Ciklum’s Torben Majgaard on secrets of IT success
Torben Majgaard came to Ukraine 19 years ago to set up a business. After dodging constant bribe demands and criminal rackets, he managed to build one of the biggest information technology companies in the country.
Ciklum has now six offices and 2,500 employees in Ukraine alone and 13 offices abroad, including in the United States and the United Kingdom.
Majgaard’s company headquarters in Ukraine and continues to grow, despite the country’s economic turbulence, political instability and corruption. The reason, says the Denmark native, is that the IT industry is able to operate separately from the state.
“No matter what happens around, IT is free,” Majgaard said in an interview with the Kyiv Post. “All you need is an office, connection to the internet, ability to code and here we go — you’ve got an IT company that can do business internationally.”
This way of thinking guided Majgaard into creating one of the most successful international tech firms from Ukraine.
When Majgaard moved to Ukraine, he noticed the damage that the Soviet mentality had done to local business.
While running his retail chain of second-hand computer shops, he was constantly facing corruption and bribery. He dodged it, but after four years Majgaard decided that he should find a way to escape Ukraine's business climate without escaping the nation.
“I was getting tired of the people who demanded bribes to allow my chain to continue operating as usual. I didn’t like it.”
Still he liked Ukraine and saw possibilities, especially in IT, so he hired programmers, put them in an office, gave them internet connection and locked the door from the inside.
"It seemed like a good business concept in that Ukraine.”
Majgaard switched from hardware to software sales, making it easier to avoid the authorities.
His Ciklum develops software for companies that work in a wide range of spheres from cryptocurrencies and internet of things to big data. It finds clients and matches them with its own programmers.
The company posted revenue of $100 million back in 2012. Since then, however, it’s been keeping the financial results secret. Currently Ciklum has two stakeholders, Majgaard and billionaire philanthropist George Soros, who bought a stake in late 2015.
In 2017, for the second year in a row, the company won a place on the International Association of Outsourcing Professionals annual list of top tech firms.
Majgaard told the Kyiv Post that Ciklum is getting ready for an initial public offering. With this in mind, he decided to step down as the CEO and hire a manager with an exper- tise in taking a company public — Michael Boustridge took Majgaard’s place. He’s worked for a number of blue chip tech companies including IBM, British Telecom, and Ciber.
Now Majgaard navigates the company as a chairman. And though his schedule is more flexible, he still has a heavy workload, meeting other industry players and adjusting the company’s strategy.
The state of the business climate hasn’t changed much over the years, according to Majgaard. Ukrainian politicians are fighting with each other and holding back Ukraine’s development.
The politicians, and their oligarch backers, are why many of Ukraine’s industries are infused with corruption and uncompetitive.
But not IT. Today this sector accounts for 3 percent of Ukraine’s gross domestic product. It earned the country more than $2 billion from exported goods and services in 2016, according to the National Bank of Ukraine.
Majgaard thinks that the tech industry thrives because it operates to satisfy international demand. Tech companies can be based in Ukraine, while working sometimes exclusively with foreign clients.
“In fact,” Majgaard said, “we don’t have Ukrainians as clients at all. The reason? Sometimes local business is achieved by bribes, and we don’t want to go there. So we only have Westerners as customers.”
Lack of local customers
Besides, few people in Ukraine can afford tech services like the ones that Ciklum and other such companies provide.
“Any business is about customers,” he said. “The economy is weak in Ukraine, and people’s purchasing power is limited.”
The absence of local customers is why many Ukrainian tech startups are moving abroad. They're simply following the money, Majgaard said.
He doubts, however, that firms from other industries can easily adopt the same business model or simply move to some other country.
Work for Ukraine
According to Transparency International corruption perception index, Ukraine ranks 131 out of 176 countries and shares this result with a rate of 29 points together with Kazakhstan, Russia, Nepal, and Iran.
Majgaard’s motherland Denmark ranks as the least corrupt country in the world.
The tech businessman thinks that the only way to reduce corruption is to make everything digital, for “bribing is not possible if the government institutions and their services become electronic.”
Majgaard said that Ciklum might even partner with the European Union and Danish and Ukrainian authorities on the initiative to help reduce corruption in Ukraine.
Apart from it, Ciklum could also develop cybersecurity systems to protect the government institutions from attacks from Russia.
When it was made public in 2015 Soros bought a share in Ciklum, and Majgaard’s company became the target of massive cyberattacks from Russia, but withstood them.
“We’ve proven that we can withstand a massive cyberattack from Russia, and now I guess we could help Ukraine in this regard as well.”
Ukrainian politicians are talking to him with interest, he said.
“They know we work clean and honestly. I tend to accept an offer if one eventually follows. And if they should try to give us a bribe at some point, we won’t take the job. Denmark is the least corrupt country in the world. This is where I’ve grown up and where my mentality comes from.”
Vision for Ukraine
As an expatriate who has spent almost 20 years in Ukraine, Majgaard does not believe that this country will develop quickly — it will take decades to build better hospitals, schools and roads.
“Ukraine’s a large country with a long history. You don’t turn around a country like that in a year or two. Reforms do happen, but I understand people who say they’re happening too slow.” That's why he's sticking to IT. “IT has a life of its own,” he said. “There’s nothing to hold this industry back — no barriers, except people’s own brains. Let people know how to work, how to found and run companies. Once they know how to do that, they can make a company. Once a startup that needs investors appears, investors usually come.”
When Ukraine educates enough tech people, there will be more research and development centers in the country, Majgaard said. This is the road to national wealth.
“This is how IT business can drive Ukraine forward,” he said. “There are other spheres in Ukraine also, but I look at the IT industry as at the industry that can’t be stopped. There’s international demand and Ukrainians can learn to satisfy it. With that, IT can be the biggest industry here in a few years.”
The Kyiv Post’s IT coverage is sponsored by Ciklum. The content is independent of the donor.
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