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. Last Updated: 07/27/2016

IT Giant Expands Niche in Net

Anatoly Karachinsky is perhaps the one Internet entrepreneur in this town not likely to be caught expounding on page view statistics, banner ad revenue figures or the ideal horizontal portal.

In fact, Karachinsky equivocates as to whether his company, the IBS Group, qualifies as an "Internet company."

"What is meant by Internet company?" he asked in a recent telephone interview from North America. "If it means a company that has a large volume of projects connected with the Internet, then we have been an Internet company for a long time. When it means a new type of business that doesn’t need revenues or profits …".

IBS Group is the biggest information technology firm in Russia, and some analysts say in Eastern Europe. It has a foothold in nearly every level of the information technology market, from hardware distribution to consulting. It rang up $185 million of the $2.1 billion national IT market last year, according to Brunswick Warburg brokerage.

It has also earned itself a reputation as the most conservative player on the Internet market, rejecting notions of a coming consumer e-commerce boom.

Instead, it has positioned itself as a resource for "real-sector" companies seeking the efficiency benefits of business-to-business e-commerce. Last week, it announced it would become the Russian distributor for Commerce One, a developer of off-the-rack B2B solutions.

"I don’t really believe in the new economy," said Yevgeny Peskin, group vice president. "There are things that IBS as a group believes in. We don’t belive in getting sky-high valuation because you have so many million visitors. We do not believe in the generic portal model. We believe in creating more value through interaction between businesses through new models. We believe in creating value by bringing modern IT technologies to Russian business. That is what our business actually is."

The company’s leaders hope investors, bled by overvaluations of U.S. net stocks and wary of companies with foggy prospects for returns, will reward them for their conservatism when they list on the Nasdaq, the New York-based high-tech exchange next year.

The group counts among its clients BP, which hired IBS to integrate its gas pumps and retail operations into a single network. Boeing buys custom software from its newly formed programming and software development unit, Luxoft. Among the Russian clients of its systems integration business are Gazprom, LUKoil, Detsky Mir, TsUM, the Central Bank, Rostelecom and subsidiaries of the national telecoms holding Svyazinvest. It claims it controls 30 percent of the market for "boxes," or branded personal computers, as the de facto representative of Dell in Russia through its distribution subsidiary Dealine and its online retailer.

Karachinsky argues that IBS’s Internet business is embedded in its core businesses — systems integration, which by one market estimate brings 20 percent to 30 percent of company revenues, and computer sales, which bring in 70 percent to 80 percent of revenues.

"One hundred percent of Depo’s orders come from the Internet," Karachinsky said. "More than 50 percent of integration projects have an Internet-related element. One hundred percent of our networks and communications projects are connected with Internet protocol," Karachinsky said.

But the company has also dabbled in consumer e-commerce, launching Newspaper Direct, an international online newspaper distribution service that lets hotel guests download newspapers in PDF format, and Russian Story, which does the same for the Russian diaspora in the West. Russian Story has also launched a sub-project, an online book and CD retailer with the same market.

The company has quietly maintained an incubator, United Net Workers, since 1996, which hatched both and Newspaper Direct. It is maintaining several projects in "stealth mode," Peskin said. IBS Group Dealine Newspaper Direct Russian Story Russian Shopping Club Dell in Russia Brunswick Warburg in Russia BP in Russia Boeing Gazprom LUKoil Svyazinvest