Russia's war on Ukraine looks a nightmare for NetcrackerRussia's war on Ukraine looks a nightmare for Netcracker

As the war in Ukraine enters its second month, the social media accounts of the country's vice prime minister and minister for digital transformation, Mykhailo Fedorov, have been weaponized against IT firms doing business in Russia.

"SAP continues supporting bloody Russian companies to make money to destroy Ukraine," Fedorov tweeted this week. His post included a mock-up of the German software company's Stanley knife-shaped logo, its bottom edge shown dripping with blood.

Digital transformation usually means purging companies of outdated systems. For the Ukrainian politician, it has come to mean purging Russia of foreign IT expertise, naming and shaming the organizations still there.

But Fedorov is not just about condemnation. Firms that have fully withdrawn from Russia in protest at Vladimir Putin's invasion of Ukraine have received praise, as Netcracker did this week.

"The company halts sales and investment in the aggressor country, closes training centers and halts hiring," Fedorov wrote in his native tongue on Instagram. "Clients of Netcracker were dozens of large companies in Russia," he added, thanking the company for its help.

Netcracker's promise to halt sales in Russia came four days earlier, via the company's own LinkedIn post. Describing Russia's invasion as "unlawful," Netcracker said that there is a "moral obligation to avoid operating in countries that have forsaken peace. We are directing operations away from Russia and have suspended sales and investments in the country."

Fear of malicious code

But the conflict in Ukraine could turn out to be a far worse nightmare for Netcracker than it is for other IT firms operating in the region. Although the company is headquartered in Massachusetts and wholly owned by Japan's NEC, Netcracker relies heavily on staff based in both Russia and Ukraine, according to recent LinkedIn data.

Of the 7,557 Netcracker employees with a LinkedIn profile, about 12% work in Ukraine, while as many as 1,900 work in what Fedorov calls the "aggressor country." (When asked by Light Reading, Netcracker said that these figures were "incorrect" as an indication of headcount but declined to provide its own numbers.)

This was already a concern for US government customers before Putin sent troops over the border. Netcracker develops operational and business support systems (OSS/BSS) for telco and other networks, and many of its coders work in Russia. Just as the US worried that China's government might slip something nasty into Huawei's products, it fears Russia doing the same through Netcracker.

To overcome doubts, Netcracker has had to prove that Russian coders cannot play saboteur, according to a reliable source. How exactly that has been done remains unclear.

These concerns seem bound to have mushroomed since late February, and they are probably not limited to US government customers. Whatever one thinks of the "moral obligation," Netcracker would have risked losing work outside Russia had it not taken steps to halt business there. Before the steps were announced, one European telco executive went jittery at the mere mention of Netcracker's name.

It is unclear whether Netcracker has completely severed ties with all staff in Russia, effectively shuttering facilities and ensuring that Russian coders are no longer being used. In its LinkedIn statement, Netcracker is far more forthcoming about the status of Ukrainian workers. "We will continue to pay all our Ukrainian employees," it says.

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Asked if any Russia-based staff are still writing code for sale outside Russia, a spokesperson said: "Though I am not in a position to interpret the Instagram statement made by Ukraine's minister, I would like to emphasize our focus is on the safety and security of our employees and the continuity of our global operations."

If Netcracker has gone as far as furloughing or even laying off Russian staff, it may quickly have lost access to a huge portion of its workforce, judging by LinkedIn data, including some of its best talent. This could seriously hurt a business reckoned to have made about $740 million in revenues last year, according to an analyst source who tracks the OSS/BSS market (Netcracker insisted this number is inaccurate but declined to provide its own figure, and NEC does not break out Netcracker sales in its financial updates). It would force the company to look for replacements at a time when everyone is in hot pursuit of software talent.

Netcracker has certainly taken a much firmer stand on Russia than close rival Amdocs, which issued a wishy-washy statement about adhering to local sanctions when asked if it would stop business. Its staff exposure to Russia is unclear, but it has trumpeted the names of several big Russian operators as customers, including MTS, Rostelecom and VEON. Unlike the better-known SAP, Amdocs so far appears to have escaped Fedorov's attention.

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— Iain Morris, International Editor, Light Reading