Expert opinions, TECHNOLOGY

Entering markets in Kazakhstan and Uzbekistan: A Russian IT company’s case

Utrace develops and implements product serialization software since 2017, when the first product labeling experiment was launched. The company’s flagship solution, Utrace Hub, collects data on labeled products and stores them in a public system – the Medical Product Movement Monitoring System for medication and medical devices and Product Monitoring System for other goods.

When post-Soviet countries, in particular Kazakhstan and Uzbekistan, started adopting Russia’s labeling practices, the company decided to tap into new markets. Currently, Utrace’s solution is being implemented into the pharmaceutical businesses in these regions, with prospects of also reaching Azerbaijan, Belarus and some other markets.

Why Kazakhstan and Uzbekistan  

First of all, Kazakhstan and Uzbekistan are members of the CIS and the Eurasian Economic Union. Russian companies understand these markets well when it comes to the economic model, business operations and cultural specifics.

Second, Russia and the CIS countries have many common legislative regulations: thus, in what relates labeling, the countries are adopting Russian experience and successful regulatory practices. Moreover, to regulate the labeling markets, Kazakhstan and Uzbekistan use a system similar to the Russian state information system, the Product Monitoring System. Utrace has experience of working with this system in Russia, and there was no need to radically change the flagship IT solution: the adjustment to the new markets took only several weeks.

Finally, CIS businesses understand and actively use the Russian language, which means there is no language barrier. It is very important because the team is able to communicate the value of the product to the customer without an intermediary. Also, the wide distribution of the English language allows for holding trilateral talks in large companies with the participation of global offices.

Specifics of working in Kazakhstan and Uzbekistan

Kazakhstan and Uzbekistan are Eastern markets. Even though the countries are westernizing and developing quickly, there are certain distinctive features, for instance, it is possible to build business contacts only while being present in the country. To that end, Utrace opened the Utrace Central Asia office in Kazakhstan, which helped to build personal ties with the top managers of major companies in the region or local representative offices of international corporations.

Among other issues, the opening of local offices allowed for developing the account-based marketing concept in all new markets. When entering a new market, the Utrace team builds its marketing strategy not on direct sales, but rather on education, helping pharmaceutical companies get to the bottom of new complicated processes. It holds free webinars where it briefs businesses about the regulatory compliance, discusses cases and answers questions. Personal work is held with the most interested participants on the market.

During this process, the Utrace team builds relations with the future customers and lives up to its reputation. It uses a personal approach to dealing with each customer at all stages of the purchase funnel, and creates a unique customer journey for each. It is especially important on smaller markets where the law of large numbers doesn’t work.

Another important thing is that it is not easy to determine the end customer of a labeling project in the CIS. Global offices often actively participate in making decisions on the digital transformation of business processes in regional offices. It can only be found during talks with each concrete company, and not right away. Therefore, the process of communicating with a potential client often gets stalled. However, this is in general a specifics of the Eastern business markets – nobody is in a hurry.

Finally, the process of entering the CIS markets is difficult because the practice of IT outsourcing is not common there. For instance, in many countries, including Russia, a consulting firm is hired to pick an IT supplier or receive pre-project consulting. Cooperating with a local consulting partner simplifies the process of entering the market because they already know about their clients’ businesses and understand their internal processes. And, what is also important, it is much easier for consultants to communicate to business why they need to introduce one or another system. In Kazakhstan and Uzbekistan, companies are trying to deal with all tasks by themselves. They have to reach each potential client and begin working from scratch.

Interacting with regulators

It is noteworthy that the specifics of the labeling market include a close interaction with the regulator, a unified labeling operator. The operator is a participant in the labeling process as are the client company and the supplier of solutions for the serialization of goods. In Kazakhstan, this is Kazakhtelecom, in Uzbekistan it is CPRT TURON.

Labeling is a novelty for Kazakhstan and Uzbekistan. In Russia, the first initiatives were launched in 2017, and in these regions, the labeling ecosystem only begins to develop. Therefore, the operator’s tasks include not only collecting and verifying the data about the labeled goods, but also educating companies. The thing is that the introduction of labeling is a complicated process that requires investment and also substantially changes the processes inside the companies. Most company leaders have trouble picturing what they should do next.

The Utrace team is actively interacting with regulators as relates the organization of training for current and potential clients. Thus, it held non-profit events in Kazakhstan and Uzbekistan where it discussed in detail steps that companies of various types need to make to launch a labeling project. Such events are usually attended by the representatives of the regulator. For example, right after a resolution by the Uzbekistan Cabinet of Ministers was adopted that outlined the terms and process of labeling, the company set up a series of offline and online meetings in Tashkent for pharmaceutical companies. They brought together over 1,000 attendees.

Is it worth the effort?

The domestic markets of the CIS countries are rather small. It is not always viable for IT producers to adapt their solutions, introduce them to new regions and open offices there. The chance to recover the costs is slim. Therefore, for many years, the CIS countries were rarely considered for expansion.

But the situation is changing. The CIS markets have become one of key areas for the development of Russian IT business. Businesses are looking for new ways of entering these markets. The experience of Utrace shows that it is possible, but one needs to take into account the specifics of working in the region and scale only those products that will not have to be significantly modified.

By Arif Gadzhiev, Development Director, Utrace

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