Many high technology companies have been doing well out of syndicated state and government buying practices in Eastern Europe – in effect these support government-granted monopolies rather than preferred manufacturers. However, the political structures, as well as the huge state-sponsored conglomerates that have characterised Eastern Bloc economies, are gradually dissolving and their associated organisations are being split up. The prevailing political and economic agendas specify the development of capitalist business and trading practices but these are not going to materialise overnight, and there remains a huge number of implications for firms either already doing business out there or contemplating a move into these emerging marketplaces. In the Soviet Union, potentially the largest of the new markets for information technology companies, the ministries that control and administer the large state organisations and industries are being encouraged to diversify their activities into markets that will provide additional, and, it’s hoped, profitable, sources of income for the time when state support is either reduced, or removed entirely. A number of commercial zones – information technology and publishing amongst them – have been identified as potentially lucrative economic areas that are likely to develop rapidly over the next few years. Computing and data processing departments within these industries and organisations have become centres for both state-related and independent business activities, and as a result, many Soviet and other East European computer companies have been spawned by groups from such departments.
Fledgling outfits
According to Alexandr Fridman, who is the director of the Soviet Unix User Group, these fledgling outfits are able to operate as hardware and software dealers and devolve their interests into separate business activities. Moscow-based Computer-Aided Technologies, SRC in Yugoslavia, Software Products & Systems in Bulgaria, and the Czech firm Software Slusovice are all examples of this happening. Indeed a rash of spin-offs, co-operatives and joint ventures has begun to emerge. However, for Western firms already well-established in the East, these changes mean that central government buying will become of minimal importance for box-shifting. Small-scale purchasing and retail business is likely to be the order of the day. For IBM Hungary, one of the biggest problems that the opening-up of East European markets is presenting, is simply how to go out and sell its computers. There is a very limited concept of marketing, little or no experience of sales techniques and no history of sales careers in these countries, according to managing director Elek Straub. Previously, all of IBM Hungary’s equipment sales have been carried out through the government, which virtually guaranteed a market in perpetuity. Straub, who has 90 employees at IBM Hungary, says the outfit achieved sales in the region of $10m last year, and there are now at least 150 mainframe sites around the country. However he reckons there are at least 200 copies of IBM equipment, perhaps 100 copies of pirated mainframe software, and over 100,000 IBM-compatible personal computers in existence – none of them made by IBM. But many of the Rjad copies of the IBM 360 are likely to disappear over the next couple of years, he believes, as the current generation becomes more widely available, and spare parts for the dinosaurs run out. As far as software goes the problem of copying is endemic. It has been estimated for instance that 99% of all software in use in the Soviet Union is pirated – a figure probably only marginally higher than in the rest of Eastern Europe – although technically there is no such thing as piracy. There is no law to forbid the copying of software.
By William Fellows
Although new copyright laws are planned – and drafts of these laws are available – no intellectual property laws of the sort that protect source code in the West can be expec-ted in the Soviet Union for many years. Even with new copyright laws it will
be a long time after they are passed before any kind enforcement will begin, according to Irina Savelyeva, an attorney with Moscow-based LECS. The problem of software copying is a double-edged sword for Western companies eyeing up the East, for while a presence in the Eastern markets is becoming increasingly necessary, firms obviously do not want their products to be copied and distributed without any kind of return. There are, however, numerous – and compelling explanations for the proliferation of pirated software. In the first place Western software has only really been available – in the Soviet Union at least – for the last two or three years certainly before the relaxation of trade restrictions it all had to be copied. Second, most Western software – with some exceptions – is available only in exchange for hard currency, and prices are far beyond the means of most Soviet programmers or developers. A good example is Microsoft Word, the de facto industry-standard word-processing application in the Soviet Union according to Stepan Pachikov, general director of the Moscow-based software house ParaGraph, which produces a range of products from hand-writing software, through user interface technology, to computer games. He believes that the way to stop the endemic copying of software is to make it cheap. If users were prevented from using their free copies of Microsoft Word he argues, most Soviet programmers would simply have to stop working, such is the popularity of the package. There are reckoned to be 300,000 programmers in the Soviet Union – in an information technology industry employing 500,000 or so. With the average salary of Soviet programmers around 300 roubles a month, it would take over four years for an individual just to amass the 12,000 roubles needed to buy a copy of the package. President Gorbachev, who draws a salary of $2,400 a month, would be one of only a handful in the country able to afford the software. Paragraph, with a turnover of around 3m roubles is now working on a Russian-language version of Microsoft Word, and reckons it will sell upwards of 10,000 copies of it next year. Meanwhile, Christian Wedell, Microsoft GmbH’s general manager, says the company is putting together a marketing scheme for a rouble version of MS-DOS that its distributors across Eastern Europe will sell, and that it is also looking to produce MS-DOS locally in the USSR.
Copyright law
The copyrighting situation in Bulgaria – indeed across much of the rest of Eastern Europe – is not quite as dire as in the Soviet Union. Ivan Todorov of Sofia-based outfit COMSED, and a legal advisor to Bulgarian information technology companies, estimates there are 20 pirated copies of every software package for each legitimate one. There is copyright law in Bulgaria enshrined in Article 15 of the Decree on Economic Activity – but at present it is confined solely to text, though a more stringent piece of legislation is going through parliament, and is expected to become law in March of next year. Some companies realising the potential of the Soviet market, and the wealth of programming and development talent, have begun to act – such as Nantucket Corp, Los Angeles, California, developer of the Clipper application development environment for Ashton-Tate’s dBase database. Through its Moscow offices, Nantucket now sells Clipper in local currency – 6,000 roubles – and offers an extensive range of support services, a newsletter and user group meetings. This is revolutionary in the USSR, where the concept of support is unheard of, says Nantucket’s Vanessa Wade. Nantucket claims a paid-up installed base of around 1,000, and its first user group meeting in Minsk in October attracted 250 delegates. Nantucket also has an academic version of Clipper up its sleeve for release around the turn of the year according to Ms Wade. The one thing that is completely impossible to support though is a telephone hotline service, because as Paragraph’s Pachikov warns, trying to get a phoneline is more difficult than buying a nuclear submarine. The prevaili
ng opinion of Soviet operators, and of Western companies already trading in the East, is that the best way to stop people stealing your software – or any other product – is to be there yourself, in force. While Western companies have been searching for ways into Eastern Bloc economies for years, Paragraph’s Pachikov believes many are frightened of investing because of these problems. His message to them is simple – put your money where your mouth is!
