western IT vendors. This requires the following:
• to audit the solutions currently in use, disable automatic updates, inspect the built-in technology accounts in the software.
• to organize a perimeter circling critical IT infrastructure components — a «bubble» of information security — to eliminate the possibility of disruption by manufacturers or cybercriminals.
• to ensure that these systems are monitored by both IT and IS departments for timely response to incidents that arise to reduce the impact on the company’s reputation.
• to create backups of all data, especially the data stored in cloud systems.
• having stabilized current operations, to develop plans for the replacement of key IT infrastructure components and security features with Russian solutions.

When migrating to Russian solutions, you must keep in mind the requirements of Russian law, especially when using certified information security devices and CIPF.

— In what ways is your company ready to help customers with import substitution — does it provide consulting services, assistance in developing an import substitution strategy, development of specific projects, assistance in obtaining benefits and other preferences?
— The company has several Competence Centers running, where professional and certified cloud architects and information security consultants will provide consulting services of any complexity, conduct audits and develop an import substitution strategy. As part of this activity, we’ll check and demonstrate the necessary functionality on our test bench, select the solution with the optimal capacity and functionality, develop a target scheme and a plan for upgrading the network — all with consideration of the existing infrastructure — deploy the necessary solutions and provide technical support 24/7.

— Has your company implemented any import substitution projects in the recent past? What are these projects? Or name the biggest/most interesting ones.
— Import substitution projects have been underway for several years now. 1C Competence Center, for example, has implemented more than 250 projects of varying complexity. Among the most relevant projects to date we can highlight the transfer of management processes of operational (industrial), financial, and economic activities of the Commercial Port of Vladivostok PJSC from the MS Axapta system to the 1C:ERP software with the localization of information flows within a single 1C:ERP 2 solution.

— Thank you so much for the conversation!