The universal simulation tool is based on designs by Russian scientists

Timofey Popkov, Business Development Director of XJ Technologies discusses the specifics of simulation tools development and promotion in Russia and in international markets, as well as prospective trends in applying simulation techniques.

Q: Please say a few words about yourself. What were the main stages of your academic and business career and the major landmarks of XJ Technologies’ development?

TP: Like most our employees, I graduated from the applied cybernetics faculty of Saint Petersburg Polytechnic University. In the course of my studies I had a period of training in Germany, at the Hamburg University. The main theme of my research at the time was the application of distributed computing to processing complex graphics. Upon graduation I entered the graduate school, where I developed the concept of simulation-based adaptive management of computer networks. As it was the beginning of the 90’s, I had to combine both undergraduate and graduate studies with work (or, rather, combine work with studies). When the crisis broke out in 1998, the foreign company where I then worked as the IT director decided to leave the Russian market, and I naturally went back to full-time academic work. In the same year I joined XJ Technologies, which at the time was closely associated with the Polytechnic University.

For our company the year 1998 actually turned out to be the starting point for the development of our major product, AnyLogic. Just then it became clear that the time was ripe for transforming the achieved scientific research results into a commercial product. At the time the company consisted of two parts: one developed custom software on demand to earn money, while the other worked on AnyLogic. The first version of AnyLogic was released in 2000, and we presented it at WinterSim, the major conference on simulation (Winter Simulation Conference, conducted in the USA since 1967). Both lines of our activity were growing successfully, but by 2003 we realized that the two absolutely unrelated lines started competing for resources. Nothing good could come out of such a situation. We had to choose which line had greater priority and was more promising. And the choice was made in favor of AnyLogic and services associated with it, even though at the time AnyLogic wasn’t bringing sufficient returns as yet. Owing to this decision we could concentrate on one line of activity, and the department that used to engage in offshore programming gradually evolved into our consulting subdivision. But the most difficult part lay ahead. In 2005, when leading western companies opened their offices in Saint Petersburg, we lost almost all our developers and had to recreate out team all over again. This task was solved successfully, and in 2007 we released the 6th version of AnyLogic, which had been rewritten virtually from scratch and was superior to the previous one in all respects. In 2007-2008 we opened branches in the USA and Europe.

Q: What constitutes the basis of XJ Technologies’ business today?

TP: Today XJ Technologies is the world leader in the area of simulation tools. AnyLogic sells successfully all over the world to an ever-growing user base. The current appearance of AnyLogic was to a great extent created owing to our users. If it weren’t for their concern and involvement, AnyLogic wouldn’t exist. We were especially aided by those who were the first to pay attention to AnyLogic. For example, Mark Paich’s reviews were a great help to us in improving the agent-based simulation features of AnyLogic. It is largely owing to his advice that AnyLogic is considered the best agent-based simulation tool.

The major distinguishing feature of AnyLogic is its multiple approach basis. In AnyLogic you can build models using any of the simulation approaches: system dynamics, agent-based modeling, discrete event modeling, or any combination of them. Our goal is to make the use of either approach or any combination of approaches as simple for the user as possible, but so as to not limit the flexibility and efficiency of the product. Throughout recent years AnyLogic made notable progress through the release of each subsequent version, and we can confidently claim that AnyLogic is the only simulation tool that allows you to create all kinds of models ,using various approaches, faster and easier than any other tool. Besides, AnyLogic makes it unnecessary for the user to buy a separate tool for each simulation approach.

Q: How did your offer to the Russian market change in the recent five years?

TP: During the recent 4-5 years the picture of the Russian simulation services market has changed drastically. Now we can confidently say that information technologies are becoming deeper entrenched in managers’ minds as a viable business optimization method. Russian companies started mastering IT by automating their accounting and production planning. These tasks were solved by means of ERP systems. Later systems capable of solving financial planning tasks appeared. Simulation-based solutions belong to a higher level than ERP, CRM, WMS, etc. The latter automate routine procedures, while simulations are used for analysis and forecast aimed at strategic decision making.

As clients changed, our offer changed with them. When we first took part in industrial and logistics fairs in Russia, we had to explain the essence of our technology “from point zero”; talk to people who had never thought IT could exert considerable influence on the main business and constitute a tool for improving the business and increasing profits. Clients didn’t always understand that simulation was the very tool capable of completing their tasks. Therefore we offered development of simulation-based decision support systems, or, put simply, systems assisting clients in solving their problems. While now we often deal with companies that already possess IT systems implementation experience and have a good understanding of what can be achieved by means of simulations. Such clients not only order services, but also buy the product, AnyLogic, for their own use.

Q: What are the specifics of your client base in Russia and in the foreign markets?

TP: In foreign markets, especially in Europe and in North America, simulation is a commonly known and recognized business decision making support technology. In Russia simulation is perceived as something associated with “high science”, space or military industry, and having no association with business. Only a few years ago simulation was something unknown and incomprehensible to most Russian companies, and up to a certain point our client base consisted of 100% foreign companies. But when large companies accumulated funds they could spend to optimize their activity, they started searching for a means to achieve their goals. Many of them arrived at simulation. Large companies were followed by medium businesses, so today simulation is becoming an increasingly popular approach to solving business tasks.

In Russia we are currently working on promoting simulation, explaining what it is, how it differs from the conventional methods, and what its advantages are. For 6 years we’ve been a sponsor of the research and practice conference “Simulations. Theory and Practice” (IMMOD), which is conducted every two years and aimed at promoting simulation in Russia. For example, the latest conference demonstrated that introduction of simulation in Russia is proceeding at a fast rate, and that the technology is gaining the attention of a growing number of companies and state institutions.

Q: We know that a considerable part of your business is accounted for by the USA and European markets. What difficulties did you encounter in entering foreign markets? Is there competition for your products there?

TP: We simply didn’t have a choice. AnyLogic was released in 2000, and we understood perfectly well that no one in Russia needed our product. First, such products were hardly used in Russia at all at the time, and we would have to spend lots of time explaining what it was and what it was needed for. Second, Russian companies were then facing a different, more pressing task – to survive. The USA, being the world’s largest market with a long and successful history of using simulations, became our major goal. This is the reason why we chose WinterSim as the first conference to present AnyLogic. Naturally, as a foreign company we were at first treated rather suspiciously. So it took several years for the users to get used to us, and for us to enter the mass market.

AnyLogic is a unique product. It is a multiple approach simulation tool with an application scope a lot wider than that of any other tools. Certainly, we have competitors in each branch of simulation techniques – system dynamics, agent-based simulations, discrete event simulations, but no other product allows to create models using either of the said approaches, let alone to combine them. This is precisely why we managed to attract the attention of those interested in new technologies at the first stage of our development. Our first clients were a great help in making AnyLogic what it is now and improving it so as to provide the best possible answer to the expectations of our users.

Q: How hard is it to promote your product among commercial companies?

TP: The difficulty of promoting a product typically depends on companies’ readiness to accept such technologies. I would say that Russian companies are keeping up a rather active search for ways of optimizing the costs of their activity, so as to successfully compete in the market, in particular with foreign companies which are more efficient than the domestic ones. Since simulation constitutes one of the basic means for analysis and improvement of a company’s efficiency, the demand for it is steadily growing. The current state of Russian business, and of the economy in general, ensures tremendous room for improvement, and, therefore, a rich environment for applying simulation methods.

Q: Who is usually the key person making the decision on purchasing a simulation tool – the top management or IT directors?

TP: Different companies have different rules. Sometimes the initiative comes from company management, sometimes from the users. The top management layer rarely gets involved in taking the decision to buy a particular tool. It typically sets the task, and the methods and means of solving it are chosen directly at the level of the subdivision commissioned with this task. Incidentally, as often as not this is entirely unrelated to the company’s IT service.

Q: What are your company’s plans for next year and for the following three years?

TP: We have many plans for this year, associated both with developing AnyLogic, as well as with increasing our client base. We plan to achieve our pre-crisis growth rate of 50% per year (last year our growth was 30% due to the crisis). Significant changes will be made to AnyLogic: it will feature 3D model animation, new libraries, and the libraries for modeling pedestrian dynamics, production, logistics, supply chains will be improved considerably.

During the next three years we plan to release the 7th version of AnyLogic. We’ve got plans as to what is going to be included in it, but I’d rather not disclose them now. Besides, we expect the company’s turnover to grow threefold during the period. We might open another branch in the Asia and Pacific region, if sales there continue growing at today’s rate.

Q: Today simulation is becoming an increasingly popular tool for strategic management, and tomorrow will probably become an indispensible part of it. Could you share your opinion on the trends we might expect in this area “the day after tomorrow”?

TP: Yes, simulation is gaining an increasingly firm foothold in strategic management. Some companies have even established a rule that no strategic decision should be taken without simulation analysis. Today agent-based simulation is increasingly being used for creating strategic models. This approach skirts certain limitations of system dynamics, and also enables creating models that were recently impossible. Besides, owing to multiple approach modeling there we now have the option of joining process models of various levels and types. For example, joining an agent-based model of strategic development and a discrete event model of production infrastructure will allow you to analyze their mutual influence in a totally new way. These simulation tends are still evolving, it takes time to recognize all the arising opportunities and applications, but soon multiple approach modeling is going to become just as common a tool for an analyst as process modeling.