Leonid Viktorov, IFS Russia&CIS
Release Date: 2011-08-31Leonid Viktorov, general director of IFS Russia & CIS: for the Russian industry, learning to love your customer is a mental revolution
Mr. Viktorov, it was essentially with your enthusiasm that IFS arrived in Russia: you laid the cornerstone of KFS, which transformed into IFS Russia & CIS. What is the history of your experience in this industry and your work with IFS?
Initially, we had the idea of developing complex IT systems and created an IT company called FORS in 1991. It was a good moment to take on computer-aided manufacturing: at that time, there were enough programmers in Russia but no knowledge of technology because there was, essentially, no economic basis for that. How could a management system appear without management? So, we came up with the idea to find software that would be open, popular and suitable for Russia.
At an Oracle conference, I met Bengt Nilsson who was head of IFS at that moment. In 1994, we agreed to promote IFS in Russia. First of all, IFS was at that moment a young company that had emerged in 1983 in Sweden (they were 8 years older than FORS). Secondly, IFS is an open company in terms of communications: its hierarchy was simpler than that of Oracle. Here, you could easily meet with the company president for a conversation. Thirdly and most importantly for us, IFS system worked and still works in open codes. If the system that I sell is closed, I can’t promise to my client that it would perform the way he wants it to. And of course, we were greatly driven by the fact that IFS was born in the real sector of economy – maintenance and repair of nuclear power plants.
Do open codes pose a potential threat for the system’s security and authenticity in Russia?
Yes they do. You can forge anything. And you can learn how the system works. Systems with no open codes are more difficult to work with. Nevertheless, open code adds confidence to the clients. For instance, currently virtually all systems are not open. That is why a nation-wide initiative appeared in Russia to introduce operational systems with an open code. With IFS systems, the clients feel absolutely safe and the programmers don’t feel that tempted to think of their own codes when they have the initial codes in front of them. Moreover, you can imagine how it is important now that we work with the defense industry.
What is the range of industries where IFS operates?
IFS focuses on a few vertical markets offering industry-focused functionality, competence and expertise coming from hundreds of projects. Currently, we highlight eight main industries where we operate: Aerospace & Defense, Automotive Industry, Batch Manufacturing, Industrial Manufacturing, Construction and Contracting, Energy & Utilities, Service Providers, Retail and Wholesale. IFS strongest competences in its markets of presence include a full ERP system (namely - Enterprise Asset Management (EAM), supply chain management, CRM, MRO, and PLM. Our share on the world EAM market in Aerospace & Defense is 40.5%. In Russia, we currently focus on aerospace.
Each of the mentioned activities is based on independent modules. Using IFS Applications, our clients can choose any module and make up virtually any combination.
How can you characterize the functionality of IFS Applications?
IFS Applications is an ERP system built in modules for more convenience of the users. Bengt Nilsson borrowed this idea from LEGO. He gives the example of two Swedish truck manufacturers – Volvo and Scania. Scania was more successful. Why? It turned out that they used component-based, i.e. interchangeable elements. Bengt realized that such systems were much more efficient. This is how he invented the idea of making any combination of modules: it is cheaper and more precise because there is less code, and it is easier to implement.
On the other hand, such ideas can be difficult to implement if the codes are old. For instance, Oracle made colossal investments in rewriting a 40 year old code. IFS has done this earlier – in late 1990ies.
Because system compatibility is essential for us, we have created an instrument to integrate IFS Applications with CAD systems. The credo of IFS is to follow the standards and not to invent them, so we support all the existing standards. A few years ago, we created a service-oriented architecture. The majority of CADs follow standards protocols ensuring easy integration of IFS Applications with any system. Of course, this also opens new advantages for aviation which is quite important for us on the Russian market.
For instance, using IFS Applications in aerospace provides Performance Based Logistics (PBL) for the manufacturer to maintain a fixed standard of running order for his equipment. Moving to PBL goes through four main stages: supplies of spare parts based on calculated value of component failure and client requests – supplies of spare parts based on failure statistics and the planned intensity of operation – planning of maintenance – supporting the availability of aircraft upon standard requirements.
One of the mentioned IFS competences is in MRO which is especially important for the helicopter industry in the view of the interest of operators and manufacturers to expanding their maintenance network. What is your strategy in aerospace and who are your customers?
We believe that the Russian helicopter industry is a strong industry with high potential that is underestimated. The Russian government officially acknowledges that after-sale servicing in aviation is not developed in Russia because this issue is not given enough consideration. For the Russian industry, learning to love your customer is a strong mental revolution. To give you an example from the UK, BAE Systems uses IFS Applications to maintain Tornado aircraft more efficiently than its customer. Like this, the customer can reduce his costs and BAE Systems can increase its profit by doing maintenance and after-sale service. In 2006, BAE Systems signed a contract for US$1.5 bln (£947 mln) thus saving US$832 mln (£510 mln) to the UK Ministry of Defence.
One of our Russian clients – Vega Radio Engineering Corporation – is going to do the same. The United Aircraft Corporation (UAC) has chosen our system as the backbone for after-sale servicing operator’s database in the frame of the maintenance program for the Russian equipment. NPO Saturn has taken this system a long time ago to support its engines.
What are components of the cost of IFS products?
The cost of IFS products breaks down in three elements: cost of the license, i.e. the authorization to use the system modules, cost of implementation, i.e. adjusting the modules to a particular customer, and cost of maintenance. Normally, it’s 18-22% of the license cost, if we are only talking about external costs. How do we calculate the cost of implementation? If license costs Х, implementation costs 1.5-2Х because our system is modern. With most companies (such as Oracle, SAP and Microsoft), it’s 3-5Х. Sometimes implementation costs up to 10Х. Maintenance normally includes a standard set of services; however, the clients often have new needs and requirements. In this case, in five years you will have to additionally buy up to three additional licenses. Nevertheless, I believe that our system results to be thrice as cost efficient as its analogs.
How can you describe the advantages of IFS solutions for the aerospace industry as compared to PLM solutions?
There is no way that we compete with PLM systems. PLM systems cover product engineering. We cover production and after-sale service. In this sense, we complement each other. As a matter of fact, the notion of technology has always been underestimated in Russia. We always had brilliant engineers who develop the idea. To implement it in production, you need technology – repetition of routine operations that should be executed under certain quality control, at a certain time, etc. Our system tracks this down and does the operational part. Like this, we coexist with PLM systems and providers of database like Oracle – they are our partners, not competitors.
When operating PLM systems, the client cares about support of the product and not its constructional changes. It’s the lifecycle seen from operator’s viewpoint. We provide maintenance of lifecycle for operators while PLM systems manufacturers cover engineering.
Talking about the development of IFS Russia & CIS, initially IFS operated in Russia through its partners. How does your promotion strategy look like today?
We need partners who know production specifics. We have regional partners – companies from Kazakhstan, Russia, Azerbaijan - and industrial partners. For instance, one of our U.S. partners is Lockheed Martin. We have signed an interesting contract for maintenance of airport equipment across all U.S. airports. We provide our systems and a small range of services and Lockheed Martin provides equipment adjusted to our software. This is a perfect example of good partnership.
Basically, the first thing that you explain to your client companies is that there are no ready-made solutions?
Operation implies a routine business practice, especially in MRO. How can a company be different from another company if they buy same machine tools, hire same people, install same systems and have the same suppliers? Obviously, the competitive edge comes from the top management or from the technologies. By all means, ready business processes account for nearly 90% of a company’s operation. The other 10% is what makes your company different. Hence, there is no standard solution, any solution should be improved, and our open system helps to improve it even better. As a result, the operator wins because he does not have to hire people who can do that. The manufacturer wins because he will actually get the profit and accumulate statistics for his engineers.
How do you see the further strategy of IFS in Russia?
We now feel quite confident on the Russian market. The key feature of our system is agility. Agility implies that any business should be able to react to competition. Every product should be launched quickly. This means that new projects are launched from scratch every time. For instance, in the fashion industry, new models are launched at amazing speed. We have seen this with our client – Milavitsa, a lingerie manufacturer from Belorussia. By the way, this is how I learned that a bra consists of 80 components.
Mr. Viktorov, your final message to the clients and participants of the Russian helicopter industry – from manufacturers to operators?
I would really like to see the best international business practice work and bring value in Russia. Our clients in Russia prove that there are no real obstacles to do that.