Severstal establishes global credibility with a
strong licensing position
Overview
Company: Severstal
Industry: Steel
Country: Russia
Link: www.severstal.com
Company Profile:
Severstal is one of the world’s
largest steel manufacturers (14
million tons of steel produced
annually). The company
generates over $13 billion in
annual revenues with its
84,000 employee workforce.
Business Leader Profile:
Mr. Evgeny Charkin has
worked at Severstal for nine
years and served as the Chief
Information Officer for the
past three. He has played an
instrumental role in
restructuring Severstal’s IT
usage and has been vocal
about the benefits the
company realizes with its
deployment of the latest
technology.
Importance of Legalization:
Severstal has a strong
commitment to ethics and
believes that it is critical to
maintain a good reputation in
the international business
community.
Commissioned by Microsoft
“We are a business with a very good reputation
and strong ethics – we want to maintain that
reputation. We do not steal.”
Evgeny Charkin, Severstal, Chief Information Officer
In a country plagued by a 65% piracy rate, Severstal has
emerged as a technology leader that thrives through its
extensive use of licensed software. Severstal invests in its
IT infrastructure to stay competitive in the volatile steel
market – enabling it to lower costs, drive efficiency, and
expand globally. In this case study, we explore the
company’s perceptions and attitudes toward the value it
gains from maintaining a strong licensing position.
IT Landscape in Russia
In a country where software piracy is standard business practice,
maintaining a strong licensing record can be a difficult decision.
Keystone Strategy’s quantitative study of piracy’s impact estimates
that Russian manufacturers playing by the rules (those with
software compliance rates above the national average) experience
$115 million in competitive disadvantage every year – which
translates into the equivalent of hiring 15,000 employees. Mr.
Necarsulmer, President of the Coalition for IP Rights addressed the
severity of this damage, noting that “IPR violations not only hurt
businesses in Russia, but cost the Russian government billions of
rubles.”
Evgeny Charkin, the CIO of Severstal, spoke to Keystone about
how the advantages of legal software guided his firm’s strong
licensing position.
“IPR [intellectual property
rights] violations not only hurt
businesses in Russia, but cost
the Russian government
billions of rubles in uncollected
revenues from counterfeit
products evading taxes and
duties…IPR violations are
barriers to new investment and
impede Russia’s effort to join
the WTO.”
Peter Necarsulmer,
President,
Coalition for IP Rights
“The ERP implementation
project will allow Severstal to
re-evaluate and raise the
effectiveness of key processes,
from production, purchasing
and sales to administration
and company management.
With its help we can…achieve
a significant increase in
operational effectiveness of our
company, [and] carry out a
cultural transformation.”
Alexei Mordashov,
CEO,
Severstal
“[Incorporating IT] has been
very essential to the
improvement of our business
processes.”
Evgeny Charkin,
CIO,
Severstal
IT drives Severstal’s
operational efficiency
As a global manufacturer with
customers and suppliers spread
across the world, Severstal
requires quick communication
to minimize costs. The
company has used IT to
expedite and automate key
processes across the supply
chain to increase operational
efficiency. “Software is critical
to our business. Our board
believes that it is a key
differentiator of our business
and a source of competitive
advantage,” Mr. Charkin said.
As such, Severstal has
revamped its IT infrastructure
over the past years with several
major initiatives. CEO Alexei
Mordashov expressed that
SAP’s ERP implementation
would allow the company to
“raise the effectiveness of key
processes, from production,
purchasing and sales to
administration and company
management. With its help we
can…achieve a significant
increase in operational
effectiveness of our company,
[and] carry out a cultural
transformation.”
Benefits of Licensed IT
Despite the unfair advantages
that pirating manufacturers
enjoy, Mr. Charkin remains
unshaken on Severstal’s
commitment to uphold the
integrity of IP laws and fair
competitive practices. “It is
about the ethics. We don’t
steal. It is not the kind of
company we are.”
He also highlights the role that
adoption of licensed software
plays in establishing the
company’s credibility
internationally and bolstering
the Severstal brand in new
markets. Mr. Charkin notes,
“We are an international
company…we do much
business globally, such as in the
U.S. We hold ourselves to the
same standards as the
international business
community.”
Looking Forward
Severstal’s global expansion has
been fueled by the strong IT
foundation it has in place.
Despite the unfair disadvantage
the company might face from
competitors’ widespread piracy,
Severstal has thrived while
promoting the responsible use
of licensed software.
Mr. Charkin remains optimistic
that new regulations and a
decrease in piracy will spur
more innovation and software
development since the two are
interconnected.