Elchyn Aliyev, CEO of the product IT company ENESTECH Software, part of TECHIIA Holding, TECHIIA Board Member tells about ways of transformation and survival of the company during the war.
Originally, I am from Azerbaijan, and today’s war is not the first in my life. Because of the Nagorno-Karabakh conflict, I know what daily military reports, grief, and thousands of refugees are like. Therefore, I started thinking about the company's new work plan in case of a full-scale Russian invasion of Ukraine.
As of February, we have been operating in more than 60 countries, but most of our clients were located in Russia. It became one of our main markets way before. In the 2010s, when we launched our flagship product SENET — software for LAN gaming centers — we started our expansion from neighboring markets. The lower the language barrier, the easier it is to gain expertise and a solid position in the market.
We understood that we would leave the market of the Russian Federation if it started an open war. But for ENESTECH, such a step meant significant losses. The Russian market generated 80% of our revenues from the entire CIS.
Right before the war, we were even performing better than was estimated in our business plan. And then it was February 24. We immediately launched the procedure for winding down business in Russia and Belarus. And... we rolled two years back: out of 1,700 customers, we have only 500 left. We lost the lion's share of our profit, but that didn't scare us.
Solution 1 — strengthening the position in current markets
After exiting the Russian market, the main task was to compensate for the customer base we have lost. We chose the two-in-one option — to strengthen our positions in current markets and enter new ones: the European, the US, Asian, Latin American, and the countries of the Persian Gulf.
Functionally, our service for managing computers in gaming lounges covers 99% of customer needs. It is difficult to offer anything extra to old subscribers other than a reduction in the subscription cost. And so we did in some countries, we lowered the price tag in Kazakhstan, Kyrgyzstan, and Uzbekistan.
First, such a step attracts new customers. Second, during a crisis, when payment capacity decreases, it is better to use a flexible monetary policy. As they say, sometimes it's better to earn 100 than not earn 500.
Solution 2 — entering new markets
This task is way more difficult compared to giving a discount to an existing customer. To begin with, we opened several positions, the main one of which was the Head of Revenue — the person responsible for new markets, expansion, flows, increasing the customer base, and profit.
We reoriented employees who were previously involved in customer support to optimize sales and find new customers. They became less occupied with work in previous positions due to the loss of a large number of clients. Instead, knowledge of foreign languages, the product, and communication skills helped them move to new jobs. Some became lead generators, some became sales development representatives, and some became customer service managers.
To select markets, we used various methods: SWOT analysis, PEST analysis, feasibility study, etc. We also hired business analysts in the target countries to study them from the inside. The following became our main parameters:
- Market capacity. For business profitability, the number of gaming clubs should amount to hundreds. We are not interested in a small market with 50 customers: the penetration cost will be greater than the profit. That's why we bet on big markets, like Vietnam, where more than 20,000 clubs are operating today.
- Compliance of the product with the needs of the market (product-market fit). Here we had to answer several questions: what are the advantages of our product, what are the strengths and weaknesses of competitors, what are the customers’ main needs, whether we can poach these customers, and what resources are needed for this.
- Customer solvency. It's hard to do business when our subscription costs are $150 and the national average salary is $100. In such markets, playing time costs less. It was necessary to calculate profitability based on this indicator.
- Political and social aspects. If there is a war in the country, we are unlikely to enter such a market, and there is no point to do so. We have already had a similar story with the pandemic — in some places, the restrictions were strict and there was no sense in approaching them.
Solution 3 — localizing
With an international product, there is no one-size-fits-all approach to promotion in different countries. For example, we decided to launch in Vietnam, which has recently been growing, like the Asian market in general.
The point is that the management of Vietnamese clubs is not even close to the one in Ukraine. In hot countries, the relationship between the client and the service provider is more trusting: first they play, then they pay. This reverses the subscription principle. In cold countries, on the contrary: first you pay, then you play. In Ukraine, this principle can be seen, for example, in minibus shuttles: in Kyiv, passengers pay for the ride before taking it, while in Odesa they pay after the ride.
It is difficult to sell IT products on the Vietnamese market directly from Ukraine. They do not trust strangers, distant foreigners, and cold calls. A personal relationship with a supplier is important to a Vietnamese customer.
The same goes for service. The administrator should have a familiar handyman who will come on call, do everything on a turnkey basis and return at any moment if a problem arises.
So, in Vietnam, your global service needs to be localized according to local requirements. That is why we assembled a local team to promote our product. Today, ENESTECH Software has another foreign office.
Another issue is payment methods. Only a quarter of Vietnamese people have payment cards, and our subscription involves linking them. Therefore, we are now completely rebuilding our system.
Finally, there are specifics in the local competition. In Vietnam, it is difficult to move from one solution to another. Our potential customers currently use less functional solutions, but they cannot leave everything behind and switch to SENET without additional engagement tools. So we are looking for options.
Solution 4 — pivoting
In addition to other countries, we are constantly looking for new areas for SENET. Our product has many convenient features for esports clubs: booking, a tournament platform, and an integrated payment system. But its core function is computer fleet control and management.
For example, the product can be used to control university and school computers. Servicing each computer individually is quite time-consuming, and with our service, you can update the software on all PCs in one click. The same goes for uploading content to computers connected to LAN.
SENET is already being used at Brown University, one of the most prestigious private universities in the United States. We want to expand it to other higher education institutions. Today, about 500 universities teach esports and related specialties: from e-athletes to producers of esports events. Esports is integrated into the education system and we use this factor to promote it.
In addition, we have already started to develop the ecosystem, which will have SENET as a B2B platform, and Esports Account as a B2C product that is completely focused on gamers. The player will be able to participate in tournaments, communicate with friends, and earn incentives from gaming clubs even while at home. This is how we will expand our audience and reduce the business dependence on offline.
Experienced by the pandemic
From day one ENESTECH was acting like a startup, even when it was fulfilling the plan in terms of the number of customers and income. We try to keep ourselves in good shape so as not to turn into a clumsy structure that crumbles under its own weight.
This approach helped us rebuild during the pandemic when we had to learn to work remotely. It became a test for the company because we basically got used to working in the office, maintaining synergy, and having perks and fun from working offline.
The company coped with this challenge. And now in front of us, just like many in Ukraine, there is a new, incomparably bigger challenge. While our country is protecting and reclaiming territories, our business is working to regain leadership positions. We work in parallel and, I am sure, we will succeed in both tasks.
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