The interview was conducted by Yoan Zapryanov and published in Capital on 18 June 2021. Read the original in Bulgarian.
Petko Karamochev is the CEO of INDUSTRIA, a company that develops high-tech solutions for the financial industry. He holds a degree in International Finance from the University of Portsmouth, has completed an EMBA program at Cotrugli Business School, and has an additional degree in artificial intelligence from the University of Oxford. His time is divided between Sofia and London, where most of the company's customers are located.
INDUSTRIA was created through the merger of two other companies, Magic Solutions and Merar. The company develops high-tech solutions for the financial industry - digital experience, enterprise blockchain, process automation, and confidential computing. In 2020, INDUSTRIA reported BGN 3M in revenues. The company employs about 40 developers and specialists and has customers in 25 countries.
When and why did you create INDUSTRIA?
We practically refounded the company four years ago. It was something completely different before that. Some clients stayed and have now been with us for 17-18 years, so we are not a new company. INDUSTRIA is the brand we have been using for the last four years, which is when we started going deeper into more serious tech. The company used to be called Magic Solutions, a name I didn't like and wanted to change, but our clients liked it, so we kept putting it off. Magic Solutions was a name from the dot-com era when everything was a "solution," but the market ended up going in a different direction. So that’s how we joined forces with Merar and became INDUSTRIA.
Initially, we dealt with banking frontends, i.e. sites, interfaces for online banking, mobile banking, etc. This business has changed a lot, especially when it comes to the websites themselves, owing mostly to the influx of new players. Now that there’s WordPress, there’s only a very small niche to fill, so now you have to work with razor-thin margins. That's why we decided to go for something more avant-garde, such as blockchain - but not public blockchain - enterprise blockchain, because we wanted to take advantage of our connections with the banking sector.
What is the company doing now?
Three and a half years ago, something very interesting happened. We decided to keep the user experience (UX) as a separate line of work, but we also resolved to be a deep tech company - we didn’t want to limit ourselves with just this small slice of Europe. Blockchain was a natural choice. We had experience working with banks and large corporate clients. Most of our customers have been with us for over seven years, which is very important in this particular instance because it’s much easier to sell to them a second, third, or fifth time by offering more services.
Then something else happened - we went beyond our borders. I was provoked by conversations with a client we had, a famous Bulgarian banker, who asked me: "If you’re so good, why aren’t you in London?" So I packed my bags out of spite. We looked at the map, decided on an entry point, visited a couple events, and little by little, we started building connections.
So what part of the team is here and what - in London?
Most of our clients are outside Bulgaria, which is to be expected. Bulgaria is a very limited market - both in terms of turnover and in terms of potential clients - though it’s still a very interesting one. Here, for example, things happen that do not happen elsewhere. The technical team, for better or worse, is entirely in Bulgaria. We recently recruited people in India as well. Now with the coronavirus situation, it's a bit of a nightmare, and we're quite worried, but we hope we can continue expanding in the coming months. We also have full-time employees in London, but the base is still in Sofia. Let's put it this way - most of the employees who work with clients directly are outside the country, and most of the technical staff is here. In total, we’re over 40 people - fingers crossed we’d ideally be able to go up to 60 by the end of the year. That number of people, by the way, is not what’s important - we’re focused on quality first and foremost. In Bulgaria, for example, even if we wanted to, we’re not in a position to take in many more people. It’s very difficult to hire in this sector.
How does one enter and maintain a presence as a technology company within the banking industry?
You enter with your reputation, a little luck, and by being ready to work for a long time with no pay. I’m not trying to come off as apathetic towards Bulgarians, but very few people in Bulgaria understand that - that you have to work for one or two years with the sole aim of building a portfolio. Forget about London, forget about “but I’m at this age” - you work for a portfolio, and you try to stay alive in whichever way you can.
In your specific case, you have been in this sector for 20 years. What was fundamental then, and what is fundamental now?
Both then and now, the banking industry is quite insular. We operate in four sectors - banking, insurance companies, capital markets, and trade finance. In all four, it’s likely not going to happen the first time around. With a company from Singapore, for example, it didn't work out the first time, but it did the second time, and we’ll have more news about that soon. However you want to enter this field, you must be a sociable person. I was a counsellor at the British Parliament for two years, and that certainly helped. The other is, you need to deliver. If they paid you for five, deliver six. You always need to be doing more than what is expected of you.
What are the biggest projects INDUSTRIA is currently working on?
The big news is that we are starting work with the Union of Arab Banks, and we are about to digitalise the entire banking sector in about 20 countries in the form of digital currencies. That’s the goal. And we’re the headliners there - besides us, both R3 and the union itself are entering the project. This feeds into my previous point - we got to this project by proving we are committed and progressive, by leading with our reputation. There’s a lot of charlatans in this business, so reputation is key. We started talking shortly after the pandemic hit last year and decided that the time was right. The Union of Arab Banks led the initiative. This includes a total of 360 banks, both central and commercial. It is digital money issued by a central bank. It’s something everyone is talking about, but - just like blockchain used to be - no one is actually doing it. We are one of the few.
How would you explain digital money in as simple terms as possible?
Programmable money. If you’re receiving benefits, then they are programmed to be used only for food, for example. You can't borrow them or buy anything else. From there, when you have the technology, you can do anything with it. In Italy, there is another project, SPUNTA, which ties the fragmented banking market together. Even though we’re talking about a single country, there’s a very complex correspondent banking system. Grants are given, for example, to children under the age of 18 for the explicit purpose of buying books, and one cannot transfer them or spend them on anything else.
INDUSTRIA deals with blockchain, but you have stated on multiple occasions that the blockchain is not a solution to everything, as people often imagine. What is blockchain a solution for? What is it not?
In the field of capital markets, for example, blockchain is a very significant solution. The digitalisation of assets is a huge step forward. In real estate, it allows a property to be broken down into a thousand pieces and traded individually. The other big thing is the standardisation of communication, which allows different market participants to feel confident in speaking the same language. As for where blockchain doesn’t apply - I still don’t think we’re ready for automated organisations. And even though I try not to pay attention to them, there are countless charlatans. There are numerous places where blockchain just doesn’t fit, but where there’s money or transactions involved, it’s an obvious choice.
To what extent is your work related to the most obvious example of blockchain - cryptocurrencies?
None. I say this with the utmost respect for my colleagues who work with crypto - but we don’t.
Is this policy or a coincidence?
It’s both. On one hand, that’s just where things ended up going, but on the other, nothing we do is coincidental. When you work with central banks, you can't work with crypto. And maybe vice versa.
Because of regulations. This is something that has existed for hundreds of years in the banking sector. New assets are emerging that want to replace the existing order, but there’s also this need to ignore centuries of regulation, which is a big problem for people on the other side.
To what extent do central banks and large governments, at least at the European level, turn to the blockchain as a solution?
There are many interesting projects in Europe, and I’m glad that Bulgaria is participating. We’ll soon start hearing more about the digital euro. The other large-scale project is the European Blockchain Services Infrastructure (EBSI), in which Bulgaria is also taking part. It's about the notarisation of documents - I actually had to make an apostille today, so the fact that it’s an expensive and complicated process is still something that’s fresh in my mind. The goal is for these things to happen faster, without intermediaries, without travelling. Another scenario is diplomas, their recognition at the European level - something that you could potentially do without having to return to your home country to pick up a piece of paper, then translate it, having to deal with people who don’t trust you, and so on. Another possibility is the financing of small and medium enterprises through the issuance of bonds on a blockchain. We’re also looking into ways to connect Bulgarian e-service providers to this process.
How do you define your management style?
I’m a very tempo-oriented manager, but I’ve fortunately learned how to delegate responsibilities and tasks. In fact, the company is currently run by other people. I’m primarily focused on the more visionary, more strategic goals. More sales than operations. It wasn’t always like this - it took me a long time to come to this realisation, and I advise all managers to make that transition faster.
Has the pandemic changed the way the company is run?
We’re all working remotely - we hired a lot of new people as well - some of them still work from home, which was very interesting to me. The company's values have also been preserved, which is good - they are, after all, internal values, not something that came out of nowhere. Every Friday, we all hear each other out, and we even get input from people who no longer work for us - some of them even come back. I constantly keep hearing other companies complain that the people they hire don’t stay. We managed to get through the pandemic with very few losses - I think only one person left, and we hired significantly more than that.
Rather, the main issue was with our corporate clients. When you’re in such a niche market, you can lose business fast. Fearing what might happen, we decided to take on a lot of work, so it's been a little intense - we’re wearing a lot of hats right now.
Isn't it the other way around - that financial institutions suffered more during the pandemic?
They did, yes. In fact, with some of them, we managed to create a few quick digitalisation projects. More often than not, however, “quick project” and “bank” don’t really go together too well. In most cases, things happen slowly, and this is reflected in the business side of things and in the financial results.
When is a bank’s digital transformation quick? And when is it slow?
If I may quote the Russian Sberbank (soon to be called just “Sber”) banker, Herman Gref: "We are an IT company with a banking license." This is your answer: transformation happens quickly when banks realise they are IT companies with a banking license. Competition will make many banks go out of business. For them, the reassurance is that there are still licenses and strict regulations in place, but the number of competitors, fintech participants, new regulations, etc., is only going to increase. Blockchain companies, in particular, have shown that they can both compete and cooperate with each other to cut costs, which is a very key factor.
Is it cliché to say that this last year has accelerated the digital transformation?
It’s not a cliché at all, it’s true. In a different context, some of our projects would have taken 10-15 years, but they happened in six months. Our projects in the Arab world are exactly like that - Coronavirus forced the banks to adapt quickly - they told us as much when they first called us.
How does INDUSTRIA select the projects it works on?
We cover four main areas - blockchain, confidential computing, process automation, and digital experience. The pandemic is currently shedding light on the need for process automation. Regardless of whether you’re a bank or an insurance company, things will probably work out on their own. People are working on it, there are information systems, they work. The pandemic has shown that when things break, you suddenly realise which processes don’t function properly and need to be automated. That’s why we rely on this approach - it’s old and boring, but it is an overall pleasant business experience. The same thing happened with “the digital experience,” too - it used to be seen as a pompous phrase, but when there are suddenly no open bank branches, and everything is on your phone, there’s no going back.
What are you worried about, from a business point of view?
I’m worried about the state of the workforce in Bulgaria. On the one hand, we have very good technical people and the whole world knows it. On the other hand, running a company that deals in solutions and services without an intermediary is a very complex task. It’s very difficult to find training for such things in Bulgaria. For technical things - yes, but people who communicate and work with a more Western approach, for example, are very difficult to find and even harder to keep. I’m also worried about travel, the increase in transportation prices, the new regulations, the long quarantine periods. The lack of face-to-face contact with the client is very troublesome, especially in the financial sector. I’m worried that the banking sector is too slow in making the jump to blockchain solutions. When they do decide on it, it’s usually long-term projects, but the road to getting there is still slow. Come to think of it, few things bother me - I’m content as long as there’s work.
How do you find personnel?
We function a bit like a training centre. The incubation period for a good employee isn’t unlike a baby’s - at least nine months. From there, we start teaching them to walk.
Without being a Minister of Education or a Prime Minister yourself, what advice would you give in that regard?
Thank God I'm neither. But my recommendation is this - we need to start bringing in staff from outside. All the things you know about - blue cards, etc. - must be introduced. Bulgaria needs to open up. Many factors are going into this, but the shortage of staff is about 10,000 people. These are highly paid positions, and you can do the math on how much in taxes that would bring in, how much that could raise consumption. We need to be looking for people from all over the world.
The idea of associations and companies in the IT sector is to attract people from outside the EU. In the meantime, however, Bulgaria has become competitive specifically in this sector. Is it possible to attract people from Central and Western Europe as well?
They’re already coming in, more of them and more often. We used to joke about this, but many companies here already employ French workers, Englishmen, people from South America. It’s going to become a melting pot, which I find very exciting. At the moment, I can’t find a difference between a Bulgarian, Hungarian or Polish company. Nobody cares where something is made - the important thing is to get the job done.
Not that anyone’s asked me for advice on this, but scaling up the number of people will be very difficult for Bulgaria. This is already self-evident. You grow a business by growing the number of people who work there, but you eventually reach a ceiling - and if you hire too fast, you become a company without culture - a place where employees come and go. The solution is in companies who create a product - ones that are invented and created in Bulgaria. The biggest and most successful companies in Bulgaria are product companies, and they are the least talked about - it should obviously be the other way around.
To quote Lee Kuan Yew, Singapore’s founder, from the very beginning he told foreigners to build their own pharmaceutical factories, to teach the locals what they can, and then to let them run things themselves. The same thing happened with Ireland - at the beginning of the century, even before we became a member of the EU, we had the opportunity to work there. Then Ireland was in this phase - the labour market was falling apart, while at the same time growing very expensive - companies wanted to move. This will absolutely happen in Bulgaria as well - there’s no question about it. We do not have enough people, and the ones we have are very expensive.
The bottom line is that we need to start making products or services with very high added value. Outsourcing, for example, is something that’s going away little by little. Great added value is to be found elsewhere - the huge margins are elsewhere.
In the long run, what are INDUSTRIA’s most realistic and most optimistic scenarios?
We also want to become more of a product company. We tried to switch to products twice, but it ended up not working out. The transformation from service to product is very complicated. When you want to be a product company, you need different DNA. We’re developing a sort of semi-manufactured goods that we feel are needed, goods that help the industry do more with less. That’s one goal we strive for - to do the things we do well, faster, without fundamentally changing our business model.
That’s the best-case scenario. What’s the more realistic one?
There is none. They are the same - there is only an optimistic scenario.
Which business book would you recommend?
Martin Walker's Front-to-Back. It’s a book about markets, offers fantastic explanations on how all kinds of financial markets work. It's a bit like an encyclopedia - if you think of something or there’s anything you don't understand, you open up the book and check it out. Another one I would recommend is Tom DeMarco and Timothy Lister's Peopleware. That one’s quite old, and it shows that nothing has really changed in the software industry in recent decades - the book is concerned with the question of how to motivate people. If someone wants to do people management, start with this book - it will solve a lot of problems.
How do you relax?
I spend time with my wife and children. When you stay at home, there’s not that much to do - I mostly read and write, specifically on the topic of AI. I enjoy turning off my phone for two weeks - that's my hobby.
INDUSTRIA is a global technology consulting, development and ventures firm with extensive expertise in the field of enterprise blockchain, confidential computing, process automation and digital experience. Official partner of R3.
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