Once, in an interview, while answering the question “What prospects for future, those private and for your company, do you have?” Natalya Kaspersky has revealed the following:

“Those private, for the time being, are inextricably intertwined with company’s ones. The company wants to launch serious attacks on several countries’ local markets; we are going to release pioneer products in data security field, and, surely, develop business of our own. And as for the future, well, we will see, how things will come around. Perhaps the company will become as large as Microsoft, that I will not be able anymore to manage it. Hence, I will start some new project."

KL has not yet become as large as Microsoft, but it had launched attacks on local markets long ago, and still continues to do this. Let’s see, how Kasperskys describe it.

Really international Company

Figures of Kaspersky Lab, which is one of the leading Russian commercial antivirus software developers, are rather eloquent. Already, for four years on end, the beyond the country sales have been yielding a better return then those on domestic market. In the year 2005, only every forth ruble was realized from Russian customers; this year, an earnings share, accrued from domestic customers, is going to amount to merely 20%.

“International Company which develops in Russia”, so individualizes her business Natalya Kaspersky, KL CEO. By now, merely 110 employees in 600 company’s stuff members are working abroad, assuming, that three years ago the company had abroad merely 110 stuff members. Sales gain of Kaspersky Antivirus in Russia exceeds rate of IT market growth (by 45% in the year 2005). On the other hand, last year, company’s product sale rate abroad increased by 80%.

Outside Russia, Kaspersky Laboratory’s largest sale markets have become continental competitive markets. This year, in the first half, merely in Germany sale rates have exceeded those in Russia.

10 year long work has summarized in such an impressive results of KL’s international activity. With no role model within Russia, company’s management has had to get trough all errors.

First steps

Everything has begun, when in 1993 Eugene Kaspersky granted a free admission to a product, which had been developed by him. Files were placed at BBC’s, since World Wide Web had not yet stood on his own feet.

As first ones have got interested private in software distributing entrepreneurs from Italy and Switzerland.

In 1994 Eugene signed contracts with them. That very Swiss man, the only one out of the KL’s first “partner wave”, still remains KL’s reseller. As for others one-man-companies, they did not succeeded in not growing with developer, and it became necessary to part company with them. At that moment, by the end of 2005, seven or eight in ten partners resided abroad. Among them there were an American, a Polack, two Germans, by one in both parties of already united Germany, western one and eastern one.
Partner network it could be called mere nominally. Monthly earnings amounted to 200 dollars, at times even less. Supply terms and conditions were the most concessionary ones, so that only to push sales forward: the discount sum has been amounting to 70%. Nowadays, nobody regrets it. “In my opinion, this strategy paid off, at that point of entering western markets”, - assures Natalya Kaspersky.

Curiously enough, that in Russia, at that time, antivirus software did not enjoy much demand at all. Sales on domestic markets started in 1994, but, relationship with dealers were abrasive and strained. Kaspersky‘s Antivirus was being displayed at a single store.

England

There are two versions of reasons and circumstances around the setting up of Kaspersky Lab first store. In 1996, a was present at a conference in England,- tells Eugene Kaspersky currently, Head of Antivirus Research Department, and loved the country so much that, when I was back, I told “let’s do business there!” So we let it begin. To tell the truth, we have done two years on.

The CEO narrates her recollections in a more low key speech. “In 1996 we were barely setting up the company, so we had many things to do then start business in Britain. Kaspersky Lab, as it is, came into being only in 1997. That’s why at that moment UK was out of question
 
In England business development has been stumbling on great difficulties. While in other countries company’s sales rate was growing steadily, in England earnings’ “pointer” hardly has been departing from zero. Later it occurred, that British market was one of the most difficult ones to conquer.

KL’s partner in London was a certain Vladimir Freidin, a Russian emigrant, who has been living in England for 25 years and occupying with software promotion. During Natalya Kaspersky's visit to London, Vladimir convinced her of setting up a local office in England, on a basis of his small enterprise. “We have thought, oh, yes, it must be cute” – recollects Natalya Kaspersky.- “And with this very office we committed all thinkable and unthinkable errors, which it was possible to commit”.

Nowadays, at Kaspersky Lab they are convinced of the fact, that it is not quite right to set up an office on a partner’ business basis.
Meanwhile, at that time, Kaspersky’s management was not much convinced of it. Everybody hoped for sale growth. Vladimir failed to come to arrangements with serious English resellers and customers. Since 2002 to 2004 the branch’s sale rate was growing, increasing by 70 % annually. Curiously enough, that at first KL office resided at Cambridge. Later it was found out, that this city of world famous university was a quite pretty place, but, at the same time, of little use while doing IT- business. Nowadays Kaspersky Laboratory stuff in England resides at Abingdon, in the vicinity of Oxford.

To break the Britain’s neck they have not succeed till now.

Though, during last three years, the office has not been yielding any loss, but, by comparison with other countries, it is obvious, that the company failed really even entering this market. Conservatism of British isles’ citizens, extreme inertia of marketing channels, British manufacturer (or, at least, American one)-oriented approach of customers, are being defined as main reasons, why English office had to remain content with its mite in KL’s total sales pattern.

The British choose for something new rather hardly and reluctantly. This is amply sufficient to recollect their famous washstands at which till now (!) are being applied two different hot-water and cold-water tops.

“Choosing between comfort and conservative decisions the British always choose for the letters”, - acknowledges Eugene Kaspersky.-“It is quite normal, they are accustomed to live in this way”. This cultural tradition seems to be the most fertile ground for customer’s brand matching. Having chosen for any famous Antivirus supplier, 70% of customers continue to prolong subscription annually. It is rather complicated to “unglue” a British from any known brand.

While promoting exactly IT-product and trying to build brand’s familiarity, the Laboratory stuff faced another British isles’ particularity, namely, that British were absolutely not accustomed to read computer –related press. A computer proved to be for them, along with a microwave oven, a common office instrument, and nobody takes much interest of it. It is possible to build a brand, exclusively and solely, by means of business-related mass media or branch exhibitions. Kaspersky Lab has been occupying with promoting a brand of its own, already for 6 years, though this occupation is non very cheap. It is more expedient to purchase a brand, which is already familiar to market, as it has done an American company “Network Associates”. In 1998 the named company purchased from British Antivirus developer, Dr. Solomon, a product, which, at that time, occupied 70% of local market share, for reimbursement of 640 million US dollars.
By the way, if KL had happened to have an extra half milliard, it, probably, would do the same thing.
With no extra funds to use for breaking into the market in a similar way, Kaspersky Laboratory was forced to move along on a less expensive and more complicated path.
Also they failed to build up a co-operation with retail networks, while a brand, familiar to all, was absent. “Retail network in England is made up very simple, namely, consistent of Dixons network (90% of market share) and variety of smaller regional networks, distributed trough the whole England. We have failed to make arrangements with Dixons. They are interested in brand or in heavy cash investments in marketing. Heavy means hundred thousands pounds. We can not afford it”, - explains
Natalya Kaspersky.

A for smaller companies market share, there too things were not going much better. Ingress to a market share of small and middle enterprises is possible only by means of channel of distribution. Here, too, software developers can face another problem.
 

“I can’t find a better name for it, - tells KL CEO,-”lazy” channels should be a common phenomenon for British market. In case, for example, in America a person sees a possibility of gaining another dollar, he will move around more quickly. In case a British sees this possibility of gaining another pound, he contemplates, whether he needs it. May be, it would be better playing golf instead. They did not want to change anything. They feel good just so. In this regard, new vendor’s arrival is not to be welcomed. We stay here and feel good

Well, such a "who cares" attitude. How to beat it?

Lonely, painfully, slowly. It is necessary to let brand grow. It is necessary to make customers to demand it and to force the channel to sale it. But customers are conservative. So we have a vicious circle”.
The thing, which saves us mostly, is a sale through our own web-site. About a third of gross turnover make up home users of Kaspersky’s Antivirus. Mature market has also his advantages, namely, the fact, that software piracy lacks fully. “Actually, the British are paying off a support, not a product. In England antivirus program is considered to be a service.”

Besides, that’s why in KL as one of the main competitive edges they consider to be a support availability within country. The British like to speak over the phone and need to hear correct English. The question of the language integrity has become especially relevant after the call-center outsourcing practice in India had acquired a certain currency.

Meanwhile, the corporate market is still remaining the most profitable one. This is direction, in which funds have been put to, lately. Major customers have been preparing their contracts for years, but after having signed it, pay generously. The sales here are also mainly direct ones. Solution providers, as well as retail vendors, are ready merely to draw up contracts, a task, which has being done by KL itself brilliantly. At the local office nowadays are working 20 stuff member, only 2 of them are from Russia.

Market dearness question is arising here, too, because the daily price of an engineer’s training in Britain is literally outrageous, hence, none of the partners is not quite eagerly anxious to place funds into the project. Though at Kaspersky Lab they have admitted, that direct sales in region were a forced choice, not that strategic one. “If we happen to develop some large corporative projects, which to realize for we will need a partner, we, surely, will start to sell by means of a channel, tells Svetlana Ivanova, Head of the KL British office.

As the result, according to Eugene Kaspersky, while bearing minor (for global players) expenses, the company has succeeded in making British representative office profitable, as well in getting a market share amounting to 1-2%. By the way, market share of a local vendor and one of the market’s leaders, Sophos, makes up merely 15 %.

Success in Germany. Whoever it says, that geopolitics is to be an estranged thing, but, in practice, it influences on economics straightly. The British isles market is extremely near to that of USA and is being under its strong impact. Any company, which does not have an office in the USA, is to be faced with cautious attitude here. In KL practice there were cases, when country of origin was one of significant reasons of having lost a tender. After KL has set up an office over the sea, it uses this factor by calling itself as a company, which has a registered office in the USA branch while develops its software in Russia. According to Natalya Kaspersky, everybody has gotten accustomed to the fact, that there are good developers in Russia, and, thus, react normally.

Germany

In Germany, where KL branch was set up only 2 years ago, there was no need of such contrivances.

Here the Russia’s image is quite positive one, even by advertising, a creators uses a Matrioshka (nested doll), while in Britain or USA it would be a road straight to fiasco. As it was mentioned above, this year sales rate in Germany, for the first time, exceeded sales at domestic market. Anti-Americanism of the Germans, as well as that of the French, is considered to be an advantage for vendors from other countries.

But, in would be difficult to achieve such impressive results, basing exclusively on dislike towards chief competitors’ country of residence.

“The Germans loves to test all, whatever it would be, including software, - tells Natalya Kaspersky, - We have been sending our product for testing wherever it was possible to. Since our product’s quality of viral code detection was high, we won these tests rather often. Thereby, we have reserved a sufficiently high level of familiarity long before we had started to do something within this region. Toward the year 2000, a few years before setting up a local office, every tenth German from target population was aware of Kaspersky Lab’s name, whereby our channel of marketing was a pretty mess. By that time, we had failed to find a proper manager.

Two Russians, who were at the top of German business branch one after another, failed in satisfying our objectives, and were fired. The first German we had hired, escaped, without even having begun his employment. But, instead, the next one proved to be a right person. Andreas Lamm, who is at the top of the Kaspersky Lab GmbH, is being respected within the company and called “an absolutely fabulous manager”. He inherited from previous managers relationship with around 40 local partners, who had an extremely low sale rate, but ambitions high and as a structure a real mess.

 All they called themselves distributors, wanted of vendor a high discount rate, and prosecuted wars with each other.

In the course of year, magician Andreas has divided the partners in three groups, after he had parted or either succeeded in coming to terms with someone. As a result, now, onto all three countries, i.e. Germany, Austria, Switzerland, fall merely 6 distributors, which supply software of more than 1000 partners. Afterwards, Andreas hired sellers and technicians, organized trainings, and sales have started. Over the last three years, earnings growth gas been amounting from 100% till 200%, market share approximates to 5%. In the first quarter of 2006, Kaspersky Antivirus Personal succeeded in occupying the third line in the country’s retail market of antivirus software. It has become possible, owing to successful co-operation with a large retail player Koch Media Company. At first, we have been working with other partner which was less large, but failed. Though sale rate was not that low, we expected more success. Nevertheless, this experience made it possible for us to approach a more large retail network.

At first , at Koch Media’s, they were stumbling at possibility of achieving success of a less familiar vendor on this troublesome market, tells Natalya Kaspersky, and demanded from us serious marketing-related obligations. Bue we made them break through reserve. Nowadays we order some music for accompanying negotiations.

At the Laboratory they are sure that “bumps and scars”, which they had gotten during conquest of the British isles, as well as more open-minded local population, have co-operated to their success on the Continent . Besides, level of competition with chief competitors (i.e. the Americans) here is objectively lower, but not only owing to countries policy orientation. English-speaking USA market, together with its “trailer” Britain, is larger than linguistically diverse European countries. That’s why, while developing business, the Americans do not put much priority on these countries. KL uses this factor for its own benefit.

Asia

Kaspersky Laboratory’s movement toward East has started over the first years of the Millennium. First endeavors to enter eastern market were being done in 2002 and 2003, namely in Japan and China. Both markets have proved to be absolutely different from those Europeans. Japan has proved to be a “squared” Britain, while China has justified the worst apprehension in regard to uncultured manner of doing business practice.

Japan

“Japan, that's the limit, - assures Natalya Kaspersky. The country has as much limitations as Britain, adding an Asiatic mentality. For five years, we, at the drop of a hat, have been visiting all those exhibitions, co-operating with enterprises, which were engaged in the field of promoting Russian business in Japan. With zero result.

No one copy has been sold. No one at all. The Japanese are contemplating, smiling, telling, that they are much interested of, nodding – and nothing. Nothing happens. Now you are asking me why. I don’t know why. Simply, nothing happens. Under these circumstances, when the company had nothing to lose, the first partner, who had been eager to become Kaspersky Lab Japan, was approved at once. After taking a glance at the “firing” list of the clients-to-be, developer’s representatives become sorely perplexed.

The names were so famous, that a question has aroused, whether it could be possible at all. But, after a while, every tenth company, mentioned in the list, has become a user of Russian antivirus. The process has started to progress, but, upon few months. The partner went bankrupt. His indebtedness the unsuccessful Japanese has been trying to “assign” to KL. At the Russian office they were expecting from him to commit a happy dispatch, but hara-kiri proved to be out of fashion nowadays. The only common thing of both companies was name, and even that one the Kaspersky Lab has been requiring from the partner to change it. The Russians undertook two legal proceedings and won both.

In 2004 the stuff members of the ex-partner incorporated a franchising company in order to start promoting KL software on the Japanese market. Business branch in Japan is still remaining insignificant and unprofitable. They have succeeded to find a CEO of the local branch only upon 2 years after described happenings. At the company they are explaining, that this task is not a trivial one. “Market opposition is so strong that any foreign object is to be imperceptible”, explains Natalya Kaspersky. One shall get on the inside of this environment. But how is it possible if you have a European face. That’s a problem”.

China

For defining the Chinese market fully, Eugene Kaspersky needed to use the only one single expression, namely, “they are stealing”. Within the company’s gross turnover this county takes less than a per cent. Whereby, in terms of quantity of customers, who visit the Lab’s sites to purchase antivirus upgrade, China stand first on the list, having a share of 25%. The second one is the adjacent Taiwan, who has a share of 12%. The Russians are the fourth ones, after Germany.

Meanwhile, software piracy is not an only problem for foreign companies on domestic market. Like in nearby South Korea, in Kaspersky Lab China has begun to do business, co-operating with a local partner. This very pattern, which is of not much effect for a vendor, proved to be the only possible for development within the country. This thesis confirms experience of not only middle ones bit also that of the largest technology companies of the world. It is impossible to merely hire stuff and convince him to work fruitfully. There is also a necessity of finding a special partner, who understands this market’s distinctive features.

At the same time, his main objective is to perform a foreign business protection from compatriots. Though, there is no guarantee in this case, too.

But, it is common knowledge, that the Chinese economy is highly- corrupted, in this case, the matter of question is not that of administrative pressure. While exposing distinctive features of local business co-operation practice, Natalya Kaspersky recollects her dialogue with a Russian Embassy’s representative in Beijing: “We have invited stuff members of our diplomatic mission in China for attending at launching our pioneer product. They are telling, - it is interesting enough, that in all Russian companies, you are the one, who is presented on the Chinese market. I have answered, that there are many other examples to mention. They are telling, it’s true, there have been built a lot of plants. But then, after having built it, they set up a joint venture.

After a while a plant’s affairs start to decline.

Instead, in front of it, they open another one, which manufactures the same things but being less expensive. And, for some reason, the plant starts to prospering, but being of a pure Chinese manufacturer.

Korea

History of KL office setting up in Korea is, may be, the most exotic one. CEO of a local antivirus software developer, unexpectedly for his colleagues, has decided to buy a theatre for himself.

A real Korean theatre in the vicinity of Seoul. For purchasing it, he has spent 12 million dollars of enterprise’s funds. His colleagues did not appreciate their CEO’s creative urge.

A little later, Kaspersky Laboratory has set up, on the basis of these managers’ team, a branch of its own in Seoul, though prior to these happenings, nothing of the kind had been planned. By the way, things came around similarly in Romania, too, where the Russian developer’s branch had been set up a year before.

Central Asia

Laboratory’s background in Central Asia confirms an extremely high corruption level in the region. All activity reduces itself to the following: find a necessary door. Things came around exactly so in Uzbekistan. The company found a necessary partner and during the shortest period of time took a domestic market share, which amounted to 90%. After the partner seceded, the company, during the same period of time, lost all customers in the country. At the Kaspersky Laboratory’s they comprehend the fact, that investments into promotion in similar regions are necessary, all the same, but are financing it on leftover principle.

What to do with this Asia?

Nevertheless specific mentality of the Asians and their business ethics, at the Kaspersky Laboratory’s they are hoping on to regain success there. The company has a plan, how to converse illegal users into the legal ones. As one of the main directions has was declared an Antivirus sale by means of the Chinese web-providers. Through the named action, it is supposed to cover a larger, even by local measurements, audience. Besides, co-operation with the Taiwan OEM-partners is developing rapidly. The latter, among other, integrate down-sized versions of Russian Antivirus Software into modems, manufactured by them.

Where to go further?

The key direction for Kaspersky Lab expansion over the next couple of years was declared USA. The company’s office in this country was set up in 2005 and still remains unprofitable. According to business-plan, the company’s representative office shall have performed break-evenly by the end of the year 2006, besides, from the beginning of the next year shall have become profitable.

Meanwhile, enormous, for KL measurements, funds are being spent for promotion. Most probably, expansion to Latin America will be a part of the USA branch's jurisdiction.

As the second priority is mentioned to be a further development in Europe, including Italy, Spain, Balkan States. Within these territories the Kaspersky Laboratory’s partners have been working during long period of time rather successfully. Only after them, in the “table of ranks” is mentioned Middle East. At the company they have already prepared a special program concerning development within this region.
So far this market, from the point of view of investment’s return, is insignificant. Expansion to Asia is being continued on India, Malaysia and Australia.

Curiously enough, one of the difficulties, which keeps the company down, is its quick development.
Over the last couple of years Kaspersky Lab turnover growth was amounting, upon average, to 74%. CEO acknowledges that the enterprise is hardly able to “digesting” this growth. “If we had some additional funds, and we have been growing on their account by 150% over three years, annually, we would have been simply pulled to pieces. – tells Natalya Kaspersky. I think, we would have lost any control over business. The structure needs a certain nurturance, but while it is growing rapidly, there is not enough time for it. The question is, whether we need it”.

That’s exactly why the funds, in case a sufficient basis for them is present, the company may place to the new technologies developments, in something, which could bring to any fundamental advantages in about 5 years.

It is quite unthinkable but nevertheless a fact. When they are referring to the factors, which let the Russian companies enter into competition on international markets, to everybody’s mind comes at once our main but discreditable advantage, i.e. low-paid manpower, and therefore, low price of the product. Kaspersky Antivirus is being developed in Moscow, where cost of labor over the last years has become very high. At the company they assure, that stuff members in Russia’s capital get higher wages than their colleagues in Germany. In regard of the reimbursement level, according to the company’s information, only Britain and oil-rich Norway leaves Moscow behind. In any case, the way of low selling prices has never been considered as attractive.

An above mentioned story of foreign expansion is not indicative of cloudless future of the Russian leading antivirus developer. Market of this software’s kind is extremely unsteady, and situation may be dramatically changed already in the next years. The main troublemaker is Microsoft, who is to launch his own Antivirus software. This story is merely indicative of the fact, that both Russian software product and Russian management are able to be successful on international market.