The buyers are changing in the Soviet Union. Only two years ago IBM Corp signed a contract with the Soviet Ministry of Education for 13,750 personal computers to be installed in schools across the whole Soviet Union. The deal envisaged a colossal roll-out programme involving another 100,000 units every year. Today such a deal would be unthinkable. The centre would never be able to instruct education ministries in all the republics on what computers they should buy. Even IBM is very cautious when it comments on how this colossal program will pan out. In 1991 enterprises have their own budgets and the 15 Soviet republics inherit more powers every month. The Western computer industry can no longer afford to talk about doing business with Moscow when it means doing business with the Soviet Union. The big-name distributors are gradually coming to terms with this fact, but a shortage of hard currancy is slowing progress. Since launching its first store in April 1990, ComputerLand Corp now has two showrooms outside Moscow, one in Vilnius and one in Volgagrad. European sales and marketing director Hitesh Mehta says the company aims for a further six in 12 months’ time.

Quest Automation

Merisel Inc, through its joint venture, CAT, now has a centre in Leningrad and plans stores in seven Soviet cities. It already has a sizeable network of dealers. Of the less well known companies (outside the USSR) the Italian-French-Soviet systems integration specialist Interquadro now boasts 20 representative offices. The German-Soviet joint venture and Hewlett-Packard Co distributor, Aquarius now has 60 service centres and a manufacturing operation in Shuya, 185 miles from Moscow. And JV Dialogue, financed by the Chicago venture capitalist Joe Richie, has dozens of semi-autonomous affiliates scattered across the Soviet Union. Its loose structure and diverse activities makes Dialogue difficult to classify but its principal area of business is still computers. But suppliers are discovering that there are no really large-scale distributors in the USSR. Whereas in the US a deal with Computerland or Merisel can expose a product to thousands of potential customers, here it is literally a drop in the ocean. Companies which are single-minded enough to want to crack the Soviet market are creating distribution channels of their own. A company that appears to be succeeding where the likes of Computerland are faltering is the British-based firm Quest Automation Ltd. British presence in the Soviet computer market is lamentably poor, which makes Quest’s success all the more impressive. The company has had a base in Moscow since 1971. It grew its business on relatively large state orders in the 1970s and during the last 12 months it has been building a Union-wide distribution network. Quest now has 16 distributors in 13 Soviet cities with a total of 26 due to be ratified by September. Moscow-based deputy head of representation Peter McBride says the decision to build the distribution channel was taken when it became clear that the number of large state orders was going to decline. Additionally he says the personal computer market had begun to stabilise over the last two or three years and buyers were looking for more advanced products. There has become a market for distributed product – local customers that want to buy from a local supplier and get proper support, he says. Setting up a distribution channel was difficult and time-consuming. Though swamped by potential resellers at trade shows most were often looking to make a single deal.

By a special correspondent in Moscow

We gave up doing shows a while ago. What most people are offering you is a contact with a potential buyer and no more, says McBride. Of the discussions the company has set up with potential dealers, only one in 200 has proved fruitful. What worked best for Quest was the active help it received from the Commercial Counsel of the British Embassy. Letters sent on Quest’s behalf from the Embassy to the Chambers of Commerce of the 15 Soviet republics eventually yielded 10 of Quest’s ex

isting 16 dealers. There is no doubt that it made a significant difference to our success both in terms of the quantity of responses and the quality of people we found, says McBride. Quest typically gives its Soviet distributors a 20% to 25% discount. On all deals of under $100,000 it will try to direct it through one of its distributors. McBride refers to his network as distributors because, though they don’t carry inventory, they offer a value-added service of local support and training. A few software companies have also taken the pioneering approach. Nantucket Corp now has a 16-strong dealer network with a further 50 agreements pending. Business development manager Virginia Clough says the Nantucket approach is to visit new cities and hold seminars. These attract both new dealers and potential customers. She says the biggest problem for new dealers is to generate enough cash to pay for their first order. Ashton-Tate Corp bases its approach around training centres. It now has training centres in Moscow, Novosibirsk, Leningrad and is being particularly successful in Kazan.The main problem for software companies is to convince Soviets that it is worth buying software at all. The first step is to sell for Russian roubles. Lotus Development Corp sells 1-2-3 version 2.2 for 5,000 Russian roubles (about $140 at the time of writing) which makes it accessible to most Soviet organisations. But the volume of sales the company is generating (1,000 copies in the first quarter and the same rate of growth in the second quarter) is unprecedented for a Western company in the Soviet Union. This month USSR business development manager Jane Kitson claimed Lotus is the only Western software company able to recover its costs in the Soviet Union. An important factor in Lotus’ success appears to be the company’s decision to link up with a large state organisation and to devolve a lot of responsibility to it.

Statistics

At the time Lotus was looking at this marketplace everyone was coming here like an oil driller or a gold miner looking for a claim. That claim was a partner that they could use, or exploit, to do business their way. We came here and looked at which organisations actually worked, says Ms Kitson. Lotus chose VINIPIstatinform, the state committee for statistics to be its distributor. Other foreign organisations would have said ‘they can’t sell because they are Soviets – they are a large monolithic organisation of aparatchiks’, but the guy who was researching this market said: ‘this organisation has 5,500 people in all major cities in all industries, it works with statistics and this is a country that reports on statistics this is part of the fabric of society.’ VINIPIstatinform acts as the sole Lotus distributor for the Soviet market. Many of the dealers came from within the organisation but others were found through advertising that it organised. Lotus now has two sub-distributors; one is CAT – Merisel, the other is VINIPIstatinform Kazakstan. Boris Nuraliev is VINIPIstatinform departmental chief in Moscow. A former programmer, he already had some experience of selling since his department sold programming time to other organisations. For Lotus, his work involves training new dealers, advising them on setting up hot-lines and advice on the whole business of selling – an alien concept here. He says decentralisation is key to success in the wider Soviet market. Personal contacts are very important; it is much better to leave selling to local people who know the market. Business in the Asian republics is often difficult even for Russians to understand. Perhaps the most disheartening thing about this market is how little Western computer companies appear to be communicating, let alone co-operating. Buyers in the Soviet market need to be educated before significant selling can begin and there is a depressing duplication of effort by Western companies all setting up parallel distribution channels. Quest’s McBride puts this down to national rivalries. He says that within the British community there is a lot of informal con

tact but very little inter-industry note swapping. Ms Kitson is genuinely bemused – what has anyone got to lose? she asks.