VZCZCXRO9247
RR RUEHLN RUEHVK RUEHYG
DE RUEHKB #1501/01 3520741
ZNR UUUUU ZZH
R 180741Z DEC 07 ZDK PAR MULTIPLE SVC
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 4478
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2537
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 BAKU 001501 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EUR/CARC, EB/CIP 
DEPT PASS TO TDA FOR STEIN 
ANKARA FOR FCS 
COMMERCE FOR 4231 ITA/MAC/ORUE FOR DSTARKS 
COMMERCE FOR 3004 ITA/FCS/ ADVOCACY FOR ACHAMS-EDDINE 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ECPS AJ
SUBJECT: AMERICAN IT COMPANIES BULLISH ON OPPORTUNITIES IN 
AZERBAIJAN 
 
BAKU 00001501  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET DISTRIBUTION 
 
¶1. (SBU) SUMMARY: On December 3, the Ambassador met with 
representatives of seven American information technology (IT) 
companies to discuss their activities in Azerbaijan, perceptions of 
the business climate, and future plans.  The companies outlined 
common challenges like the lack of qualified employees, IPR 
concerns, and problems working with local business partners, which 
many agreed were typical of transitional markets.  Despite the 
challenges, many of the IT representatives said they had promising 
opportunities in Azerbaijan, particularly in e-commerce, 
e-governance, and e-learning, hardware and software solutions, and 
toll-free telephone and DSL internet services.  END SUMMARY. 
 
¶2. (U) On December 3, the Ambassador hosted a breakfast with 
representatives of American information technology (IT) companies 
doing business or considering opening an office in Azerbaijan.   The 
following companies attended: 3M, AvirTel, Cisco, IBM, Microsoft, 
Oracle, and SilverKey.  Avirtel, Microsoft, Oracle and SilverKey 
have local offices in Baku, while Cisco and 3M's Baku offices are 
regional.  The visiting IBM representatives were part of an 
exploratory group to determine if the timing is right to open a 
representational office in Azerbaijan.  The companies are involved 
in a wide range of projects like establishing a Cisco Next 
Generation Network to provide connectivity throughout the country, 
e-commerce, e-governance, and e-learning, providing mainframes and 
server technologies and solutions, providing software solutions, and 
toll-free telephone and DSL internet services. 
 
Why Azerbaijan? 
--------------- 
 
¶3. (SBU) Cisco and Microsoft cited strong political support obtained 
during meetings between their companies' CEOs and President Aliyev 
as their main reason for choosing to open offices in Azerbaijan. 
Microsoft's representative also said that working with the GOAJ to 
strengthen intellectual property rights (IPR) was one of Microsoft's 
main goals in Azerbaijan.  AvirTel and SilverKey representatives 
said they saw a niche for introducing new technologies and 
initiatives like toll-free telephone service, wireless internet 
services, and e-commerce.  IBM representatives said that reaching a 
monetary partner sales threshold drove their decision to explore 
opening an office.  3M's representative said his primary business 
and the reason 3M chose Azerbaijan was the company's activities in 
the oil and gas sector, with its IT services growing as 3M expands. 
 
Who Are the Clients? 
-------------------- 
 
¶4. (SBU) Many American companies consider the Ministry of 
Communications and Information Technology (MCIT) their primary 
partner and client, as they work together to introduce new 
legislative proposals and strengthen IT infrastructure.  Many 
companies have also established good relations with other government 
entities like the Ministry of Education, the Ministry of Economic 
Development, and the National Bank.  Some companies said they are 
also looking to the ministries of national security and defense as 
potential commercial prospects in the future. Other companies like 
Avirtel, 3M and Oracle are focusing primarily on individual clients, 
or companies in the oil service and the financial sector. 
 
What Are the Challenges? 
------------------------ 
 
¶5. (SBU) The American IT companies face many challenges in 
Azerbaijan, typical to transitional economies.  All of the companies 
agreed that the biggest challenge is the lack of qualified employees 
due to the quality of IT education in Azerbaijan and low IT 
penetration.  The companies agreed that IPR issues, the need to 
conduct due diligence on local partners, and corruption are common 
challenges for Azerbaijan.  They also faced challenges with local 
business partners who they say expect immediate and short-term 
profitability and do not understand long-term business planning and 
budgeting.  Participants said that they view one of their goals in 
Azerbaijan to "change the mentality" and approach towards the IT 
sector, both in business circles and the GOAJ.  They agreed with the 
Ambassador's comment that U.S. companies adhere to the highest 
standards of corporate conduct, take social responsibility 
seriously, and are good business partners for Azerbaijan. 
 
Future Prospects 
---------------- 
 
 
BAKU 00001501  002.2 OF 002 
 
 
¶6. (SBU) Despite a disappointing BakuTel, which Oracle and Cisco 
said resembled a job fair rather than an industry conference, the 
representatives were optimistic about the future of Azerbaijan's 
Information and Communications Technology sector and their ability 
to do business here.  Cisco and 3M pointed out that with business 
growing so fast in both Azerbaijan and Georgia, they might establish 
independent representative offices in the latter soon.  The 
companies supported the idea of conducting quarterly meetings to 
share insights and support each other. 
 
Comment 
------- 
 
¶7.  (SBU) We agree with these companies that Azerbaijan, with its 
fast-growing economy and ambitious IT plans, presents good 
opportunities for U.S. IT companies.  We continue to work with the 
GOAJ to encourage improvements to the business climate, which are 
key to attracting further foreign investment.  We believe the 
February Economic Partnership Commission meeting will be a good 
opportunity to showcase IT investment opportunities in Azerbaijan 
and will encourage the GOAJ to include MCIT officials in its EPC 
delegation. 
 
DERSE