"It Was Outsourcing in Science." How a Belarusian Start-up from the 90s Grew to $16 bln

EPAM started out just like any other Silicon Valley start-up — only not in a garage in San Francisco, but in a Minsk basement.

Leonid Lozner

Arkadiy Dobkin

In the early 90s, Leonid Lozner and Arkadiy Dobkin, who met in high school, decided to build a Belarusian-American business. Lozner opened the first EPAM office in the basement of his apartment building.

Before EPAM, Lozner worked in physics for 12 years, but in those times a career in science wasn't enough to pay the bills, Leonid recalls. Many people gave up their research and moved on to working in business. When Arkadiy Dobkin offered him a job as a freelance software developer, Leonid didn't hesitate.

Lozner wanted his work in technology to be combined with his two main passions — modern engineering and science.

The first office of EPAM in the basement of an apartment building, 1993. Photo from Leonid Lozner's personal archive.

According to Lozner, he earned the money to finance EPAM in Belarus doing technological freelance work for Americans: "This was, in fact, outsourcing in science." Arkadiy Dobkin already lived in New Jersey at the time.

Dobkin didn't end up in America by accident. In 1991, while working as a programmer in the Institute of Powder Metallurgy, Dobkin organized a small software coop. Software was developed on a freelance basis, and clients were sought in Ukraine.

The 1990s were full of anxiety, and almost no one was sure what the future would hold. Arkadiy had a sister who lived in America. When Dobkin was leaving, he asked the team to wait for him to be in touch.

Dobkin made himself at home in the US fairly quickly. They remained in touch through fax messages.

Capitalization: $16.6 bln (August 10, 2020)

Founders: Arkadiy Dobkin, Leonid Lozner

Trades at: NYSE

HQ: Newtown, PA (US)

Services: consulting, design, development, optimization, integration of applications

Employees: > 37,000

Founded in: 1993

Lucked Out

It's 1994, and there are six people on the EPAM team. Dobkin recalls that in those times it was very important to establish connections with the international market: Arkadiy who was constantly telling stories about the mythical Belarusian programmers had almost earned him the title of the village idiot at his main place of employment. And then one day, his story came to fruition.

That year EPAM got its first serious client — the Belarusian team developed logistic solutions for the Swiss company Bally. The shoe brand remained EPAM's client until the mid-2000s.

More luck: in 1996, Colgate-Palmolive became the new large client of the company. Suddenly EPAM's technology became noticed by large Western players.

The founder of the leading software developing company SAP, Hasso Plattner, offered EPAM to build large corporate solutions.

Dobkin explains their success in the 1990s very simply: despite the fact that there were thousands of similar teams, it was only them who were not afraid to experiment with new technologies.

By the early 2000s, EPAM already employed over 200 people who flew all over the world developing the first online stores and e-commerce products.

In March, the burst of the dotcom bubble destroyed thousands of companies. EPAM's team survived: they were down on workload, but still had the money.

USA, 1995

1996

Minsk, 1997

Acquisitions

The technology offered by Belarus professionals was valued in the US, but there were no platforms for development of science and business in Belarus at the time. Leonid wanted to fix that.

By the mid-2000s, EPAM's geography expanded. Dobkin and Lozner shifted emphasis from Northern America to Europe and were attracting new clients.

In March 2004, EPAM acquired Hungarian Fathom Technology, and in the following years — B2Bits Corp (2008), PlusMicro (2008), and Rodmon Systems (2009).

In February 2012, EPAM went public on the New York Stock Exchange. The Belarusians were now doing projects for Adidas.

In the years that followed, EPAM performed many acquisitions, among them were the digital agency TH_NK that was in the top-100 list of agencies in Great Britain, as well as the companies Alliance Global Services and Dextrys.

In 2018, EPAM launched the analytical platform InfoNgen with the elements of machine learning, as well as Telescope AI — a platform based on artificial intelligence to organize internal business processes. In 2019, EPAM was joined by Competentum, test IO, and NAYA Technologies.

By early 2019, the company employed its 10,000th employee in the Belarusian office. This person already used to be employed in EPAM.

In October 2019, EPAM became the global business partner of UiPath for joint development of PRA solutions.

In February 2020, Diya application was launched in Ukraine. It was downloaded by over two million people in just half a year. EPAM experts took part in development and testing.

In June, Microsoft implemented a large-scale program for European IT professionals Azure in partnership with EPAM.

In July, EPAM and UNICEF presented a joint development of a multifunctional platform HealthBuddy COVID-19 to protect people living in the countries of Europe and Central Asia.

EPAM has its own education center for the training of young professionals that has already taught over 10,000 students.

The company's other products include EPAM SolutionsHub: a library of program accelerators and Open Source solutions, as well as the instrument Open Source Contributor Index.

Leonid Lozner exited the company's management in 2008, keeping 6.2% of shares. Lozner calls himself a 'might-have-been scientist.' In recent years, he has contributed to the development of robotics for children and dreams of a Science Museum.

Strategies

Elaina Shekhter

As EPAM expands its business in Europe, it also adjusts its global tasks. Since March 2015, CMO Elaine Shekhter has been in charge of EPAM's global strategies and marketing. She also manages business operations and communication, including the regional offices.

Elaina joined EPAM Systems back in 2001 and played a key role in the development of several service lines and CRM systems of the company.

"We used to say that EPAM is more than income or profit. Our results are the results of our clients, and it is very important for us to present the values of the company correctly. Marketing is a relatively new part of EPAM's structure, the work here is done by really 'hybrid' teams made up of very different professionals. In addition, I communicate with all teams and try to delegate as much creative work and decisions to the EPAM leaders as possible," Shekhter says. "EPAM is growing, and so the company needs to adjust to the new conditions. For instance, we are gradually adding consulting and design to our services as a mandatory prerequisite of integration."

Despite a broad choice of program solutions, EPAM marketing is rather aimed at finding talent. The competition in the Belarusian IT market is increasing: in order not to lose valuable human resources and increase loyalty, EPAM develops education programs, with EPAM University being among them. However, according to Shekhter, employees leave any company.

Outsource — Not Outsource

EPAM established itself in the market as an outsourcing company, but its founder thinks that this stereotype long needs to be broken.

"We have always been, and we remain an engineering company. And today we are also a consulting, designing, and education company. Whether we make a product for sales or offer solutions… Is this outsourcing? Or a very relevant product or service produced by an engineering company? There is nothing wrong with the outsourcing model, it is a very important component of the global business," Dobkin says.

Today, EPAM covers various spheres — from architecture and media to energy. Most of the income comes from American clients.

"There is nothing wrong with the outsourcing model."

One way or another, the lockdown impacted the work of companies all over the world. Judging by the official statements, EPAM didn't lay off staff, although employees did start working remotely. The forecasts that the Belarusians have for the European IT market are rather optimistic.

"At the end of 2020, we definitely won't see the usual 20—25% growth for the IT industry like in the previous years. However, this doesn't mean a steep decline, but rather some slowing down. It is still a difficult question when everything will go back to the usual growth rate. Any long-term forecast now is guesswork," the head of EPAM in CEE Yuriy Antoniuk told AIN.

According to Dobkin's estimations, in Q1 of 2020, EPAM performed better than expected. The company closed Q2 with profits of $632.4 million — 15% more than the previous year.

Today, the world market of IT outsourcing is estimated at $342.9 billion. According to the forecast of the analytical platform Research And Markets, even during the crisis caused by the pandemic by 2027 its cost will exceed $410 billion. The Belarusian IT segment is growing steadily together with the market.

Today the High Tech Park has over 60,000 employees who produce 3.5% of Belarusian GDP, CTV writes. In 2019, the export of services amounted to over $2 billion. In the two recent years the number of residents at the HTP grew four times.

According to recent information, EPAM has 37,000 employees and has offices in over 30 countries around the world.

The Belarusian company that in the lastt ten years grew into a large corporation has projects with world-famous brands in various spheres — from Google to Coca-Cola, although most technological solutions of EPAM are still based on outsourcing.

Dobkin speaks about the impact the pandemic has on business without apprehension:

"If this is not your first time in crisis, you realize that things will go back to normal at some point. So you have an advantage of having prepared for that.

For 20 years, we developed through innovation and built our digital platforms to support distributed work — this is part of our [corporate — Ed.] culture, part of our DNA.

"In three days, 37,000 people in our company started working remotely."

When the crisis hit, many competitors found themselves in difficult circumstances. However, those who were doing global development with an especially high degree of distribution managed to transform faster. In three days, 37,000 people in our company started working remotely.

When the crisis ends, there will be a serious leap in demand for companies that can ensure the next level of the digital revolution. The pressure on companies with the goal to produce products of higher quality with higher speed with a different level of agility will increase exponentially. For the IT industry this is a big boost for further development."