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As the founder of “1C” built a business with revenue of $1 billion (part 2)

Rebirth of dealers
In 1994, small and medium-sized companies could already afford more expensive products, and their owners understood the need for modern accounting. Noticing changes in demand, “1C” released the program “Accounting 6.0” for Windows. Qualification of accountants was not enough, and the seller had to think about technical support. “1C” could go the traditional way, expanding the staff of technical services, but even the most brilliant support service would not be able to provide quality support for the product throughout the country.

Then Nuraliev decided to give the function of technical support to partners. However, many dealers did not want to take the risks of serving end customers. To work with the new product, it was necessary to hire and teach specialists, create innovative units, call centers… From the sale of a beautiful plastic case with three five-inch disks of “Accounting”, which cost $ 480, dealers received $240. And the average salary of the employee of the partner company was about $100.

Faced with resistance, Nuraliev decided to change the format of the relationship — to turn part of the dealer network into a franchise. “Franchising in the IT are generally rare, the experience was not, — recalls Nuraliev. Something they invented themselves, something subtracted from Western experience that in other industries spied”. In addition to the prefix “1C” in the name and the right to work under the brand of the company, which received the best, partners provided technical support and advertising. They had to learn new programs and each pass paid certification. And to pay a $100 royalty per quarter, if you do not fulfill the sales plan.

For dealers, the fee for the status of franchisee was very significant, says Marina Slesarenko, Deputy Director of “1C”, and at that time — the Director of the company “Integrator” from the city of Volzhsky. “Nuraliev convinced dealers that happiness, if it will be with them to take the money and not directly with clients. While he was with them, takes the money, then interest, so they lived well,” she says.

But not only that convinced the dealers. The franchisee was offered not a 50% discount on the sale price of the product to the final buyer, as an ordinary dealer, but 55%. In mid-1996, 85 out of 1,500 partner companies signed up for the 1C franchise, and by the end of the year their number had grown to 590. The partner network worked for sale not only software “1C”, but also someone else’s — the same Microsoft programs, etc. Now “1C” earns on its business software more than 35%, another 40% — on the game. The rest is third-party vendor software.

The success of its own products “1C” was due to the fact that the company has established close relations with the tax authorities. “Changes in law are always published in advance, — explains Nuraliev. — Another thing is that when a document is prepared, it can have several options, and developers have to make two or three versions of the program, and sometimes even leave it “switch”.

The popularity of “1C” was confirmed by the frequency of pirate versions. According to the head of one software company, about half of the circulation walking around the market could fall on pirated copies. To begin to deal with this problem was only in 1997, after the release of the draconian anti-piracy articles of the criminal code, which for copyright infringement have relied in prison.

Nuraliev not in vain holil dealer network. In 2010, according to the company EMTG, the number of franchisees “1C” reached 6000. Such a network was not even in industries with developed franchising — for example, the retail X5 Retail Group had 610 franchisees, Sportmaster — 157, Rosinter — 109. “Nothing like the scale of no software company in the world,” says Ivashentseva from Baring Vostok. Now in the network “1C” about 10 000 enterprises, they employ more than 150 000 developers. And the staff of “1C” does not exceed 1000 employees.

The crisis of 1998 showed that the business software market is much more stable than other segments. The owners of medium-sized companies saved on it less than on the other. Sales of accounting software decreased, according to estimates of “1C”, only twice, while operating systems — five to six times, games and other multimedia programs — 10 times. The business part of the market recovered faster. In November 1999 monthly sales of 1C were higher than before the crisis: $2.7 million versus $2.3 million it would Seem, is the time to develop the profile direction. However, the “1C” went to another market.

In the midst of crisis, Elmir has come to the head of game software Yuri Miroshnikov and offered to make a flight simulator that would compete with the game from Microsoft. “It was scary,” recalls Nuraliev. “1C” and previously engaged in games that developed rapidly in Russia before the crisis, and in 1996 even released made based on the cartoon “Investigation are koloboks” game”Brothers Pilots”. Nuraliyev risked. In 2001, the game “Il-2. Stormtrooper” at the same time came out in Russia and in Western markets (where the publisher was the French Ubisoft). Specialized site Imagine Games Network (IGN) included it in the Top 25 games of all time. In stores Walmart “Il-2” bypassed the sales of Microsoft Flight Simulator, reported the research company NPD.

But soon “1C” had to focus on the core business. The company felt the pressure of serious competitors in the market of medium-sized enterprises, which began to implement resource management systems (Enterprise Resource Planning, ERP).

Counter fight
The main difference between ERP and other programs is that it combines accounting systems of all divisions of the company and maintains a single database for all tasks. Previously, there were separate programs for accounting, warehouse, store, logistics, work with personnel and customers. The ERP system brings this information together. With its help, the Manager can see the history of relations with the client, his credit rating, the availability of components in stock for this order, and the head of the Department — to take into account the loading of orders and the schedule of employees ‘ vacations. When accounting is conducted by Department, the top Manager receives conflicting information, but if all of it is brought together, it becomes more difficult for his subordinates to manipulate data. ERP is not cheap. The cost of systems for large businesses starts from $1 million, for the average — from $100 000. But in the 2000s, Russian medium-sized enterprises could already afford it.

Anticipating the growth of demand in the Eastern European market, in 2002, Microsoft bought the manufacturer of software for the “middle” Navision. A year later, SAP — a leader in the development of management programs for large companies — also entered the Russian market of medium-sized enterprises. Global grants were “from above” — from major customers to medium.

Nuraliyev went to a new niche “from below”. On questions of journalists about the competition with world corporations he joked, calling the events “counter fight”. In 2003, “1C” has released the eighth version of the system “1C: Enterprise”. It was intended for companies with hundreds of jobs and larger. Two years later, according to the market researcher IDC, “1C” in the Russian market ERP held 9.7%, and in 2011 — 31.6%, leaving behind, for example, Oracle.

Due to what Nuraliyev successfully conducted “counter fight”? “1C” helped the development of the market. In the Wake of economic growth already working on products “1C” small businesses grew rapidly, turned into “average”. And moved on to more complex supplier programs. But there was another factor — the same “affiliate network”. Oleg Novikov, CEO of EKSMO, recalls that in 2011 they decided to switch from SAP to 1C, re-equipping 500 jobs. “If there were problems, it was difficult to reach SAP, — he says, and the specialists from the partner company 1C:Rarus were there.” “1C:Accounting” is on the market since time immemorial and has become the same standard of accounting in almost any company as MS Windows — the operating system for almost any computer. Eating away market share is always more difficult than capturing an empty market,” says Viktor Tsygankov, IDC analyst.

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