Sramana Mitra: Do you remember the denomination of the customer? How much did the customer pay?
Ruslan Fazlyev: I think it was $100 a license. I did my math quickly. Five cents investment for $100.
Sramana Mitra: Amazing.
Ruslan Fazlyev: My second 5-cent spend was disappointing because there was no customer, but my third spend brought another one. It was 15 cents to get two customers. The next year, we went up to 20 employees. The year after, it was 50. Apparently, I was not the only guy in my city who wanted to build software. When I created this employment for myself where I was able to build software systems, many other people from the same city were excited about being able to work on global software. It was easy for us to hire talented engineers.
Sramana Mitra: What was the progression in the head count?
Ruslan Fazlyev: We started with three people. A year later, we were 20. Then a year later, we were about 50 people. We got to 100 quickly. I’m not sure if it was double year over year. The non-scalable consulting part was kept on an outsourced model so that we can keep the company smaller.
Sramana Mitra: In this progression from three to hundreds of people, at what point did you switch from doing services projects to just selling products?
Ruslan Fazlyev: That’s a good question. Initially we didn’t intend to abandon the custom projects, but within the first five to six months of the company, we realized that it was very commoditized, and it was mostly price competition. There were other countries with low cost of living such as Ukraine or India. They would drive the prices down and meanwhile, the cost of living in Russia increased dramatically.
Suddenly, salary expectations of a good programmer went up from $10 to a few thousand dollars. It caught up in some of the less developed European countries. While it was not as high as Silicon Valley, it was still pretty high. It was important to de-commoditize the services. We realized that by having a platform of our own, we have a non-commodity product whereas outsourcing is commoditized. That’s why we decided to abandon this line of business in the first six months of being in operations.
We still provide e-commerce-specific consulting and outsourcing services. They used to have no focus at all. They would build whatever the customers wanted them to build. That’s where the difference is.
Sramana Mitra: What became of the business? Were you then selling this PHP platform?
Ruslan Fazlyev: The core of the business was selling the license for this platform and providing all-inclusive type of service. Most of the services that appeared in the market later had the segregation of platform versus service. If you to Presta shop, you get a cart from Presta shop, but you’d have to get consulting services and implementation services from someone else.
If you work with Ecwid, you could have all of the services from the same supplier. You just describe your needs in e-commerce. X-Cart will either satisfy this out of the box or by bonding customization services on the platform. That was the line of business that X-Cart was in. I’m no longer with X-Cart. I’m still a shareholder there.
A few years into this business, I realized that there was one problem that no one in the world was solving. By that time, there were numerous PHP e-commerce platforms. No one was providing the service that would help customers to add an online store to an existing website. All of the platforms in the market essentially work the same way of creating a store from the scratch. What I’ve discovered through my years with X-Cart is that many customers would come to us and say, “I already have a website. It works for me. All I want is to add e-commerce right to that website.”