CEO conversations: Quantum computing, leadership, and overcoming the 'time tax'
Self-made entrepreneur and business executive Serguei Beloussov has a 24-year track record in building, growing and leading high-performing, multinational tech companies in North America, Europe, and Asia. Beloussov founded Acronis and Parallels, is the co-founder of QWave Capital, chairman of the board of trustees for the Russian Quantum Center, and sits on the governing board of the Centre for Quantum Technologies in Singapore.
In this interview with Enterprise Innovation, Beloussov touches on geopolitics and quantum computing, and takes us through the evolution of Acronis, its innovation and hiring strategies, and the disruptive technologies that excite him the most.
You had a business back in Moscow in the early 90s. What was the environment and experience like back then?
I went to specialized school and university. At some point while I was completing my studies, I started my first company—a PC business in ’92. I was 20 years old, Russia was converting from a socialistic country to being a capitalistic country, and a lot of things were happening.
Take us through the setting up of Acronis and the SWsoft days.
In my first company, I hired a Pakistani employee who had been head of the Moscow office of a trading company in electronics. I hired him in 1993 when he was studying in Russia and I convinced him to join me. In January 1994, I left my first company and I came to Singapore where I started my second company—a consumer electronics company. We stayed in Singapore as a logistics center, but very quickly opened an office in San Francisco for the same purpose—to source components. So we had three businesses by then—the PC business, which we expanded to Malaysia, Pakistan, Indonesia, and Russia, and a consumer electronics manufacturing business.
Why specifically in those places?
Because we have a competitive advantage in those places. But it was difficult to do business and we ended up not making money. We didn’t lose money, but it was just not a smart business move. We had also started a third business selling ERP software—we became a franchise distributor of a U.S. ERP vendor. Eventually we started writing software because when you manufacture consumer electronics, you need to design consumer electronics as well. If you don’t design it, you don’t control the material.
Every piece of electronics has software and we needed to have people who create our production lines from scratch. We didn’t have money to buy production lines. To open a consumer electronics factory, you need typically $150M investment but we had only a few million dollars so we bought used machines and we repaired them. To fix them, you need to write software and you need to hire people. We started writing software for Solomon Software and then by end of ’99, it was clear that we cannot scale the business in software by writing software for other people. We already at that time wrote software for many people. We did it in Singapore where we’ve had 60-70 mostly Russian engineers. We did have an office for a short while in India in Bangalore—we had about 40 people—but Russian engineers and Indian engineers are not so compatible and we ended up bringing some of them here in Singapore, but mostly closing down the India office.
One quick aside—Russia seems to produce a lot of very competent engineers and computer scientists. The Soviet model is one thing, but what is it about the education system in Russia that enables this?
One reason you correctly pointed out is Russia is a great empire—it has been for the past thousand years. They’ve the largest land mass, they accomplished it because for many years it had a very strong military and they were very aggressive. To maintain military strength, for about 150 years Russia has been investing in different types of sciences. It’s a long-term, traditional engineering culture, especially during the Soviet Union when it was competing for world domination with the United States. It basically did all the same things as the United States but in a slightly different way. The U.S. had more money so it had more computers; Russia had less money so there was much more mathematics. But overall they were two competing countries that produced a lot of technology.
Has there been a significant change in the way science and mathematics and engineering have progressed in Russia?
Obviously the main change is there’s much less money. Second main change is that the most talented people go out and work anywhere they want. For example, one of my friends is doing some very exciting experiment which he might get a Nobel prize for. He’s a professor in Harvard and he’s from Russia. Russia has 145 million people—probably some percentage leaves.
You have R&D centers in U.S., Russia, Singapore and Bulgaria. How do you distribute that R&D workload across these four centers?
The largest at the moment is Russia, but we have some sensitive development related to security and privacy, and this is done outside of Russia. We only localize it in Russia. So whatever we sell to various governments, including the U.S., these are either developed in Phoenix, Arizona, in Sofia, Bulgaria, or in Singapore.
Obviously there are geopolitical concerns about security. There’s the Russian government, the U.S. government—are there restrictions on what you can and can’t do when it comes to government?
This happens in every country. You cannot avoid it. There are established practices in every country. In the U.S., we have a clean room where we have people in this room who review the source code—they're Americans, they’re in the United States and they build it there, test it there—they do everything in the United States. We can’t really affect or possibly fire the management or force the management to fire them, that would be immediately visible to U.S. government, so it’s a standard practice for all companies.
In general, what is the innovation strategy for you guys?
We have an incubation team, but generally right now we’re not a very large company. We’re just 900 people—if you count full time outsourcers, then it’s actually 1,000. But we're still not a large company. We’re executing one vision so we are sort of still in a startup mode. But even though we’re not large, new products aren’t difficult to launch because we have the channels, distributors, resellers, and the sales people…we also have a special research center here in Singapore.
Is the convenience of Singapore largely for business reasons?
We partner with Formula One and it just allowed me to understand why I like Singapore so much. It’s the convenience. Basically, Singapore decreases time tax. For example, if I need to go to a dentist in Boston, it takes me 30 minutes to get to a dentist, 20 minutes to wait for a dentist, and takes me 30 minutes to get back…that’s an hour and 20 minutes. But here it takes me 10 minutes to a dentist, and I do not have to wait my turn when I get to the clinic, and then it takes me 10 minutes back. If you go to places like London, Moscow or Mumbai, it could be worse. That relates to everything from dining to buying something in a store. So I was thinking, look, I work a hundred hours a week—if I save several hours a week, why does it matter? And then I realized that it’s not about how many hours I save, but how many more hours I have versus my competitors. The value is in competition—in Formula One, if you save two percent, you win. Here in Singapore it’s the same thing. Because in business you’re in constant competition! If you save two percent of time, that’s extremely valuable.
Earlier you mentioned that even having 900 employees in your company is too many...
When you grow, if you’re growing too fast, you risk hiring wrong people. That’s something I am always concerned with. Our methodology of hiring people is closer to Apple versus Google. Google has been known to hire lots of people, push them through stages, and some of them leave. In my biggest company, Parallels, we have a Head of software from Apple onboard. He was reporting directly to Steve Jobs for 23 years—he came with the acquisition of Next—and he told me that Apple only hires 10 percent per year. If they start the year with 1000, they end the year with 1,100 people. In worst case scenario, they hire 15 percent, but he said they actually never went above 10 because then most of what their people would be doing is interviewing or they would decrease hiring quality—which is something they don’t want to have happen. Decreasing hiring quality won’t enable them to shape very nice products. On the other end is Google, which is brute force versus quality. I mean, Google is a good system and in the end, they end up having very good products—perhaps not as polished as Apple, but very powerful. And if you look at Google market cap, it’s $586 billion and Apple is $730 billion. Very competitive. And Google will obviously overtake Apple, it’s quite clear.
Because of the diversity of their business?
Not just that, but well, I mean lots of reasons. One is that Steve Jobs is gone while Larry Page and Sergey Brin are alive.
Fair enough…but I guess there was a sense of cult of personality around Jobs as well.
Well, Steve Jobs was a very special person. Yes people liked him, loved what he did, but cult of personality assumes you really like the person or really fear the person. Cult of personality would be requiring somebody to communicate with the person and tell him nice things, and Steve Jobs was not the kind of person people were communicating too much with.
Just to give you one example. At some point, I went for lunch with my board member Bertrand—the one who worked with Steve Jobs—and we were eating lunch and he said he had never eaten lunch with Steve. Work was enough. Not a single meal with Steve Jobs—and he was directly reporting to Steve Jobs for 11 years.
What are your thoughts on the challenges that businesses will face in terms of data security in 2017 and the evolving threats to data protection?
One of the challenges is that data is rapidly becoming valuable in itself. In the past, a lot of data was garbage because there were no analytics tools that would deal with them. So you’d produce a lot of data but then what to do with it? Today there’s big data, artificial intelligence, and machine learning, and there’re a lot of enhancements in both areas so any piece of data can be used to extract value, whether about productivity, health, business, etc. So all of a sudden you deal with the fact that any data needs to be somehow protected and preserved. If you don’t preserve data, you might end up being not competitive in the future. Imagine you as a person would not have memory, would forget everything except the last 10 days, for example. You’re not going to be competitive.
The other challenge is balancing the physical world with the digital world. It’s becoming one world, and that is very dangerous because in the physical world, things are hard to break in. This is my iPhone and it’s unlikely that it will be suddenly modified in some crazy way. But in the digital world, everything can be modified. So making sure that everything is authentic is suddenly becoming a problem because you have the physical world blending with the digital world. You get things like self-driving cars and automatic weapons that make decisions of shooting or not shooting somebody, driving left or right, hitting or not hitting somebody, and all these decisions are based on data. So we need to make sure that the data is safe and secure and private, and that it’s actually authentic and real, and not some kind of junk.
What are the technologies coming up that excite you?
There is one technology that’s widely known that excites me—it’s quantum technology. I’m on the board of the Centre for Quantum Technologies in Singapore and there has been huge progress. This year is really the year when there will be significant progress in the area of quantum computers. There’s already huge progress in the area of quantum communication—I’m chairman of the board of the most successful company in quantum communication, a Swiss company called ID Quantique. We’re starting to grow very fast because people really understand that quantum networks are the only networks allowing for private and secure communication.
Another technology which puzzles me, not excites me, is artificial intelligence because it’s not clear how it will go. It’s a little bit scary because in a way it will make 95 percent of jobs not necessary. In the world where there are no jobs, people have to have very developed hobbies and there has to be a very developed social system. If you have a 30-hour workweek, you have a lot of hours which you need to occupy. In the future, you’ll have 2 hour work weeks because the rest will be done by machines. What are you going to do with the rest of your time? The other part of this is the government needs to be prepared to create a system that will spread the benefits of the society between people in some kind of fair way.
When do you think quantum computing will get commercialized?
Commercialization will come in maybe five years. Artificial intelligence is already happening now. Look at Tesla and Alexa.
For quantum computers to make a significant change for humans…well if you look at mobile phones, they are actually, what, 40 years old? They came out in the 70s, right? But they affected us in the 90s. And then the smartphones came just in 2010, which is seven years ago, so now it’s significant change because everybody has a smartphone. I think for quantum computers, the significant change will happen in 10 years. Quantum computers can be used to design new materials—and most of the people who consume new materials are in the military. If some military will create some dangerous materials, then who knows how it’s going to be used?
Is that going to significantly increase the risk we have right now anyway?
It’s hard to say. It’s not very easy to precisely predict, but it’s dangerous. When one party is significantly stronger than any other party, it eventually becomes dangerous for a lot of people because the party—any power—eventually gets misused unless there is a balance.