Raima Corp. -- Potential For Growth In Russia Promises Challenge, Rewards




- Employees: 42, plus 13 at Vista Development Corp. subsidiary.

- Headquarters: Bellevue.

- Business: Computer database management systems and related software.

- Chairman: Stephen Smith.

- Sales: $4.5 million (1989).

- Profits: Not disclosed.

- Major competitors: Other database suppliers such as Oracle, Informix, Unify, Novell and Ashton-Tate.

- Strategy: To establish its products in the Soviet Union through joint ventures and by training Soviet programmers in U.S. business practices.

As a market for American high-tech products, the Soviet Union presents some daunting problems.

- The economy is low-tech, and until very recently, the U.S. and its major Western allies had little incentive to help modernize it. This was, after all, the Evil Empire.

- A host of restrictions still limits the products that Western businesses can sell the Soviets. Until last year, it was illegal to sell them the equivalent of an IBM AT personal computer or a low-end Macintosh - machines that are considered obsolete in this country.

- There is no copyright law to protect intellectual property, a particular problem for software companies.

- There is almost no business expertise in the Soviet Union because private enterprise has been nonexistent since shortly after the Russian Revolution in 1917.

None of which fazes Stephen Smith, chairman of Raima Corp., a relatively small but fast-growing Bellevue-based developer of computer database management software and related products.

``International sales for technical products are easier than domestic ones,'' Smith says. ``Most of our competitors aren't over there.''

America is the world leader in most software areas and if other database manufacturers dismiss international markets as too difficult to penetrate, it leaves Raima an open field against weaker foreign competitors.

In that respect, ``Russia is just an extension of the rest of the world,'' Smith said. ``But it is the biggest growth opportunity. It's also a bigger challenge than most American companies will go for. That gives us an advantage.''

Raima was founded in 1982 by two former engineers for Boeing Computer Services, Randall Merilatt and Wayne Warren, who remain officers of the company. Smith, who was the 15th person hired by Bill Gates at Microsoft, joined in 1984.

For the last three years, Raima has been actively pursuing international markets. About 35 percent of its sales are foreign, and Smith aims to raise that to 50 percent soon.

Since Raima does not write the word processing and spreadsheet programs familiar to many office workers in this country, it does not have to compete abroad with such American software giants as Microsoft and Lotus. Instead, its products are aimed at a narrow market segment - C-language programmers who design their own database applications to meet specific business or other needs.

Smith was attracted by the potential of the Soviet market during a visit last September, which was followed by a series of seminars in Leningrad in October.

He quickly fashioned a two-pronged approach to address the peculiar problems associated with breaking into the Soviet Union.

Since the Russian ruble is a ``soft'' currency that is nonconvertible in the international market, most business deals with the Soviets involve barter arrangements in which the Western company swaps its products for Soviet goods that it then most sell elsewhere to earn money. These deals are time-consuming to research and clumsy to implement. Like most businessmen, Smith prefers real money.

So he arranged to get his software into the Soviet Union by entering into an agreement with Baltic Amadeus, a company that sells personal computers in the Soviet Union.

Baltic Amadeus is a joint venture between the Lithuanian Academy of Sciences, which owns 50 percent of the the company; Avstrokop, an Austrian manufacturer of PC's, which owns 45 percent, and a group of Russian programmers who own the remaining 5 percent.

Under terms of the agreement, Raima sells its db-FILE File Manager database program to Avstrokop, which ``bundles'' it with the computers that Baltic Amadeus sells. The agreement calls for a minimum purchase of 1,000 copies of the program the first year. The first 250 copies have already been shipped.

Raima is also negotiating with several other state-owned cooperatives to supply them with personal computer systems that include database software.

Smith said he quickly discovered that the Russians' understanding of programming was much more advanced than their knowledge of what it takes to make a business work. The Soviet Union has prided itself on scientific education, and the basics of computer programming are widely known. Smith even found that some of Raima's software had made it to Russia before him in the form of pirated programs obtained from friends in the West.

But the Soviets' lack of business knowledge seemed to Smith to be a major roadblock to both the modernization of the Soviet economy and to the development potential of its market for computer products. He and his project manager, Sergei Kalfov, the son of Russian immigrants, note that there is not even a word in Russian for marketing.

So, as the second prong of his plan, Smith established a program under which Raima will hire Soviet programmers and bring them to company headquarters in Bellevue. They will be paid about $2,000 a month, and will spend 12 to 18 months learning both computer programming for business applications and American business practices.

When they return to the Soviet Union, Smith says, they will be able to train others and, not incidentally, sell software.

Smith has some concerns about protecting Raima's program copyrights in the Soviet Union. Thus, his initial agreement with Baltic Amadeus is for bundling db-FILE rather than Raima's top-line program, db-VISTA III.

The rights to db-FILE are protected by a contract whose genesis demonstrates some of the complexities of doing business with the Soviets. The contract was drawn up in English, which is much more precise than Russian in business and software terminology, then translated into Russian. If problems arise, they will be arbitrated in Sweden under provisions of Washington state law.

Smith said he does not expect any serious problems, however.

``The Russian programmers recognize that they should protect software,'' he said. ``They have their own programs to sell . . . I think the guys we're working with are going to work hard to honor the agreements.''

In addition, he said, a law to protect software rights is being drafted.

As a further indication of Smith's commitment to the Soviet market, both Raima and its services subsidiary, Vista Development Corp., are supporting the US/USSR Business Development Corp., a company founded by Seattle software developer Nicholas Corff to promote high-tech trade between the two countries.

``The opportunity (in Russia) is there for the big guys, the Weyerhaeusers and the Paccars,'' Smith said. ``But the immediate opportunity is high tech.''

Strategies appears weekly in the Business Monday section of The Seattle Times.