Ruminations on Russia

The text below has been quoted, and edited by me, from an article written by Valerie Thompson in Computer World. I have not found it in English as I understand it was published in the Swiss version. Such gems should not be left unearthed�.

I have made some comments in blue along the way which got lost and are now bracketed.

From Russia with love and bytes
By Valerie Thompson


Russian high-tech, obscured for the longest time by news flow about the Mafiya and its use of selected seedy Swiss bankers, cowboy capitalism, and oil oligarchs, (however the mind-bendingly stupid Chekisti seem to be being doing a good job of tying to change that impression) has substantially evolved in recent years.

Today people talk about the success stories and role models, such as Google co-founder Sergey Brin. They mention Israel (oh what a joy a journalist who understands more than the lunatics trying to promote Russian technology at MinSvyaz and Trade Minsitry) -- it is a little known fact that the basis of the tiny country�s ability to create a huge, new high tech economy, is the influx of highly education Russian Jews - many of whom worked in the former Soviet Republic�s military industrial complex.

And they will talk about a rich supply of talented engineers and scientist with math skills, physics know-how, creativity. They will also mention Russian tenacity and pride. A new dynamic is emerging.

A number of smart, young Swiss-based high tech firms have tapped into one of Russia�s richest resources. They have found success transferring Russian developments to the West to solve tricky software programming issues, introducing new innovative products for a global market.

ACOL Technologies, based in Geneva, acquired an R&D team in Moscow, forming a new company with Russian entrepreneur, Alexander Shishov. (Probably one of the best CTO�s operating in Russia today � actually delete probably.) It already has customers in the US and in Russia and at the time of writing was in discussion with investors to back its bid to make ultra-high brightness light emitting diodes.

Two other firms, A4Vision and Virtoons AG, are tapping Russia�s advanced digital signal processing and software programming skills to develop innovative, new products for niche markets, while Novavox based its entire R&D effort in St Petersburg. It has had success selling its computer telephony products for PBX manufacturers and wireless operators.

The Swiss aren�t the only ones who have discovered this shortcut to advanced technology and innovation. Intel�s Centrino software is developed in Russia. It employs 200 engineers in Nizhny Novgorod in development and 150 contractors in Sarov in central Russia, as well as close to 100 developers in Moscow.

Intel Capital�s Marie Trexler told BusinessWeek that her business unit hopes to profit from the country�s rich supply of technical talent and engineers. Specifically, the Russians� advanced knowledge of materials science and ability to design powerful algorithms. Man-made crystals could lead to new semiconductor materials, she said, adding that the algorithm know-how could lead to faster processors and software. Wireless and radio are also Russian strengths.

The Russians are coming!
High-end animation software companies, such as Pixar, Dreamworks, DNA, could soon be facing competition from a much cheaper and elegant solution from Russia developers.

One year old Virtoons AG is a Zurich based animation studio, founded by Russian-born Alexander Semenov. His idea is to create an animation studio that can produce animation sequences on a PC based on interpreting movements of someone wearing a magnetic sensor suit in real time. If his software team is successful, they will remove the need to hire hundreds of people to �draw� and render animated clips, plus, since the software operates in real time, it could cut development times dramatically. Oh and by the way, he wants to do it in 3D, as well.

The studio is working on a solution based on animation software which it acquired from a Moscow-based high tech incubator called Latypov.

Semenov says his software has to run on standard processors. Being Russian, the developers just did not have access to the capital to acquire high performance computers. But he figures it�s a smart approach because the niche for supercomputer based animation solutions is already occupied by the big US players. �Pixar and Dreamworks have a solution that runs on terabit process and needs gigabytes of storage,� explains Semenov.

Virtoons success started early. It has already won a prestigious contract from SF DRS for a new children�s cartoon series, the first since Pingu ten years ago.

Semenov is currently presenting sample scripts and the concept to television channels around the world.

Normally a studio will deliver a single sample script, a few minutes of demo film and a description of the characters, explains Semenov, but Virtoons has delivered all 13 sample scripts for the series. Semenov felt he had to �over-deliver� in order to overcome any doubts that the startup would be unable to follow through on its promises. �To convince the TV channels over-delivering was the only way,� says Semenov.

The company received financial aid from the Swiss Organization for Facilitating Investments (SOFI), an initiative of the Swiss State Secretariat for Economic Affairs in cooperation with KPMG.

SOFI helped the entrepreneur during the application process and show him how access a SECO fund with some success. Virtoons was able to raise capital in the form of loans that have to be paid back in five years time. In Moscow, 17 jobs have been created and 18 more are planned for this year.

Bright LEDs, Russian ingenuity
When disc drive manufacturer Quantum merged with Maxtor two years, one of the company�s top European managers, Jean Charles Herpeux convinced a couple of colleagues to try their hands at forming their own company.

Herpeux says he wanted to exploit his experience building up sophisticated sales and marketing organization for his own profit. They went to Russia looking for some bright ideas and there found Alexander Shishov who was running a company called Corvette Lights. Shishov had been having difficulties breaking into the European and US markets with some innovative high brightness LEDs and subsystems based on his firm�s R&D breakthrough. So he was happy to do a deal with the Frenchman.

Herpeux is a big fan of the Russian techno-elite. �If you want to talk about reliable technology, just remember that it was the Russian Soyuz that rescued the NASA space station crew,� says Herpeux. (The MIR also long outlived its planned expiration date when it finally burned out in 2001 after 15 years in service.)

He is one of a number of outsiders that are increasingly recognizing the strength of Russia�s system of education in the fields of mathematics and basic sciences, as well as the solid work experience with complex projects and diverse technologies.

The cultural traditions with Western Europe and America, says Herpeux. It is something that cannot be said of the software development outsourcing leader, India.

The Russians have come up with a way to make any color of LEDs shine more brightly. The technique increases the brightness without increasing the power consumption due to a smart packaging technique, precision optics and better thermal management. Typical applications are traffic lights, automobile brake lights, commercial displays, and giant screen computer displays.

First customers for ACOL Technologies, which now employs 22 people, are US based firms that make traffic lights.

Herpeux says he has not run into any problems working with the Russians. �It�s just like managing an operation in any remote place in the world. There is less difference in the culture between the Swiss and the Russian than the Swiss and the Americans or the Japanese,� says Herpeux.

The Swiss, the French and the Russian education systems are normative, he says. Whereas the Anglo Saxon method of educating people, which rewards good presentation and self expression, rather than demonstration of an ability to complete assignments based on certain standards. What makes Russia�s outstanding is that it rewards creativity at the same time, which results in engineers and software developers that can solve problems.

From Russia to the shores of Lac Leman to Silicon Valley
A4Vision has transferred technology from Russian labs to Geneva and now to Silicon Valley. Its facial recognition system relies on inexpensive digital cameras, an infra-red grid projector, and a standard PC running A4Vision�s software.

It is recognized by industry experts as being one of the most �advanced�.

Backed by an Italian venture capital company and Switzerland�s Logitech, A4Vision, has its R&D activities in Moscow but that probably won�t be touted too much in the future as the firm has an American headquarters and is aiming for the US-homeland security market.

The Russians have the inter-disciplinary (this is the key every time � either the Zhiguli approach to technology � they had to work with less so they worked out ways of making less work better) know-how to understand the optics, electronics, math and physics required to make such software work, says Kelly Richdale, a co-founder of A4Vision.

The smart Russian behind the innovative solution is Artiom Yukhin, a former researcher at the Bauman Moscow State Technical University; there he headed the 3D machine vision research team.

His expertise in mathematical modeling, along with his research team�s dedication made it possible for A4Vision to change direction shortly after being founded to become a supplier of �homeland security� solutions after the September 11th attacks on the US.

Richdale says she was able to ramp up quickly, growing from 10 employees to 60 within 18 months. The Moscow engineers are �hard-working�, able to make innovations, but also willing to do the hard work required to commercialize a technology.

St Petersburg R&D
Novavox AG was founded in 1994 and employs 75 people. It is currently restructuring and relying on the adaptability of its Russian R&D team to grow into the future. Employ numbers are down from a peak of 160 during the telecommunications boom where it achieved what few Swiss-based telecommunications applications makers have achieved: it was able convinced big brand name equipment makers, such as Tenovis and Alcatel to incorporate its software into their products. The US Army is one of its customers.

Andre Zgraggen, the company founder now lives in Russia. His lab recently received ISO quality certification. Settling the development in Russia, has given the company an advantage far beyond being able to find good programmers, it has �opened the doors to the Eastern European market�, which has been growing.

Advantages of being in Russia are not only technical; market-wise the products can be made available in six other languages due to the language skills of his St Petersburg crew. The company is branching out into offshore software development.

The Swiss Russian tech exchange
A number of government funded initiatives could very well lead to further partnerships between Russian and Swiss scientists, engineers, and entrepreneurs.

For example, the SNF has funded dozens of joint research projects on a wide range of topics, many are basic research in physics related and biotech topics, but some have direct application in advanced materials and future electronics and quantum computing applications.

In addition, delegates from Russia�s scientific community have been invited to meet and tour centers across the country, including the Paul Scherrer Institut, CSEM, and the two ETHs in Zurich and Lausanne.

TEXT BOX: Once a giant electronics sector
The Russian educational system, with its emphasis on mathematics and physical sciences, the foundation for the strategic achievements of the former Soviet Union in space, nuclear, and oceanographic exploration technologies, is responsible for the large number of qualified software developers, says RusSoft, (unfortunately they could not recognize an Israeli development model if it leapt out of their kasha in the morning) a trade organization based in Moscow.

Russia had sixty-five science cities centered on advanced research institutes across the country. But today the electronics industry in Russia is one-third the size it was at its Soviet peak. Some experts believe it will take a few more years for that giant to change directions to a market oriented sector (in the meantime the Russian Academy of Sciences is dong $1.6bn in outsourced research contracts.) In Soviet times, R&D was driven by government action plans, rather than the need to solve a customer�s need or a market�s problem.

�Due to its heft and infrastructure, however, it has managed to retain a sizable indigenous base,� says Malcolm Penn, an industry analyst at Future Horizons in Sevenoaks, England.

�Investment in electronics was out of step with the Wild West, fast-buck/low-risk investment style in Russia of the early nineties,� comments Penn. Russian and other former Soviet states suffered from a lack of foreign direct investment, except for the automotive and wired-telecommunications industries, both heavily subsidized by governments.

One of the countries largest electronics exporters is Svetlana that still manufactures vacuum tubes. It has found a global niche. There is a growing demand among audiophiles, for example, for hi-fi equipment where digital technology does not deliver the same quality of sound.

During the Cold War, the former Soviet Union did not have access to the fastest microprocessors or supercomputers but they still put the first rockets into space. They achieved what they did by writing powerful algorithms using their tremendous digital signal processing skills, according to Kelly Richdale, who majored in Russian studies at Cambridge before moving there and eventually co-founding A4Vision in Geneva.

There are quite a few success stories of Russian high tech entrepreneurship already, such as Abbyy Group�s with its offices near Red Square in Moscow and Epsylon Technologies, but this is just the beginning. The research for this article revealed dozens of innovative and creative examples of Russian high-tech entrepreneurialism.

Esther Dyson agrees. In a recent report she writes that Russia's programmers have begun to recognize their capabilities and �being smart and creative� they are now figuring out how to organize their marketplace better, putting in place not just software firms but training centers, education loans and the like.

Success Stories
Abbyy Software, founded by David Yang, who has at least two other tech startups under his belt, makes optical character recognition software. It can be found in more than half of the scanners manufactured worldwide today. Turnover is E12 million a year and the firm employs 250 people in Russia.

Its OCR software is used by Lexmark, Compaq and Samsung. It was recently praised by PCWorld as the best OCR engine in a recent analysis of printer performance.

Five year old Archivista, based in Zurich, licensed Abbyy�s OCR software for use it in its flagship archiving software. The tiny startup firm sells its software in Germany, Austria, Netherlands, and Switzerland.

Abbyy has picked up �relatively quickly� the basics of entrepreneurialism, says Urs Pfister, founder and CEO Archivista who has worked with a number of Russian software vendors. That is his diplomatic way of saying that the once bargain basement priced software licenses from Abbyy are now much more expensive than they were a number of years ago when the Swiss upstart made its deal with the Russians. They have increased �dramatically� and reached a much fairer (for the Russian) price level.

Yang also invented Cybiko, a wireless peer to peer handheld device that is meant to launch in the US this year. It claims to have already sold 250,000 units at $129 each. A European launch compatible with mobile phone and WiFi networks is expected at a later date.

Since more than 60 percent of its employees are working in R&D in Moscow, we can expect more innovations soon. (And thus if you are still with me is the real story of Russian technology.)