Currency Exchange / Rub

USD	31.1582
EUR	39.8077
GBP	49.2611

www.amcham.ru/events/ceo/peterson

Printer-friendly version

Apr 16, 2004: CEO Forum with Don Peterson of Avaya

The AmCham Russia CEO Forum with Don Peterson took place April 16, 2004. Following the breakfast meeting, Peterson spoke with AmCham News.

How big is Russia for Avayaand what kind of growth potential do you see in Russia?

We haven't sized it. We don't actually give out size by market, but it is our third biggest individual country behind the U.S. and UK. Percentage-wise, certainly as an individual country, it is probably near the top of the list. This could grow into a meaningful percentage, not a double-digit percentage, but as an individual country a meaningful percentage in 3-5 years. This is a "now" opportunity and continuing into the future.

What do you see today that makes it a "now" opportunity compared to two or three years ago?

Today there is a readiness to look at the new technologies, readiness to invest, and an openness to doing business with a U.S. company – 90% of our business in Russia is with Russian companies. Even though we serve many of the multinationals, they are relatively small here.

Where does Russia fit when you compare it to countries like China and India?

I think India and China have similar long-term secular growth opportunities that are quite substantial. India and China are larger countries, so the dynamic there is somewhat different, but I think the growth opportunities are consistent.

Is it right to talk about Russia in the same breath as India and China?

I see Russia as an early stage economy shifting increasingly to capitalism, still building the underlying tools of law and so forth that are required for that to expand rapidly, but with a general consensus that more freedom, more use of capital, and more encouragement of entrepreneurial activity is the key to progress in the country. So in that sense, I see a very similar consensus in Russia as exists in India and China – obviously very different circumstances in each one, but the same trend.

Do you see a niche for Russia in doing more sophisticated types of programming?

Russians are very capable in these areas – as are the Indians and the Chinese. But for the last 20 years, the Indians and Chinese have been major inhabitants of the graduate programs in America and the Russians haven't been there. So, the Indians and Chinese who are running the companies that are drawing this work over there are calling people they went to school with. This is not some macroeconomic policy executed by government; this is networking right out of school. They go to people who they know and trust and who trust them. That is how all of this is getting done. This is not a macroeconomic event in the sense of a government instituted policy.

Many of the Indians that are doing this work in India actually did the work in America after they got out of school. They decided to go back, sometimes because they lost their visa or simply because they wanted to go back to their family. They have maintained those contacts and brought that business. Russia does not have that relational infrastructure in place yet, nor is it likely to have the same model available to it of exporting a generation of students and then getting them back. In that sense, trying to find a way to make this all happen is going to be more of a challenge for Russia.

Does Russia have a competitive advantage in cost reduction for outsourcing compared to India and China?

I don't think there's an advantage over India or China. I think there is a way that Russia can be very competitive in that market space. It won't be able to be unresponsive in other areas and just rely on its cost structure – that won't be enough. India and China are pretty cheap. They also have positive trends in legal structures and so forth. Right now people have some confidence in those countries.

What do you make of the political blips we see and concerns about the tightening of control by Russia's political leaders?

From a business standpoint, increased control and reduced uncertainty is frequently a positive thing, so long as there's enough breathing room to let that entrepreneurial spirit shine through and drive the creativity that is needed for the overall progress.

Are other CEOs looking toward Russia these days as a place to do business?

It obviously varies by industry, but I think many business leaders in the U.S. are recognizing Russia as a significant opportunity – lumped generally with Eastern Europe. If you look at Eastern Europe, the biggest thing there, once you pay a little attention, is clearly Russia and that opportunity.

Was there anything particularly surprising or interesting that came up during the forum?

I would just make the observation that I think the group interaction, the ideas that came out around the table were helpful to me. This exact thing does not occur everywhere else. The fact that it is happening here – people are out with each other as a community – I find that very positive. I think this is a very good sign for future trade relationships, future investments, and so forth.

Are there any obstacles on the U.S. or Russian side that hinder the development of high-tech cooperation in the commercial area?

There is still, as there is with China, a lingering cold war model not too far below the surface, that everybody would like to ignore, but that every once in awhile rises up generally because of some news story of the day. I think the reality is that we're not going to get past that except with experience. I think the key thing is to move forward. I think the comment I made about this group being one of the best sources of evangelism about investment in Russia, is very important and obviously not just by the people, but by their company. I think that is what's going to win the day. People find out that when you go there and do your things, you achieve your goals. That will naturally attract, frankly, as much as the market can take and probably more. More Americans than they want by the time it's over.

Since this is your first trip to Russia, what is your first impression of Moscow?

It's a very different looking city...I think it has a tremendous amount going for it. It's very live – every bit of activity and night life as in New York or Paris. It has an appropriate place as one of the grand cities of the world. As it opens up, more people are going to appreciate that and take advantage of it.