– You have worked in the US, the Middle East, Europe, China… You’ve been involved in finance, corporate management, and in international projects in the clothing and food production industries, in design and architecture, engineering, communications… How did you manage to combine all of this?
– Professionalism, competence, and commitment. For me, these are the three most important concepts. As for the geographical range…well, here’s a recent example. A certain European footwear company requested my help to enter the Russian market. Once they found out that I also had a good understanding of the American market, they suggested doing the very same in Florida. We are putting together a preliminary analysis here in Moscow, and preparing to go over there to Miami in May to carry out the “field work”.
About Massimiliano Ballotta
Born in Bologna in 1964. Graduated from the University of Bologna, studied for a year on the European Union Erasmus programme in the UK at the University of Hull, before being awarded a Master’s degree in Economics and International Law from the John Hopkins University in Washington. Worked for two years as part of a UN development programme in Jerusalem. And then, on problems in the real economy at Nomisma, Italy’s foremost centre for research. Established his own consultancy company, Progeco, in 1998, working on projects for the World Bank and the European Commission. Was head of the Italian e-company eXtrapola, member of the board of directors of luxury clothing producer Hettabretz SpA, and Director of International Projects at the leading European consultancy firm, Ambrosetti. Living and working in Moscow since 2000.
Massimiliano has become used to being in far-off countries since childhood. His father, having served in Italy’s then largest state industrial-financial holding company, The Industrial Research Institute (IRI), worked abroad a great deal and took his son along with him. Whilst still a young boy, Massimiliano lived for a while in Nigeria and Iran. Then, in England, the US, and Israel. And he travelled a lot around the world even after he had taken up permanent residence in Moscow in 2000. It is only in the last six to seven years that he has “settled down” somewhat and begun to focus on the main thrust of his activity: developing Russo-Italian business connections.
By his own admission, he ended up in Moscow quite by chance. For a long time, Russia lay beyond the sphere of his business interests. And then, one day, he became acquainted with a woman from Russia who had holidayed in Italy. She was a specialist in corporate and commercial law, had studied in Saratov and the United States, worked for a few years in the Moscow section of White & Case – an American law firm with branches in a number of countries – and finally set up her own company, LegaLife, in Moscow.
Massimiliano became interested in this project and, in 2000, became a company shareholder. And, in 2007, he began working for them himself, both setting up and heading something new at LegaLife: a consultancy department.
On the company website, where we are introduced to the team of two dozen colleagues, it is indicated that in the Consultancy Department, apart from Massimiliano, there work only two others, both Russian. How do the three of them cope with such a large volume of work?
– We three make up the permanent staff, – Massimiliano patiently explains. – But we invite in extra people to work on specific projects. Generally, we recruit them right here, in Moscow. But, in legal practice, if arbitration proceedings start up in any of the Russian regions, we are granted assistance by the local law firms.
Ulf Schneider, Founder and Managing Partner, RUSSIA CONSULTING Group:
— In Russia, a foreign investor needs good consultancy much more than foreign investors in their own countries do. For a long time, the consultancy market in Russia has been strictly divided into local and foreign consultants. Many foreign investors prefrred to get consulting only by companies from their own countries. Strategic consultancy is an exception. Western consultancy companies in Russia are doing fantastic business with local Russian clients. The consultancy market for Russian investors in Germany has been much less prominent up to now, and does not display uniform tendencies.
Moscow is very dynamic. If you have been away from Moscow for a year, there will be much that you do not recognise. Therefore, a consultant in Moscow must be prepared for much more intellectual flexibility to carry out his work properly. Moscow is one of the most expensive cities in the world. You will be surprised to hear me say that when I founded RUSSIA CONSULTING in 2003, its starting capital was 50,000 euros, and I myself did not draw a salary. At first it was tough going, but eventually I achieved success. RUSSIA CONSULTING is now a company with eight offices in six countries and over 400 employees, 300 of whom are in Russia. As for the cost headings, the first thing to be pointed out in consultancy is the salaries, Net salaries here are often higher than comparable ones in Germany. And office space in good locations in Moscow often costs five or more times as much as similar premises in Germany.
Our interviewee bemoans the fact that, over recent years, having vetted various candidates, he is of the strong opinion that finding qualified experts in his field is far from easy. The standard of Russian professional training, he maintains, still lags behind that undergone in Europe. Now, of course, he is aided in his search for specialists by the personal connections and contacts he has built up over his 14 years of work in Moscow. However, there is stiff competition on the local market already. Although, on LegaLife’s competitive advantages, Massimiliano’s reply flows unfalteringly:
– Our competitive advantage lies in our unique positioning on the market. We are a Russian law firm with international experience and the appropriate professional competency. Compared with large international law firms, we are faster, more attentive to the client, and – why hide it? – we are less expensive, too.
Compared with large international law firms, we are faster, more attentive to the client, and – why hide it? – we are less expensive, too.
They have had an element of luck: the company started during a period of rapid growth for Russia’s economy. It developed, it could be said, in parallel with this growth. If, at the start, in 2000, there were but a few employees, by 2007, there were already 20 people employed at the company. It is Massimiliano’s strong conviction that Moscow provides the kind of opportunities for business which have long since dried up in Europe.
– If, in 2000, we had set up a similar company in, say, Milan, the financial and economic capital of Italy, then, by 2014, we wouldn’t have been able to count the same number of clients we have today from amongst such international grandees. Nor, as it happens, from those based in Russia either: we have worked with Gazprombank, with Alpha Bank, and with Mosinzhstroy. The market in Europe was carved up long ago. The Moscow market, too, is gradually becoming saturated, but the prospects for startups here are greater than they are in the West, as was the case before.
Massimiliano’s clients are not only “grandees”. LegaLife also works with medium-sized, and even small, businesses. The number of Russian customers is growing but still accounts for no more than 30% of their entire clientele.
The search for new clients is the main aim of any business in the service sector. It is Massimiliano who deals with this personally. He arranges seminars in Italy for various business associates, prepares and distributes business communications. And, this year, he is even going to deliver a series of lectures on Russia and Italy’s economic ties at the University in his hometown of Bologna.
Aleksandr Pechersky, Managing Partner and Managing Director of ALT R&C:
— The proportion of consultancy in the Russian GNP is only a half or a third of what it is in the West, therefore the market continues to grow, although not so fast as before. IT consultancy with subsequent installation of the equipment remains the most dynamic sector. Consolidation of the major auditors with international companies continues. Western players dominate in management and strategic consultancy, leaving niche fields for local companies. Consultancy companies are gradually getting a better class of customer, intensifying this tendency. By comparison with Europe and the USA, the Russian market is denser and more competitive. It would be hard today to find a company in Russia dealing, for example, only with consultancy in the field of pharmaceutical logistics, though there are many such companies in the West. The lion’s share of customers is in the big business and state sector. Historically, the market has developed so that medium business has grown very rapidly, unlike in the West, which means today firstly a lower class of customer, secondly the need to overcome the negative image of consultancy (90% of clients have had experience of working with swindlers); and thirdly, the expectation that consultancy will be a ‘magic wand’ for instant solutions to problems with immediate effect, often in the absence of the will to accept such solutions. In spite of these problems, consultancy remains a high-income business, yet the whole company can consist of one man with a notebook.
In Moscow, too, the search for clients is aided by participating in the activities of professional organisations: the Italian-Russian Chamber of Commerce, the Association of European Businesses, and the international network, LAWorld, which brings together more than 50 law firms with branches in 90 cities throughout the world. It is those colleagues from LAWorld in London for example, who, where appropriate, will recommend the very same LegaLife to their clients in Moscow.
– Clients: they are the bedrock of our business, - emphasises Massimiliano. – All the more so in Moscow. Setting up a law firm with just a couple of people in the Russian capital is not a costly enterprise. But getting bank loans for a company without any material, let’s say industrial, assets, is extremely difficult. Such a company can only expand by attracting new clients. As luck would have it, Moscow gives you the chance to bring in quite good money. However, the cost of renting office space in the city centre here is considerably higher than in Europe, and the salary levels for lawyers is also 30-40% higher than back in Milan. For us, the Moscow market is very interesting: there are many companies which have need of serious legal support.
Moscow gives you the chance to bring in quite good money.
– And what would you say on the subject of Russian clients? Is working with them difficult? Is there anything particular to them which is down to their being Russian?
– In terms of working with clients, the best place of all is the US, – replies Massimiliano. – There, they pay more attention to professional competency than to personal relationships. Whereas Russia, in that respect, is more like Italy, in that interpersonal relations are very important. And, both over there and over here, competence alone, without those well-established personal relations, will not be enough. To tell the truth, it is worse in Russia: those relationships may be there, but they do not always come with that professionalism. Russians prefer to work with friends. They trust them more, even if their competence is lacking. The situation is changing now, but 10 years ago, that is precisely how things were more likely to come about.
Massimiliano has felt at home in Moscow for a long time. The Russian capital, he is certain, provides the foreigner no fewer opportunities for a comfortable existence than other big cities around the world. In 14 years, he has not once, for example, felt in fear for his life.
Russians prefer to work with friends. They trust them more, even if their competence is lacking.
– It may well be because I live right in the centre of the city, - he says. – It is clean there, orderly, and you are aware of law enforcement agencies being around.
And he is in no way hindered by what he himself admits to being an insufficient knowledge of the Russian language: the majority of his many Moscow friends speak at least some English.
– You know, in my profession, where details in negotiations with clients are important, you have to know the language very well. But, I don’t have enough time for that. Which is why we have a division of duties: I tend to deal with foreign clients, and my Russian colleagues deal with their fellow compatriots. But I have been particularly lucky. As a rule, for the foreign businessman in Moscow, Russian language is vital. Knowing the language does help an awful lot.
As the conversation turns to those pitfalls which lie in wait for foreign businessmen who are only just finding their feet in the Russian capital, Massimiliano is categorical:
– The greatest danger is sloppy thinking. Thinking that everything in Moscow is going to be easy. That it’s enough, let’s say, to have a good product, and that you will sell it straight off. That’s not the case at all. Here, for a start, there is already serious competition. There is no small number of bureaucratic difficulties, if only with the customs authorities. The Russian legal system is very much out there on its own: there is no point thinking that everything here is exactly the same as it is in Europe. The legal code in Russia is, overall, relatively young and is still developing. Let me give you an example. In the West, practices related to minority shareholders have been established for a long time and have been addressed in detail. In Russia, this issue, from the legal standpoint, has only just started to be developed in the last four to five years. So, when a matter gets to the stage of court proceedings, the judges, at times, do not have a clear or detailed legal frame of reference.
The Russian legal system is very much out there on its own: there is no point thinking that everything here is exactly the same as it is in Europe.
Or, here’s another thing which I myself still find astonishing to this day, – says Massimiliano with a smile. – We Europeans are used to planning our business. For two Italian businessmen, it is par for the course to designate a certain day two to three months away for a meeting. In Russia, this is virtually impossible. Here people prefer to come to agreements on the hoof, at the last minute. There is no doubt that the market is becoming more professional, but the tendency to do business à la russe persists.
I have kept until the very end of the interview a question which lies somewhat beyond the scope of our conversation about business. On the LegaLife website I read that the firm provides free legal aid to those who are socially vulnerable, as well as to children’s sports clubs.
– Yes, from time to time we try to do something socially useful, - says Massimiliano, appearing almost a little embarrassed. – In my opinion, this is something peculiar to law firms. Providing assistance to some pensioners, veterans, and disabled people... Or, let’s say, to young sportsmen. We love tennis and we have helped a young team to sign their first professional contract. These things are no big deal but, to us, they are important.