Long-time IT insider Esther Dyson of EDventure Holdings speaks with The Russia Journal on the state of the budding sector.

Esther Dyson covered the IT sector as a reporter before moving into Rosen Research. Then, in 1983, she bought the company from her boss – renaming it EDventure Holdings. EDventure has interests in several companies in Russia, including the Cybico computer-game developer and the Rambler search engine. She spoke with The Russia Journal about investnment in the sector.

The Russia Journal: What was your first investment in Russian IT?

Esther Dyson: It was [computer-solutions provider] TerraLink, in 1996. And I am still an investor [in that company]. The industry was smaller then, but it was already a different community from the rest of Russian business. The people are a special breed, working with start-ups that they created themselves rather than with privatized assets. I love this market, and I think it is a great source of hope for Russia. Not that the computer industry becomes rich for itself, but that its customers become more productive and form a more effective, transparent and productive economy throughout Russia.

RJ: How has the situation in Russian IT changed since then?

ED: It has grown bigger – both the companies themselves, and the volume of customers. The Internet has changed things, and most customers – not individuals – are now online.

RJ: Some experts and industry insiders say that investors in Russian IT have become more careful. What is the reason for that?

ED: They have become more careful overall, and that affects IT investments in Russia as well. They are more careful because they have learned something from their mistakes, but perhaps they have learned the wrong lesson. They seem to have learned: "Do not invest," [but] they should have learned: "Invest carefully."

The computer industry in Russia needs money from customers even more than from investors. When I talk to foreign investors looking at Russia, I often advise them to invest in IT by buying computer services and equipment for Russian companies in other industries, to make those companies more productive and profitable. For many investors, that will be more rewarding than trying to invest directly into a market that they do not understand.

RJ: Is the Russian IT sector still attractive to prospective investors? Could you give your assessment of foreign investment in Russian IT last year and your forecast for this year?

ED: No forecasts. I think the sector is very attractive for people who know what they are doing, and who can provide wisdom and expertise as well as money.

RJ: Some investors say that they are more interested in e-solution companies whose products could also be used outside Russia. Is this tendency strong? Are pure content projects likely to receive any foreign investment?

ED: It's very hard to sell Russian products outside Russia. But outsourcing is a promising market for companies who do it well, e.g. [software developer] Luxoft, in which I am also an investor.

RJ: What are the main tendencies in the Russian Internet? Is it likely to begin making money?

ED: The Internet will not make money. Some large, well-run [Internet service providers] will. Some companies using the Internet will. But the Internet is not a business strategy. It's a business tool.