In the small town of Yoshkar-Ola, with a population of 250,000 people, there are several ad-hoc IT companies. What’s behind the phenomenon?
The village of Ivanovka is about 23 kilometers from Yoshkar-Ola’s town center, which is pretty far by local standards. When going there, you can see modern country houses behind rows of old wooden cottages. These are future residences of IT professionals. “We circled the whole neighborhood to find the perfect place before we decided on Ivanovka,” says Yury Uskov, the founder of iSpring, one of the local IT companies. The three-story garage with a separate kitchen, fireplace and big hall is already finished. It was designed as a place for men’s get-togethers. Uskov is going to use the room on the ground floor as a garage for two of his Russian-made four-wheel-drive convertibles.
iSpring manufactures software which helps large companies and university professors create learning materials. “In our small republic, we don’t have oil or anything like that, so we needed to find another way to make a living,” Uskov says. Now iSpring brings in over $3 million a year, and most of their customers are from the USA and Europe. In the small town of Yoshkar-Ola with population of 250,000 people, there are several ad-hoc IT companies. What’s behind the phenomenon?
The Yoshkar-Ola riviera was recently constructed after the fashion of either Venice or Brugge. It is also famous for two copies of a Moscow Kremlin tower. Uskov calls this glamor, but not in a negative sense. “What is Yoshkar-Ola? At its founding, it was only a small wooden fortress. It is a dead end, a terminal railway station,” explains Uskov, whose family has been living here for 300 years. Uskov cares for his hometown, but doesn’t communicate with local authorities too much. They, for their part, suddenly realized that success in the IT field is something worth bragging about on the federal level. “We don’t mind,” smiles Uskov.
He names an advanced programming school at a local technical university as a reason for having a large number of IT specialists in Yoshkar-Ola.
During the Great Patriotic War (WWII), many large military plants were relocated to Yoshkar-Ola. At a local machine-building plant, they still produce missile systems for air defense. Another Yoshkar-Ola resident, Vladislav Maimin, president of the Moneta.ru payment service provider, says that many intellectuals from Moscow and St. Petersburg came here due to the relocation of those plants. According to Maimin, more than half of the town’s population has been working at those plants; even universities were established to provide the plants with a qualified workforce.
After Perestroika in the 1990s, the plants’ operation started to fade. “Many people were fired, so they had to switch to business in the private sector,” Maimin says. This is how a company called Guardian appeared, which was Russia’s leader in steel door production for a long time. A local company called Ariada became a major supplier of refrigerating machinery after the plant was moved here from Kiev and eventually specialized in refrigeration unit production.
Many things have changed at the local Technical University as well. In 1990, a new degree program, which was called Systems Programmer, appeared. “Almost all of the first graduates found out about this program from the newspaper. The professor Valery Trachtenberg, who was one of the lecturers, composed a huge article on why it was important and necessary, and this is how we were inspired,” Uskov says. However, it was not that easy to find a job after graduation.
In August 2004, a huge party was held in a small apartment in the town center, at the first iSpring office. Uskov and his companions had just received the first payment for their new software product, FlashSpring, a PowerPoint-to-Flash converter. “The customer paid us something like $100, but we spent much more on the celebration that day,” Uskov says. The next day had a disappointment in store for the programmers, as the customer asked for a refund.
It was much easier to send or publish a Flash file than an ordinary presentation. Uskov explains that there were few companies that did something like that at the time. The American company Macromedia had been working on a similar project, but in a year, this rival company was bought by Adobe, which almost made Adobe a monopoly on the market. “One day, people just noticed us, started to write reviews, and recommend our tool,” says Uskov. How did the idea leap into his mind?
In early 2000s, Uskov with his fellow students started to program on a by-order basis. “Our friends and acquaintances helped us find customers, and some customers found us themselves through recommendations,” the entrepreneur recalls. Such a job kept them in lunch money, but they couldn’t work like that anymore, as they simply got bored. “We could complete a project in, say, three months, but because of all those interminable negotiations, it could take a year all told,” Uskov says. In 2004, the programmers started promoting their own tool for creating Flash banners, from which the other iSpring tools eventually originated.
“First, we completed the project, and only after that did we begin to analyze what people were interested in it,” says Uskov. It turned out that most of the user base was tutors and teachers, so the niche was now defined. However, the name FlashSpring had to be changed in order to avoid any copyright problems with Adobe, who were present on the same market and also owned the Flash trademark.
How large is the market? According to IPOboard, the e-Learning market volume is over $90 billion globally. As for Russia, it is much smaller, something about 9 billion rubles. However, e-Learning technologies are used not only in the education field. Another sector is staff training at large companies. That was what iSpring decided to focus on. What’s remarkable is that the company had operated on the USA and European market from the outset. The business connections and understanding of the market had already been established during the made-to-order programming phase.
Even though Articulate competes with iSpring on the western market, these local programmers have many overseas customers, including world-famous brands like IBM, Tesla Motors, Siemens, Pfizer, Lego, and even the US Defense Department. Uskov thinks that working with Oracle was the company’s greatest success. “They already had their own tools for staff training, but one of the decision makers liked our solution better. We have improved many aspects of our software while cooperating with them,” the entrepreneur says.
In March 2015, an investment company, Alfa Capital Asset Management, started deploying distance learning using iSpring solutions. It’s noteworthy that iSpring won the contract over about 20 other software providers. Yury Grigoryan, a member of the board at Alfa Capital Asset Management, says they loved the iSpring customer-centered approach and the tool
However, the system needed some modifications, as the customer wanted to have a custom interface. “Their business style is startup-like, with fresh new ideas constantly appearing, and they are very responsive,” Grigoryan says. It took much time to generate all the courses (there are 126 of them now), and the system started functioning at full steam in September 2015. “We grant access to the system to our employees, newcomers, and partners,” Grigoryan says. What do the staff members learn? The focus is on the investment business, the company’s core activity, but there are also several educational courses on wine tasting, art, and history.
Live in comfort
Despite their success in the global marketplace, most iSpring employees, including the Sales and Support Departments, are based in Yoshkar-Ola. Several times a year, some team members visit e-Learning conferences in the USA to network, talk with existing customers, and find new ones. “This is how we met many of our current customers and partners,” Uskov says.
Why doesn’t this successful company with $3 million revenue move to Moscow? “There are at least two reasons for that. The first is economical and the second is ideological,” the founder of TravelLine, Alexander Galochkin, reasons. He was Uskov’s classmate at the university, and then they programmed together. They meet every week, as Yoshkar-Ola is a small town, and camaraderie in the IT sphere is very tight.
According to Galochkin, the number one factor is that Yoshkar-Ola is their hometown, and when needed, Moscow is just a one-hour flight away. Plus, local programmers are highly-qualified, while salaries are a bit lower than in Moscow. In fact, businessmen create the workforce themselves. “I have given classes at our tech university for 8 years. This year, I decided to quit, as I lacked time for my family and job,” Galochkin says. Uskov took a further step. Besides teaching at the university, he founded his own schools for programmers, two for kids, and one for adults. “It is required to fill out loads of paperwork, a lot of red tape,” Uskov complains. But now he’s happy: his younger son goes to his school, while the eldest one is already working at iSpring.
“We’d love to live in comfort, so we do our best to make it happen,” Uskov says. Recently he took charge of a local association of IT companies, which will also include TravelLine, one of the largest software suppliers for the hotel industry, and the Moneta.ru group of companies, which, along with the payment system and a range of other services, includes an online shop with a revenue of 1 billion rubles. So, what’s next? “Housing prices should go down soon, so it’s going to be the perfect moment to buy apartments for the young employees,” Uskov remarks. There are new tasks for iSpring as well: iSpring tools have won popularity among the medical community, so there’s another niche to carve out.