Armenian Information Technology Sector: 2011 State of of Industry Report

2011Stat teofIndustr ryReport
Arme nInf matio A enian form on Tec ology ctor chno ySec 2 2011Stat fInd ryRe rt teof dustr epor Softw S wareand rvice dSer es
EnterpriseIncubatorFoundationArmenianInformationTechnologySector ARMENIANINFORMATIONTECHNOLOGYSECTOR SoftwareandServices 2011StateofIndustryReport 20042011EnterpriseIncubatorFoundation

123HovsepEminStreet, Yerevan0051,Armenia Phone:+37410219797 Fax:+37410219777 Email:info@eif.am http://www.eifit.com Allrightsreserved.

ThisReportmaybefreelycopiedanddistributedaslongastheoriginalcopyrightisdisplayedandno modifications are made to its content. Copies of the Report are available for download from http://www.eifit.com. All respective trademarks, brands, and names are the property of their respectiveowners.EnterpriseIncubatorFoundationdoesnotguaranteetheaccuracyofthedataand information included in this Report. The Report was developed as of December 2011 and, unless otherwisespecified,isbasedoninformationavailableatthattime.
2011StateofIndustryReport
CONTENT

Foreword.....................................................................................................4 ArmenianITSectorataGlance...............................................................6
CompetitiveAdvantagesofArmenia.................................................................................6 2011/2008MainIndicators..................................................................................................7
IndustryOverview ....................................................................................8 .
History ....................................................................................................................................8 . Industrybackground..........................................................................................................13 Turnover...............................................................................................................................18 Productivity..........................................................................................................................24 Workforce.............................................................................................................................26
OtherAreas...............................................................................................29
ManagementPractices........................................................................................................29 ResearchandDevelopment...............................................................................................29 . Telecommunications...........................................................................................................30 EducationalSector...............................................................................................................31 PolictDevelopments...........................................................................................................36
Appendices...............................................................................................40 .
Armenia,KeyFacts.............................................................................................................40 . ScienceandTechnologyinArmenia,Timeline...............................................................44 MinistryofEconomyoftheRepublicofArmenia..........................................................46 EnterpriseIncubatorFoundation......................................................................................47 UITE,ArmenianITAssociation.......................................................................................48 Methodology........................................................................................................................49 IndustryStatistics................................................................................................................51 ArmeniaontheInternet......................................................................................................54 Abbreviations.......................................................................................................................55
EnterpriseIncubatorFoundationArmenianInformationTechnologySector
FOREWORD

Information Technologies (IT) industry has grown to oneofthekeysectoroftheArmenianeconomy,which promotes the technological innovation and productivity in the country. IT and Telecommunications industry is among the rapidly growing segments, which has been recognized by the Government of Armenia as the primary constituent of theeconomicprogress. Duetotherichresearchandeducationaltraditionsand skilled human resources, Armenia has attracted numerousglobalhitechfirms.TheR&DcentersofvarioushitechcompaniesfromEurope, Russia and the USA are already based in Armenia. These facilities work on cutting edge technologies and tools employed by many corporations around the world to develop productsandservicesorsolveavarietyofbusinessproblems. AnewcomprehensiveITindustrystrategyadoptedbytheGovernmentofArmeniain2008 focuses on developing telecommunications and business incubation infrastructure, improvingthequalityandincreasingthenumberoftechnicalgraduates,expandingsupport and financing mechanisms for technology startups, and developing other areas important for the growth of the Armenian IT industry. On behalf of the Government I would like to expressourbeliefthatthesuccessfulimplementationofthisstrategywillstronglycontribute tothecompetitivenessoftheArmenianITindustryandrankingthereofamongstotherhi technationsoftheworld. Sincerely, TigranDavtyan MinisterofEconomyoftheRepublicofArmenia
Enterprise Incubator Foundation is a business development andincubationagencysupportingITcompaniesinArmenia. Our objectives are to improve competitiveness of Armenian IT companies in the global marketplace, build linkages with business communities in key technology markets, improve access of local companies to knowledge and information on bestpracticesandexperience,andassistArmenianfirmswith attractinglocalandforeigninvestors. TheReportisbasedonoursurveysofthesectorconductedin 2004 through 2011. The goal of this Report is to promote deeperunderstandingofArmenianITsector,itsmainneeds, aswellasgaininsightsonpossiblesolutionstoitskeyproblems.Itcoverskeyaspectsofthe industry including history, revenues, productivity, workforce, educational sector, policy developments,andothers. In 2011, the Armenian IT industry recorded a number of achievements, including the growthintotalturnoverandexport,newlocalandforeignstartups,aswellastheeffortsin furtherance of the overall industry progress such as the Microsoft Innovation Center, the ArmenianIndianCenterforExcellenceinICT,RegionalMobileApplicationsLaboratoryfor EasternCIS,SouthCaucasusandCentralAsiaandothers. The Report could not have been prepared without numerous interviews with managerial andprofessionalstaffofITcompanies,facultyofeducationalinstitutions,representativesof development organizations and others. We are immensely grateful to all those individuals fortheirtimeandhelp. Sincerely, BagratYengibaryan DirectorofEnterpriseIncubatorFoundation
ARMENIANITSECTORATAGLANCE
Historically, Armenia was on the forefront of hightech research, development, and manufacturing. Since early 1950s, Soviet Armenia has been a main hub of USSRs critical scientific and R&D activities in a number of technology industry segments such as mainframe and industrial computing, electronics, semiconductors, software development, andothers.Aftertheindependenceof1991,theindustryswitcheditsfocustothesoftware development,outsourcing,andITservices. The software and services segment really gained its momentum during the last 12 years, duringwhichthesectorgrewat27%perannum.
COMPETITIVEADVANTAGESOFARMENIA
WorldclassR&Dcapabilitiesinengineering,computerscience,physics,and mathematics, WelleducatedandtalentedworkforcewithhightechnicalskillsandEnglishlanguage proficiency, StronguniversityprogramswithspecializationsinITandrelatedsciences, Highlycompetitivecostoflaborandlowoperatingcosts, SolidGovernmentsupportofthesectorandcommitmenttoimprovetheinvestment climate, SustainableandcontinuousgrowthofITsector, StrongandsuccessfulDiasporainEuropeandNorthAmerica, Extensiveexperiencewithlargemultinationalcompanies, SoundlawsandregulationsforIPprotection.
2011/2008MainIndicators
OperatingCompanies Industrytotal Localfirms Foreignbranches
2011 281 174 107
%from Industry 100% 62% 38%
2008 175 119 56
%from Industry 100% 68% 32%
%change 2011/ 2008 61% 46% 91%
CAGR 2011/ 2008 17.1% 13.5% 21.1%
IndustryRevenues,million USD Industrytotal Localfirms Foreignbranches Industryaveragerevenue percompany Localfirms Foreignbranches Domesticmarket Exports SoftwareandITconsulting InternetServices
$205.1 $87.0 $118.1 $0.73 $0.5 $1.10 $115.4 $89.7 $143.1 $62.0
100% 42% 58% 100% 56% 44% 70% 30%
$111.3 $50.1 $61.2 $0.64 $0.42 $1.09 $41.9 $69.4 $96.0 $15.3
100% 45% 55% 100% 38% 62% 86% 14%
84% 73% 93% 19% 10% 16% 175% 29% 49% 304%
22.6% 20.2% 24.5% 9.0% 4.7% 7.6% 40.2% 8.9% 14.2% 59.3%
Productivity(averageoutputpertechnicalemployee,excludingISPs),USD Industrytotal $36,311 100% $26,100 Localfirms $36,508 93% $22,400 Foreignbranches $36,115 107% $29,800
100% 86% 114% 100% 87% 13% 50% 50%
39% 63% 21%
11.6% 17.7% 6.7% 11.4% 7.1% 33.8% 6.2% 6.3%
HumanResources(persons) Industrytotal Technicalprofessionals Managementandadministrative Localfirms Foreignbranches StudentsinITrelatedspecialties atmajorArmenianuniversities (2011)
6,760 5,226 1,534 3,154 3,606
100% 83% 17% 46% 54%
4,890 4,250 640 2,460 2,430
38% 23% 140% 20% 20% 0%
6,970
100%
6,800
100%
0.0%
INDUSTRYOVERVIEW
There are two principal stages in the development of Armenias technology sector: period undertheSovietruleandpostSovietindependentArmenia.
HISTORY
SOVIETARMENIA(19201990)
TherootsoftheindustrycanbetracedbacktotheperiodbeforeandduringWorldWarII whenaheavyindustrialexpansionwasunderwayintheUSSR.Thelatterrequirededucated technical specialists in different fields of economy leading to the establishment of two primary educational institutions in Armenia: Yerevan State University (YSU) in 1919 and YerevanPolytechnicInstitute(currentlyStateEngineeringUniversityofArmenia,SEUA)in 1933. Armenian Academy of Sciences (currently National Academy of Sciences, NAS) was formedin1935.FoundationofYSU,SEUA,andNASwasastartingpointinthelonghistory ofthedevelopmentofscienceandtechnologyinArmenia. Era of computers and software development began in 1956 with the launch of Yerevan Scientific Research Institute of Mathematical Machines (YerSRIMM). The institute was specificallycreatedbythedecisionoftheSovietGovernmenttodesignandbuildelectronic computersandrelatedequipment.Alreadyin1959,YerSRIMMdesignedthefirstgeneration computer Aragats running on vacuum tubes; in 1961, the second generation computer Hrazdanonsemiconductorelementswasready.Duringearly1960s,theInstitutestarted todesignmainframes,automatedcontrolsystems,aswellasoperatingsystems,networking and application software. YerSRIMM was the leading institution of the former USSR specializedinthedevelopmentofmicroprogrammedcomputersystemsNairi,whichwas grantedmorethan40patentsandwaspresentedat20internationalexhibitions.YerSRIMM designed and produced at its own production plant dozens of computers, some of which were compatible with PDP of Digital Equipment and IBM mainframe series. The institute was well known for the development of IBM360/370 compatible ES series of computer systemswidelyusedinscientificandindustrialapplicationsthroughouttheSovietUnion.A significantachievement ofYerSRIMMwasaprojecttodesignatelecommunicationsystem for the mission to the moon. In 1980s, YerSRIMM alone employed around 10,000 people, morethantwicethesizeofthewholeITworkforcetoday. A number of production companies were established oriented towards R&D and manufacturingofelectronicsandsemiconductordevices. TransistorsemiconductorR&D and manufacturing plant (1958) was a USSR leader in the production of transistors and amplifier diodes. In 196465, Sirius radioelectronics plant making radioelectronic components and Posistor microelectronics factory producing diodes and hybrid integrated circuits were constructed in the city of Abovyan. Institute of Microelectronics, Scientific Research, and Technology (1966) was developing microelectronic circuits,
automated measurement devices, and other advanced electronic devices. Yerevan Telecommunications Research Institute (YeTRI) established in 1978 was involved in the production ofintegratedcircuits andother productsbasedonsiliconthinfilmtechnology. In1986,Ashtaraksemiconductorandelectronicsmanufacturingplantwasconstructedwith total investment of $120 million. The plant focused on the production of semiconductor wafers, circuit boards, solar cells, and other electronic devices. Another major manufacturing facility, Mars integrated circuits and electronics plant ($300 million investment)wasbuiltin1988tomakeprintedcircuitboardsandintegratedcircuits. After the liberalization of the Soviet economy in late 1980s, a number of new firms were created to provide system integration and custom software development services. Those companiesfocusedmostlyonservicestothedomesticmarketwithveryfewofthemdoing businesswithforeignclients.Majorareasofspecializationatthetimewereaccountingand financialapplicationstargetedatthelocalcustomers,hardwareassemblyandsale,andsome outsourcing services.Thefirst privateIT company in Armenia, Armenian Software,was established in 1987. As of 1990, there were around 40 large technology oriented R&D institutes and production companies in Armenia. During this period, Armenia was consideredaleadingcenterofelectronicsandinformationtechnologiesoftheSovietUnion.
INDEPENDENTARMENIA(19912011)
OnSeptember21,1991ArmeniadeclaredindependencefromtheSovietUnion.Breakupof USSR and start of the era of personal computers led to the collapse of the Armenian technology sector that for many years had been concentrated primarily on largescale manufacturing and R&D. The fact that major client of the industry the giant Soviet militaryindustrycomplexwasnolongeravailable,exertedgreatpressureontheindustry to shift its focus from largescale military applications to market and customer driven solutions and services. Thus, gradually new companies evolved to fill emerging opportunitieslocallyandinforeignmarkets.Thepotentialcreatedduringpastyearswasthe major force, which enabled entrepreneurs and investors to start new business ventures in thefieldsofhightechandIT. In 1990s, a new age in the industry development started when several USbased software businesses opened branches in Yerevan including Boomerang Software (internet applications), Credence Systems (semiconductor designtotest solutions), Cylink (network security products and VPN solution), Epygi Technologies (IP PBXs), HPL Technologies (yield management software and test chip solutions), Virage Logic (advanced embedded memoryIP),andothers.DiasporaplayedakeyroleintheformationofArmeniasfledgling software industry and was the primary factor behind the early establishments of many foreigncompaniesinArmenia. Starting late 1990s, the industry received a new impulse for growth stemming from successes of the previously formed companies, overall recovery of the economy, and unprecedentedgrowthoftheworldwideITindustry.ThepotentialofArmeniasITindustry
EnterpriseIncubatorFoundationArmenianInformationTechnologySector drew attention of a larger number of investors, policy makers, and professionals. The industry started offering higher paying jobs to the young generation encouraging them to pursuecareersinthetechnologyfields. GrowingimportanceofITindustryledtheGovernmentofArmeniatodeclareICTasoneof the priority sectors of Armenian economy in 2000. Other key initiatives in the policy field included preparation of Armenias ICT Master Strategy and formation of Information Technologies Development Support Council (ITDSC) in 2001 and launch of Enterprise Incubator project in 2002. Union of Information Technology Enterprises (UITE), Armenian IT association was established in July 2000 by the private sector to consolidate industry advocacy efforts, facilitate business, and encourage advancement of research in the ICT sector.In 2008,the Government adopteda newindustrydevelopment strategyfocusedon infrastructure, workforce, education, venture financing, esociety, and other areas. In 2010 theGovernmentofArmeniaapprovedESocietyDevelopmentinArmeniaConcept. Existing strong scientific and educational base formulated the significant success of the semiconductordesignindustry,whichgrewintoalargerevenuegeneratingsegmentwithin the IT industry and attracted a number of large foreign direct investments. In 2000, US based LEDA Systems Inc., founded by a graduate of State Engineering University and specialized in design of integrated circuits and components, started a branch in Armenia. Oneofthekeyinitiativesofthecompanywastheformationofaspecializedtrainingcenter in cooperation with SEUA. At the center, students had an opportunity to receive quality engineering practice in the design of integrated circuits, related software and components. ArmeniasconsiderableexpertiseinthefieldofchipdesignattractedSynopsysInc.,aglobal leader in EDA and VLSI design. The company acquired Armenian operations of LEDA Systems and Monterey Arset (systems on a chip) in 2004, HPL Technologies in 2005, and VirageLogicin2010.Currently,SynopsysisthelargestsoftwarefirminArmeniaemploying more than 500 professionals. Following the success of Synopsys and Virage Logic in Armenia,MentorGraphicsInc.1establishedapresenceinYerevanthroughtheacquisitionin May 2008 of Ponte Solutions Inc, a Californiabased developer of solutions for the manufactureanddesignofsemiconductorswithamajorR&DcenterinArmenia. Inearly2000s,moreforeignbusinesseslauncheddevelopmentlocationsattractedbyhighly qualifiedlaborforceandcompetitivecosts:CQG(analyticssoftwareandtradingsolutions), EPAM Systems (offshore software development), Lycos Europe (panEuropean online network),Luxoft(softwaredevelopmentandoutsourcing),andothers.Suchmajorbrandsas Alcatel, Siemens AG, Microsoft Corporation, and Sun Microsystems Inc. operate representative offices in Armenia and are involved in various industry specific and educationalinitiatives. In 2007, National Instruments, an Austin, Texas based corporation with over 4,300 employees and operations in 40+ countries, started an engineering and R&D office in Yerevan, Armenia. National Instruments manufactures automated testing equipment and develops virtual instrumentation software employed by engineers worldwide to design
1 MentorGraphicsCorporation(NASDAQ:MENT)isaUSbasedfirmestablishedin1981.Thecompanyisaworldleaderinelectronichardware and software design solutions, providing products, consulting services and support for the worlds most successful electronics and semiconductor companies. Company has an annual turnover of over $825 million and employs 4,300 people worldwide. Source: http://www.mentor.com/.
10
solutions for a variety of industries such as aerospace, automotive, communications, electronics, energy, industrial measurement and control, life sciences, semiconductors, and others.Today,NIArmeniaisofferingconceptualsolutionsforengineeringfirmsengagedin the development of products and turnkey solutions for different industries, including aerospace. In 2007, Sun Microsystems and Enterprise Incubator Foundation started a joint project aimed at establishing training laboratories at several major Armenian universities and a solution development and R&D center. The project was cofinanced through the USAID/Armenias Global Development Alliance initiative, which supported public/private programsfocusedondemocracy,economicgrowth,workforcedevelopment,education,and environmentalissues. WithintheframeworkofMemorandumofPartnershipbetweentheGovernmentofArmenia and Microsoft Corporation the Microsoft Innovation Center was founded in Yerevan, in May2011,theintentionwhereofwastocreateanenvironmentthroughapplicationoftools andsoftwareofMicrosoftCorporationtoattainthedevelopmentofprofessionalknowledge andskills,improvementofentrepreneurialabilities,andproduction,testingandpromotion of innovative ideas. The project is implemented by the Enterprise Incubator Foundation, and supported by the Government of Armenia, Microsoft, the USAID and the SEUA. The MicrosoftInnovationCenterpromotesthedevelopmentofkeyknowledgeandexpertiseat small/medium enterprises through trainings, workshops, competitions, consulting and coachingbyapplyingadvancedandeffectivemethods.TheMicrosoftInnovationCenteris the largest in the region and serves as a model for establishment of similar centers particularlyinCentralEurope. In November 2011, the ArmenianIndian Center for Excellence in ICT was founded at YerevanStateUniversity.TheCenteristhejointenterpriseoftheGovernmentsofArmenia and India and is implemented by the Enterprise Incubator Foundation (Armenia) and C DAC Center (India), and is the largest ICT investment of the Indian government in the region. The main mission of the project is to establish a specialized infrastructure for deliveryofICTrelatedtrainingandR&Dprogramstocreatenewopportunitiesforworld class workforce development in Armenia, and will serve as a R&D center for High PerformanceComputing.ThecenterisequippedwiththeIndianPARAMSupercomputer, which will enable test and evaluation works in biotechnology, meteorology, seismology, ecologyandotherrelatedareas. DuetotheselectionoftheEnterpriseIncubatorFoundationasthewinnerofthecompetition announced jointly by the Government of Finland, Nokia and the World Bank for the CIS countries,in2011theRegionalMobileApplicationLaboratorywasfoundedinArmeniafor EasternEurope,SouthCaucasusandCentralAsia.Itintendstobecomeoneofthefivebasic laboratories worldwide and will be a focal point to provide favorable environment for innovative mobile applications, commercialization of concepts and products, development oftechnicalandbusinessskills,establishmentofcontactsbetweenregionalenterprisesand specialistsandattractionofinvestments.
11
EnterpriseIncubatorFoundationArmenianInformationTechnologySector In2011,oneofthemajorengineeringcompaniesoftheworld,theSingaporeTechnologies KineticsLtd(STKinetics)officiallyannounceditsentryintoArmenia.STKineticsopeneda branchinArmenia,whichwouldbeprimarilyaimedatcreationofR&Dlaboratoryandthe platformforstandalonemachineryandofflineequipment.Thealgorithmsdevelopedthere willbeappliedworldwide. In2010,CISCOSystemsNetworkAcademystartedfunctioninginArmenia,andcurrentlyis implementing training programs in CCNA(Cisco Certified Network Associate) and CCNP (Cisco Certified Network Professional). In 2011, Memorandum of Partnership was signed between the Government of Armenia and CISCO Systems. Within the framework of Memorandum, CISCO Systems will support the implementation of a number of projects, particularlytheestablishmentofCISCOLab.
12
INDUSTRYBACKGROUND
Armenian IT sector has two distinct segments of companies: companies with local ownershipandwithforeignownership.Characteristicsofthebusinessesfromeachsegment suchasnumberofemployees,salaries,revenuesandotherarenoticeablydifferent.
ESTABLISHMENTOFENTERPRISES
Armenias software and services industry is rather young: the prevailing number of companies,nearly80%,wasfoundedduring20002010. The first local private software firm was established in 1987, and within 5 years the first foreignbranchwaslaunchedinYerevan.19911997turnedtobeatoughtransitionalperiod for the technology sector: regional conflicts, collapsed economy, brain drain all had considerableeffectsontherevivaloftheindustry.Asof1998,around3540softwarefirms andISPswereoperatinginArmeniaemploying,accordingtovariousestimates,nearly1,000 specialists.Sizeoftheworkforcewasnotablysmallerin1998comparedtothatobservedin 1987whenonlyYerSRIMMemployedupto10,000people. Duringthelast11years,theindustrysawasharpincreaseinthenumberofnewlyformed companies,bothlocalstartupsandbranchesofforeigncompanies.
ICTCompaniesinArmenia:19902011
2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 <1990 0 50 100 150 200 250 300
The number of operating IT companies in 2011 reached 281 representing nearly 17.1% growth from 2008 to 2011. On average nearly 20 IT businesses were launched annually in
13
Enterpr riseIncubat torFoundat tion A ArmenianIn nformation nTechnolog gySector 200020 011.Thiswa asinsharp contrastto o1990swhe enonly56 companies swereform medeach year. peakin200 08,annualn numberof newlystart tedfirmsre eachedarou und30.Tho osehigh Atthep rates, h however, may be diff m ficult to su ustain due to a short tage of qualified dev velopers, enginee ers,and pro oject manag gers.Impor rtantly,22s startupswe ererecorded din2011,o ofwhich 15were eforeignbra anches.
FORE EIGNOWNEDCOMPA ANIES

In2011,thenumb berofforeig gnownedc companiesi inArmenia areached10 07or38%f fromthe meniasexpertiseinsof ftwaredeve elopmentis swinninggrowingreco ognition industrytotal.Arm asthusfoste eringforeig gninvestmentsintheIT Tsector. oversea ntyears,the eUScompa aniesmadethemajorit tyofforeign ncompanie es(45%). Similartotherecen mberofcom mpanieswit thEuropean nownershipgrewby6 6%vs.2008. Thenum
Ow wnershi ipGeographics
5 50% 4 45% 4 40% 3 35% 3 30% 25% 20% 15% 10% 5% 0% USand Northern N America A Europ pe Rus ssianandCIS S Oth her
In the m majority of cases, the foreign bra anches are p pure develo opment cen nters for the parent e compan nies.Foreigncompanie esusuallys setupsmalldevelopm mentcenters sand,asthe ereisan effectiv vely operatin team in place, star increasing the numb of empl ng n rt g ber loyees and moving lue activities to Arm menia. It is common when the whole cyc of a cle higher added val nys technical activities includin R&D, d ng design, cod ding, testing and sup g, pport is compan eventua ally moved to Armen In addi d nia. ition, some companies have also started re s o elocating parts o their business related functio of ons such a marketin and cus as ng stomer sup pport to
14
Armenia.PracticeofsendinglocalprofessionalstothecustomersitesoutsideofArmeniato provideimplementationandcustomersupporthasbeenwidelyused. In2004,2005,and2010,ArmenianITsectorwitnessedamajorM&Awithinthechipdesign segment. Synopsys Inc., a leader in delivering solutions for semiconductor design and manufacturing, acquired LEDA Design, Monterey Arset, HPL Technologies, and Virage Logic.ThenewcombineddevelopmentcenterinArmeniaownedbySynopsysiscurrently thelargestdomesticsoftwarepowerhousewithmorethan500employees. OtherexamplesofacquisitionsofexistingArmeniancompaniesduringthelastseveralyears includedthreestateownedArmenianenterprises(MARS,YCRDI,andYer.ACSSRI)soldto Russian investors by the Government of Armenia, an Armenian branch of a US company, Brience, which was acquired by Germanybased Lycos Europe, and acquisition of Ponte Solutions,aUScompanywithanR&DcenterinArmenia,byaUSbasedMentorGraphics Corporation. Insummer2011,theregionalsoftwaredevelopmentlaboratoryofDLinkInternationalwas launched within the scope of the Gyumri Technopark Project. DLink International is a Taiwanese company, a world leading manufacturer and vendor of network and telecommunicationdevicesandmaintainsworldwidepresenceinmorethan100countries. Infall2011,oneofmajorengineeringcompaniesoftheworld,theSingaporeTechnologies KineticsLtd(STKinetics)officiallyannounceditsentryintoArmenia.STKineticsopeneda branchinArmenia,whichwouldbeprimarilyaimedatcreationofR&Dlaboratoryandthe platformforstandalonemachineryandofflineequipment.Thealgorithmsdevelopedthere willbeappliedworldwide.
DIASPORA
ItisawellknownfactthattheUnitedStatesandRussiaarethemajorDiasporacentersand accordingly50%offoreigncompaniesrepresentthetwonations. Diaspora is considered one of the major competitive advantages of Armenia in terms of access to foreign markets and expertise. The majority of foreign branches operating in Armenia are established through direct involvement of Diaspora Armenians. Diaspora representativesareusuallywelldisposedtowardsArmeniaandarewillingtocontributeto its development. Companies with top management or owners of Armenian descent are bettersuitedtoevaluatetherisksandunderstandtheculture.Localcompaniesalsobenefit fromDiasporawhensellingtheirservicesabroad. Poor marketing skills and knowledge of target markets is a serious obstacle for the local companies. Having better understanding and being close to the target markets, representatives of Diaspora are better suited to sell or create contacts. In many cases, they
15
EnterpriseIncubatorFoundationArmenianInformationTechnologySector serveeitherasthefinalusersoftheproductorasliaisonsbetweenArmenianandWestern companies.
SPECIALIZATIONS
In the recent years the main trends of IT company specializations have undergone certain changes. The most widely practiced specializations are now customized software and outsourcing,webdesignandprogramming,ITservicesandconsulting. Thoughoutsourcingremainsapriorityspecialization,theArmenianITcompaniesarenow movingtootherproductsandservices.Thisisclearlyagoodsignthatprobablymeansthat industry is shifting to higher added value services. More companies are now involved in engineering,systemsdevelopment,andR&Dservices. Such tendency is favorable especially for local companies that are currently involved in chipsdesignandsystemengineering. Thedevelopmentofmobileapplicationsisexpectedtohaveagoodpotential;particularly42 companieshavementionedthistrendastheirbusiness.
CompanySpecializations:Distribution
Customizedsoftware andoutsourcing Webdesign anddevelopment ITservices andconsulting Internetapplications andecommerce Internetservice provider Networkingsystems andcommunications Databases andMIS Accounting,banking, andfinancialsoftware Computergraphics, multimedia,andgames Chipdesign,testing, andrelated Other Other
Localfirms,2008 Foreignbranches,2008 Localfirms,2011 Foreignbranches,2011
0%
5%
10%
15%
20%
25%
In recent years the local companies have evidently obtained the required qualification to offer complex software solutions and services. In addition, IT firms are pursuing opportunitiesintheInternetrelatedareassuchaswebdesignanddevelopment,provision ofInternetservices,andInternetapplications.Strongfocusoninternetrelatedareasmaybe explainedbytherelativelyhighandincreasingdemandforinternetservices,lowbarriersto
16
entry by groups of young entrepreneurs, and the expected growth of ecommerce in Armenia. Despite the small added value nature of web development, it still plays an important role in the industry due to the substantial number of small companies offering webdesignservices. In general, both local firms and foreign branches are becoming more diversified than they wereinthepast.

17
Enterpr riseIncubat torFoundat tion A ArmenianIn nformation nTechnolog gySector
TU URNOVER
In2011, ,theturnov verofArme eniansoftw wareandser rvicessecto orreachedn nearly205.1 1million 2. resultin ngin27%CAGRdurin ng19982011 1 Thisfig gureconstitu utesabout2 2%ofArme eniasGDPin2011($9. .4billion3)v vs.1.7%in2 2010. 1, ustry recorded 22.6% average annual growth. Industrys % g During 20082011 the indu 4,pr utiontothe etotalexpo ortsrosefro om7%in2 2008to8%i in2011 rovingtheg growing contribu importa ance of the software sector for th Armenia economy focused on the expan he an y nsion of exporto orientedbu usinesses.
ArmenianI A ITIndustr ryTurnove er
220 200 180 160 140 120 100 80 60 40 20 0

Domesticmark ket Exports Industrytotal
205.1
111 1.3 69.4 41.9
115.4 89.7
2008 2011
Thesha areoflocal companyrevenuescomprised42 2%ofthein ndustrystot talvs.39% in2010. Local fi irms are no in a bet ow tter shape t than severa years ago they have more emp al o: e ployees, theirtec chnicalexp pertiseandk knowledge ofthemar rketisonth herise,and theyarew willingto implem mentmoreco omplexand daddedval lueprojects. tent and su ustainable p performance of the branches is e e explained b the way foreign by Consist compan nies operat in Arme te enia: they are primar a rily outsour rcing cente with a specific ers budget andasmal llprofitmargin;littlev valueisleft tinthecoun ntry,onlyo operatingex xpenses. heless,bran nchmodeli isstillrelev vantforArm meniaand hasvisible positiveef ffects on Neverth theindu ustryandt theoverall economy.I Inthelong run,howev ver,models swithasig gnificant addedv valuecomp ponentaren neededfort theindustry y.
In1998,to otalturnoveroftec chindustryssoftw wareandservices ssegmentwasaro ound$10million. Source:US SAIDICTAssessm mentReport,July2 2000. 3 Source:Na ationalStatisticalS ServiceofArmeni ia,http://www.arm mstat.am 4According gto2011exportra ates(Source:Cent tralBankofArmen nia).
18
70% of the indu f ustry reven nues were generated from Sof ftware Dev velopment and IT Consult tingsegmen nts,whileth heshareofInternetSer rviceProvid derscomprised30%. For the majority (75%) of the Armen e nian IT co ompanies th average annual re he e evenues amount tedfrom$100thousandto$1mill lion. estcompan nies(with tu urnover $1 mlnandov ver) compr risingonly 15%of allI ITfirms 47large generat ted55%ofa allindustry yrevenues.Asopposed dto2008,th heshareoflargecomp paniesin the tota industry revenues reduced d al y due to the increased number of small com f mpanies. Numbe erofsmallf firmswithl lessthan$1 100,000inre evenuesinc creasedby3 3%,andthe eirshare in the t total indust revenue grew by 7%. Thou try es y ugh those fi irms do no have any visible ot y impact on the industry, their increased number ev r vidences the gradual d e developmen of the nt localmarket. estcompan nies(withtu urnover $1 mlnandov ver) compr risingonly 15%of allI ITfirms 47large generat ted55%ofa allindustryrevenues. egard to th industry revenue contributio he y ons by IT company specializatio s ons, the With re busines sses of hig ghest earnin capacity mainly i ng y included th customi he ized softwa and are outsour rcing,chip designandITservices sandconsu ulting.Itisi importantt tonotethat tthough only 3% of IT com % mpanies we specializ in chip design, the revenue comprise about ere zed eir es ed 14%ofthetotalITindustrytu urnover. ternet Serv vice Provide recorde the high ers ed hest rates the annua growth of their al The Int turnove comprise around 59% durin 20082011. A key re er ed ng eason for this was th major t he change in regula ations perta aining to the telecom t mmunicatio ons industr that end ry ded the olyofArme enTel.This ledtothee entranceof newmajor rplayersin theISPfiel ldanda monopo
19
EnterpriseIncubatorFoundationArmenianInformationTechnologySector considerabledropininternetconnectioncosts.Moreover,additionalnetworkswerebuiltto connectArmeniatomajorinternethubsinRussia,Europe,andUS.
CompanySpecializations:Revenues
millionofU.S.dollars Customizedsoftware andoutsourcing Chipdesign,testing, andrelated Internetservice provider Networkingsystems andcommunications Internetapplications andecommerce Accounting,banking, andfinancialsoftware ITservices andconsulting Webdesign anddevelopment Computergraphics, multimedia,andgames Databases andMIS Other Other
Localfirms,2008 Foreignbranches,2008 Localfirms,2011 Foreignbranches,2011
10 15 20 25 30 35 40 45 50
In2011,thevolumeofthedomesticmarketreachedabout$115.4millioncomprising56%of the industrys total. Since 2008, the sales in the domestic market have increased by more than175%,whichhasbeentheresultofasubstantialgrowthintheinternetservicesarea.In addition,exportsincreasedessentiallyandreached$89.7millionor44%ofindustrystotal in2011vs.2010whenexportshaddecreasedduetotheglobalfinancialcrisis. Nevertheless, share of exports of software and services segment (without ISPs) was still larger ($89.7 million) than that of the domestic market ($53.4 million). The main reason behind the difference in exports and domestic market is that the largest companies of the industry are branches of foreign firms, which almost completely export their products or services.Inaddition,manylocallyownedenterprisesalsoexportsignificantportionoftheir output.
20
DomesticMarketandExports:LocalFirmsvs.ForeignBranches millionsofU.S.dollars
180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
57.5 70.7 10.8 31.1 Domesticmarket,2008 50.3 58.0 19.1 Exports,2008 Domesticmarket,2011 18.9 Exports,2011
Localfirms Foreignbranches As opposed to 2008, the weights of local and foreign companies almost equalized at the domestic market, while the foreign companies were still prevalent in exports with 79% share.Suchmajordifferenceiseasilyexplainedbythefactthatalmostallforeignbranches are established by their parent companies as offshore software development locations. In addition,allthreetelecom/mobileoperatorsandcertainmajorISPshaveforeignownership, howevertheyrenderservicestothedomesticmarket.
DOMESTICMARKET
Revenues of IT companies from the domestic market reached $115.4 million in 2011. Software constituted 46% of the domestic market, while ISP segment was 54% with an estimated$62millionintotalmarketrevenues.ShareofforeignownedISPsandoverallISP market increased considerably due to the demonopolization of the telecommunications industry, formation of new large ISP firms, and acquisitions of telecom players. In 2011, domestic market turnover was larger than that of the exports ($115.4 million vs. $89.7 million). ThepicturewasquiteoppositewithsoftwareandITconsultingsegment,wheretheexports exceededtheturnoveratthedomesticmarket($89.7millionvs.$53.4million).Thesmaller volumeofthedomesticmarketwastheresultofrelativelylowdemandforsoftwareandIT consulting services among population, businesses, and the Government. A number of factors were responsible for the low demand including the margin domestic market, low wages,lowdemandforproductivityenhancementtools,financialconstraints,highsoftware piracyratesandotherfactors.
21
EnterpriseIncubatorFoundationArmenianInformationTechnologySector Becauseoftherelativelylowdomesticdemand,therewaslessinducementforArmenianIT companiestodeveloppackagedsoftwareoroffernewandqualityservices.Themajorityof softwarepackagessoldonthedomesticmarketincludedaccountingandfinancialsoftware forlargeenterprisesandbanks.Otherproductsandserviceswiththelargestdemandwere enterprise resource planning solutions, ecommerce, web development services, tools for healthcareindustry,anddistancelearningprograms.
DomesticMarketRevenues:Segmentation millionsofU.S.dollars
90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0
22.6
9.6 21.4
Localfirms,2008
62.1 40.1 5.7 5.1

Foreignbranches,2008 Localfirms,2011 Foreignbranches,2011
InternetServices
SoftwareandITconsulting
EXPORTS
Armenian IT industry exports nearly $89.7 million of products and services to many countriesworldwide.About50%ofITcompaniesexportstheirown productsandservices though the export volumes vary; for certain companies exports account for low share in revenues,whileothersexporttheirproductsinwhole(100%). Thelargestshareofexports,almost58%,goestotheUnitedStatesandCanada,thesecond largest is Europe with 26%, and the third comes Russia and CIS with 6%. The revenues generatedfromexportsincreasedby29%vs.the2008rates.
22
ExportRe E evenues:Geograp phicalDistributio on
Export Geography, 6% % Eu urope,26%
Other,10% O
USA A&North Am merica,58%
We can state that the declini n ing tendency in expor generated revenues due to the global rt s e financia alcrisisdati ingbackto2008,hasbeenovercom me. eral terms, the factor hinderin the grow of exp rs ng wth ports includ the insu de ufficient In gene knowle edge about Armenia a and its IT i industry by the intern y national bu usiness com mmunity; remoten nessfromm majorITma arketsandla anguageba arrier,which hare,howe ever,lessim mportant now as the young generatio is becom s g on ming more proficient in English and other foreign languag ges.
23
Enterpr riseIncubat torFoundat tion A ArmenianIn nformation nTechnolog gySector
PRO ODUCTIV VITY

Industr average productivi or outp ry ity put per technical em mployee for software and IT r consulting segmen in 2011 r nt reached $36,311 repre esenting nearly 11.6% CAGR from 2008. ompaniessh howed17.7 7%annualin ncrease,wh hileforeignbrachesaro ound6.7%. Localco nuous and sustainable growth r rates in rec cent years, in 2011 th local he Due to the contin niessurpass sedthefore eigncompan niesbyprod ductivityra ates. compan
Though the real p h productivity has grow in the r wn reporting p period, it is obvious t s that the industry needs to change th current economic model based on low o he wend outs sourcing s vices such as engineeri a ing, researc and product develo ch, opment. services to higher value serv Wealre eadyseecer rtainprogre essassomecompanies s,bothforei ignanddom mestic,have estarted offering engineering, design, and R&D services. I is impor g , D It rtant to imp prove prod ductivity conside erably becau Armen does not have the enormous workforce of India or China, use nia r and,the erefore,sho ouldfocuso onboosting goutputpe eremployee eversussiz zeofthewo orkforce inorder rtoraisein ndustryreve enues. 82011, the i industry wi itnessed an increase in nominal productivity rates som n n p y mewhere In 1998 5.Suchcom around 10%CAGR R,whichwasmostlya attributedto oexportori ientedfirms mpanies ays foreign mar rkets, thus becoming able to gen nerate highe revenues and to er s find wa to the f charge higher rate as they b es build their reputation among the existing an new cus r e nd stomers. onally, softw ware profes ssionals, pr roject mana agers, and companies in general become c Additio moreex xperiencedastheyparticipateinl largerandm moreadvan ncedproject ts.
5
Due to unr reliability of historical data, as well a significant chan as nges in the indust structure, grow in productivity i difficult to estim try wth is mate. Therefore, r rates provided her should be used with caution. re d
24
ThefactorsbottleneckingthegrowthofproductivityoftheArmenianITcompaniesinclude: small domestic market for software and services and low demand for productivity andsophisticatedtools; focus on lowend outsourcing services and insufficient concentration on packaged softwareandotherhighervaluesegments; shortage of highend software engineering, project management, and business professionals; lackofrecognizedprocessmanagementcertificationssuchasCMMI,ISO9001,and others; insufficientnumberorlackofspecializedsupportinstitutionssuchasventurecapital funds,incubators,technoparks,andothers.
25
WORKFORCE
In2011,theworkforceemployedbytheITsectorreached6,760,whichaccountedforabout 17% growth from 1998. Around 77% of the workforce was technical specialists such as softwareengineers,analysts,developers,ITprojectmanagers,andothers. Management,businessandadministrationprofessionalsrepresented23%ofthetotal.Local andforeigncompaniesemployed47%and53%ofthetotalworkforcerespectively(in2008, thisratiowas50/50). Theratioofmalestofemalesemployedbytheindustrywas65/70%and30/35%accordingly (2008rates).
WorkforceDistribution:Specialty&CompanyOwnership
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Localfirms,2008 Foreignbranches, Localfirms,2011 2008Business&management Technicalspecialists Foreignbranches, 2011
2,110 2,140 2,373 350 290 2,928 781 678
Onaverage,anITcompanyemployed24people,whichtoacertainextentdifferedfromthe 2008rates28employees.Importantlythedifferencewassignificantintermsoftheaverage numberofemployeesoflocalcompaniesandforeignbranches18and34accordingly. From6,760businessandtechnicalprofessionalsemployedbysector,25%workedforISPs. Workforcedistribution,asbelowchartshows,haschangedvisiblysince2008:morepeople areemployedbyforeignISPs,16%oftheworkforcein2011versus6%in2008.
26
WorkforceDistribution:SegmentsandCompanyOwnership 2011 Local Foreign Foreign 2008 Internet Internet InternetServices,16% Services,Services, Local, 6% 7% Software Local & InternetServices,9% Local,Software& IT ITconsulting,37% consulting Foreign ,43% Foreign Software&IT Software consulting,38% &IT consulting ,43% Distributionofcompaniesaccordingtotheirstaffsizein2011wasclosetothe2008rates.As before, the number of specialists employed by the firms varied significantly within the industry. Only 5% of all businesses employed 100 or more specialists, while 77% had less than25employees.Thoselargestcompaniesmakingonly5%employednearly3,290people constitutingaround48%ofthetotalworkforce. Ontheotherhand,firmswithlessthan25peopleemployedintotalcloseto2,031specialists, which wasaround30%oftheworkforce.Thus,distributionofcompaniesaccordingtothe workforcesize,asbelowchartshows,isskewedconsiderablytowardssmallbusinesses.
CompanySizeDistribution
<25,77%
2549,14% >=100,5% 5099,4%
27
EnterpriseIncubatorFoundationArmenianInformationTechnologySector Majority of people employed by IT sector has higher education and around 20% of the technical staff has some type of a professional qualification from leading vendors such as Microsoft,Oracle,Sun,andothers. Thoughthelocalcompaniesprioritizethepersonneltrainingastheessentialfactoroftheir development,fewofthemareinthepositiontoprovideongoingtraining.Theavailabilityof the respective resources and personneltakes a significant roleinthis process.Branches,as partoftheirstrategicmanagement,constantlytraintheiremployeesbothinArmeniaandat the head offices. Furthermore, the branches have created special resource centers and libraries to provide opportunity for the staff to improve their qualification and skills. Employees of certain foreign branches are offered employee stock options and other non salary incentives. Many companies practice nonpaid internships when selecting fresh graduates.Itiscommontohostinternsandtotrainthemanduseforsmalladdedvaluejobs and then select the best for permanent positions. New employees usually do not start workingatfullcapacityforperiodslongerthantwomonths.Formanycompaniesthisisa limiting factor hindering growth and making employers complain about the quality of education. Armeniahasbeenchosenasanoffshoredevelopmentdestinationbytheforeigncompanies partly because of its inexpensive and highly productive labor. However, due to the low supplyof qualifiedspecialistsand the appreciationoflocal currency,thesalary costshave increasedoverthelastyears. In 2011, at local companies the average monthly salary of a technical specialist comprised $1,200andofthemanagerial/businesspersonnel$1,500. Armenia is still considered a lowcost offshore development location, where salaries are competitive with those of many IT outsourcing countries such as India, Russia, Israel, Ireland, and China. Nevertheless, economic forces behind the appreciation of Armenian Dram may have serious negative impact on the cost effectiveness of Armenian software firms.
28
OTHERAREAS
MANAGEMENTPRACTICES
Significant difference exists between the management methods applied by locally owned companiesandbranchesofforeignfirms,foranumberofreasons.Themajorityofbranches are not engaged in common management practices such as business development, marketing,andstrategicmanagement:theseactivitiesareaccomplishedbytheheadoffices. In addition, foreign companies, when compared to locally owned firms, employ more advanced project management practices and use better documented and designed methodologies. The reason is that, in most cases, processes employed by the parent companiesaresimplycopiedtotheArmenianbranches. However, as companies grow and develop, their management methods become sophisticated. Western practices are becoming part of the daytoday management of local software firms. While several years many marketing and project management functions were conducted by a companys director, now many firms have separate departments dedicatedtomarketing,HR,operations,andother areas.Companiesacceptlargernumber of business graduates and pay more attention to management training and professional development. Process improvement methodologies such as CMMI, ISO, and IT Mark are becoming widely recognized in Armenia as more companies get engaged in streamlining theirmanagementanddevelopmentprocesses. Manylocalsoftwarecompaniesdonohavesufficientexperienceandknowledgeofthebest managementpracticeswidelyemployedbyforeignbranches.Themajorreasonsarethelack ofqualitymanagerswithappropriateeducationandbackground,newlydevelopingmarket economy,insufficientexperiencewithinternationalclients.
RESEARCHANDDEVELOPMENT
Historically major research were carried out in specially created institutions mostly for defenseandindustrialprojectsfinancedbytheGovernment.Departmentsattheuniversities focused on smallerscale research programs. After the collapse of the Soviet Union, government funding sharply decreased, which in turn forced those institutions to look for newsourcesoffundingtofinancetheirresearchactivities.Severalprivatecompanieswere createdonthebasisofstateownedresearchinstitutionstodevelopandmarketcommercial productsandtoperformsmallerscaleresearchactivities. Today, around one fifth of the private companies are involved in some sort of research activities. The research, however, is mostly of applied engineering and company specific
29
EnterpriseIncubatorFoundationArmenianInformationTechnologySector natureandisdirectedatquickcreationofintellectualproperty.Incaseofforeignbranches, the results of their research are transferred to the parent companies in their respective countriesand,therefore,donotnormallycreatecompetitiveadvantagesforArmenia. Public research is conducted mostly by the major universities (SEUA and YSU) and by institutes withinthe National AcademyofSciences. Researchis carried outin thefields of computer aided design (CAD), theory of algorithms, discrete mathematics and combinatorics,cognitivealgorithmsandexpertsystems,softwareengineering,networking, distributedprocessing,patternrecognition,mathematicallogic,computationalmethodsand signal processing systems, and others. Generally, in recent years there has been a shift towardstheappliedasopposedtothefundamentalresearch,whichraisesconcernsoverthe longterm viability of research by universities and research institutions. Institutions involved in R&D activities face several issues. Other issues are weak commercialization mechanismsandmodestcooperationbetweentheindustryandresearchorganizations.
TELECOMMUNICATIONS
A variety of internet access service offers is available in Armenia (e.g. dialup, DSL, WiFi, WiMax, GPRS, EDGE, 3G (UMTS/WCDMA), FTTB, 4G(LTE) and others, a certain portion whereofisofferedbynumerousproviders). Basedon20092010date,theaccessibilitytopersonalcomputersper100peoplewas15and 27accordingly,andtheinternetaccessper100peoplewas15.3and44accordingly. According to the United Nations Global Emanagement Readiness Report 2010, Armenia was behind 100 countries notwithstanding the fully liberalized telecommunications since 2007withthreemajorcompetingmobileoperators,numerousinternetserviceprovidersand a numberofnew entries. In recent fouryearsthe expansionofmobile communication has surpassed 100%, due to which Armenia turned up in the third place among the CIS countriesandaheadofitsneighborsintheregion. However,withthewidespreadintroductionofrelativelyinexpensiveADSL,WiFi/WiMAX, and 3G services, the number of broadband users increased substantially over the last 34 years. According to various experts, in 2011 the number of broadband subscribers may reach 300,000 (10% of the population or 40% of households), around half of which being usersoffiberoptictechnologiesFTTB,ADSLandtheotherhalfofwirelesstechnologies3G, WiMAX.ThebroadbandinternetisprovidedintheregionsprimarilythroughADSLand3G technologiesofferingseveralMbpsconnectionstoavarietyofindividualandbusinessusers. AsofDecember2011,thetotalinternettrafficamountedtoapproximately25Gbps. TherearethreemobilephoneoperatorsinArmenia:ArmenTel/Beeline,VivaCell/MTSand OrangeArmenia.
30
ThemajorISPsareforeigninvestedcompaniesincludingtheaforementionedmobilephone operators, as well as Ucom, GNCAlfa Arminco, WEB, Armenian Datacom Company (ADC)andothers.Therearenumeroussmallinternetprovidersofferinginternetservicesto alimitednumber(normallyfrom2to10)largecompaniesorafixeddistrict(forinstance,to someresidentialareas).
EDUCATIONALSECTOR
The development of the educational system is a condition precedent to the ongoing development of the IT sector in Armenia. The application of professional IT education modelsisessentialforsupplyingskillfultechnicalandmanagerialstafftoITcompanies. Armenia has a strong tradition of higher education, where universities put great stress on training students in the fundamentals and in educating them to understand the entire engineering process. Today this tradition is enhanced with new ideas and approaches, whichistheresultofArmeniasadoptionoffreemarketprinciples.
UNIVERSITIES
StateEngineeringUniversityofArmenia(SEUA)andYerevanStateUniversity(YSU)arethe oldest and largest institutions developing engineering professionals for the IT industry. Other institutions active in the IT education include American University of Armenia (AUA),EuropeanRegionalEducationalAcademy(ERA),andRussianArmenian(Slavonic) University State Engineering University of Armenia (SEUA) State Engineering University of Armenia is the successor of Yerevan Polytechnic Institute established back in 1933. The university offers a number of degrees in many fields of engineering,science,andtechnology,anditistheprimaryeducationalinstitutionpreparing engineering specialists in Armenia. It has several branches in other cities of Armenia. Number of students today is 10,0006, and the number of graduates since foundation amounts beyond 115,000. 1960. SEUA began teaching computer related courses starting from1960whentheDepartmentofCybernetics,ComputerSystems,andRadioEngineering waslaunched.Latereachoftheseareashasbecomeseparatedepartmentsandtogetherthey noweducatemorethan3,000engineeringstudents.Todaytheaforementioneddepartments offer several specializations in computer and hardware design, software engineering, electronicsandchipdesign,automatedcontrolsystems,andothers.SEUAconductsR&Din a variety of areas such as design and installation of computer systems and networks, researchanddesignofsemiconductordevices,artificialintellect,researchanddevelopment of dynamic systems, analysis and synthesis of management systems, microelectronics, microcircuitry,etc.
Source: SEUA, http://www.seua.am
31
EnterpriseIncubatorFoundationArmenianInformationTechnologySector Yerevan State University (YSA) YSU wasfoundedin1919.1920.Today,itisthelargesteducationalinstitution inArmenia with more than 13,000 students7, and estimated number of all graduates reaching 90,000. YSU offers degrees in a wide range of disciplines including biology, economics, history, linguistics, law, mathematics, physics, and other areas. Department of Physics and Mathematics was established back in 1924; later, in 1971, Department of Informatics and AppliedMathematicswasfounded.ThesemathematicsdepartmentsoffermajorsinsuchIT related areas as algorithmic languages, cybernetics, discrete mathematics, system programmingandmodeling,andothers.About2000studentscurrentlystudyintheabove stateddepartments. American University of Armenia (AUA) American University of Armenia (AUA), an affiliate of the University of California, was established in 1991 as a graduate university based on the U.S. system of education. AUA offers Masters degrees in Business Administration, Computer and Information Science, IndustryEngineering,Law,andotherareas.75studentscurrentlystudyattheDepartment of Industry Engineering.8 AUA conducts research in such fields as business, engineering, environmental management, healthcare, law, and political science through its several researchcenters. European Regional Educational Academy (ERA) EREA was founded in 2001 by the European Union, and offers degrees in Software Engineering and IT Business Management. Apart from the professional training the ERA curriculaincludestudyofthreeforeignlanguages:English,FrenchandGerman.Currently about180studentscurrentlystudyatERA.9 Russian-Armenian (Slavonic) University (RAU) TheRussianArmenian(Slavonic)UniversitywasestablishedonAugust29,1997,basedon thetreatyexecutedbetweentheGovernmentofRussianFederationandtheGovernmentof Armenia.In1999,theRAUlistofprofessionswasfurther expandedtoincludespecifically AppliedMathematicsandComputerScience,andAppliedPhysicsDepartmentwaslateron established in 2003. The departments provide majors in mathematics and math modeling, systemprogramming,electronicsandmicroelectronics.RAUcurrentlyhas324students.10 Currenteducationalsystem,exceptforafewuniversities,isinheritedfromtheformerSoviet Union. After the independence, however, demand for professionals had changed significantly, which resulted in discontinuation of many fields and specializations and emergence of new ones. A number of universities have already adopted the western style twolevel educational system with Bachelors and Masters degrees, however the Soviet 5yeardegreeeducationalsystemisstillpracticedbycertainuniversities.Manyuniversities offerpostgraduateeducationandPhD.
7 8 9
Source: YSU, http://www.ysu.am Source: AUA, http://www.aua.am Source: ERA, http://www.eriicta.am 10 Source: RAU, http://www.rau.am
32
The main issue faced by the educational sector is inadequate funding: tuition fees and government support are not sufficient for the majority of educational institutions. At the sametime,manyuniversitieshavenointentiontoraisetuitionfeesbecausetheyarealready highforanaverageArmenianstudent.Otherissuesfacedbymanyuniversitiesarelackof textbooks and professional literature, outdated library, limited availability of computer equipmentandInternetaccess.
FACULTYANDTEACHINGMETHODS
Most of the IT related faculty staff is concentrated at YSU and SEUA with the remainder spread throughout other universities. The faculty staff totals 800 at the five leading universities.
FacultyDistributionacross5ITUniversities
400
YSU,360 SEUA,320
300
200
Slavonic,80
ERIICTA,40 AUA,25
100
0 The majority of educational institutions consider their curricula and teaching methods uptodate and in line with industry requirements. Many professors develop their classes using experience of leading European, Russian, and US universities and with their assistance. In some cases, local IT professionals are invited to help faculty in aligning the curriculatothelatestindustrytrendsandrequirements. Today,moreandmoreinstitutionsrecognizethatbesidestechnicalskillsstudentsneedtobe proficient in business areas as well. Different business courses are offered at a number of universities including marketing, management, business ethics, law, and other subjects. Teaching of foreign languages such as Russian and English are also considered extremely importantfordevelopmentofqualityengineeringandmanagerialcadre.
33
EnterpriseIncubatorFoundationArmenianInformationTechnologySector Despite the recent improvements in the educational system, current teaching methods are consideredinadequateintheattempttomeettheITindustrysdemandforqualityhuman resources.Furthermore,twomajorinterrelatedissues:lowwagesandagingfacultyresult inthefacultysize beingconstantordecreasing overtimewhilethestudentbodygrowing eachyear.
COOPERATIONWITHPRIVATEBUSINESSES
Cooperation between the industry and the educational institutions was rather weak for a number of postSoviet years. However, this trend has changed recently. Examples of such cooperationare: Interdepartmental Chair of Microelectronic Circuits and Systems established by LEDASystems(acquiredin2004bySynopsysInc.)andSEUA.TheChair,nowpart of Synopsys University Program, supplies more than 60 quality VLSI and EDA specialists each year. Later Synopsys expanded this initiative through opening interdepartmentalchairsatYSU,RAUandERA; Internet and web technologies laboratories established by Lycos Europe, EIF, and SourcioCJSCatSEUAandYSUin2005; SuneducationallaboratoriesformedbySunMicrosystems,EIF,andUSAIDatSEUA, YSUandRAUin2008; Gyumri IT Center, first IT training center in the city of Gyumri, established by the FundForArmenianRelief(FAR)andEIFin2006; MicrosoftInnovationCenterformedbyMicrosoft,EIFandUSAIDatSEUA; ArmenianIndian Center for Excellence in ICT, founded in 2011 under the joint projectofGovernmentsofArmeniaandIndia; RegionalMobileApplicationLaboratoryfoundedin2011forEasternEurope,South Caucasus and Central Asia under the joint project of InfoDev, Government of FinlandandNokia. Theaforementionedcompanieshirethegraduatesoftheparticulartrainingcourses.Atthis point, industry and university cooperation does not go further than teaching and training, mainlyconcentratingonthepreparationofqualityprofessionalsforseveralcompaniesand industryingeneral.
34
STUDENTS
In 20102011, nearly 6,900 students were enrolled at the Armenian universities offering IT related professions11, of which about 6,000 study at the above stated 5 main universities. Around 75%ofall thesestudentsstudyatSEUA andYSU.ForeignstudentsfromEurope, Russia & CIS, Middle East, and other countries study in Armenia, and their number is growingovertime.Inrecent35yearsthestudentsrecordedsubstantialacademicprogress, andtheenrolmentintheITrelateddepartmentshasbecomeratherdifficult,specificallyat YSU and SEUA. Programming, information and applied mathematics, automated control systemsandmicroelectronicsarethemostpopularmajorsforapplicants.
StudentDistributionacross5Universities ITrelatedmajors
3,500 3,000 2,500 2,000 1,500 1,000 500 0
ERIICTA200
Slavonic325 AUA75
SEUA3,000
YSU2,000
In general, the representatives of IT firms regard the current number of students as inadequate to meet industrys demand in technical specialists. In addition, the level of qualificationofgraduatesdoesnotoftenmeettheneedsoftheindustry,whichforcestheIT companies to organize additional on job training for those graduates to obtain relevant qualificationandgetfulltimepositions.
11
Source: National Statistical Service of Armenia, http://www.armstat.am
35
POLICYDEVELOPMENTS
In 2000, the Government of Armenia declared the IT sector as one of the priorities for the developmentoftheArmenianeconomy,whichwasfollowedbyanumberofspecificactions tobringtheGovernmentdecreeintoeffect.In2001,theGovernmentjointlywiththeWorld Bank,USAID,variousfoundations,universities,andprivateenterprisesdevelopedtheICT Master Strategy and ICT development implementation plan to promote IT and establish Armenia as a regional ICT hub. In May 2001, the Government approved the ICT Development Concept Paper and Action Plan prepared by the Ministry of Trade and EconomicDevelopmentinaccordancewiththerecommendationsoutlinedintheICTMaster Strategy. InJuly2001,InformationTechnologiesDevelopmentSupportCouncilofArmenia(ITDSC), chaired by the Prime Minister was established by the decree of the President of Armenia. The mission of the Council is to act as a bridge between the Government and the private sectorandtoserveasaconnectinglinkbetweentheDiasporaandArmenia.Thegoalsofthe CouncilaretoassisttheGovernmentandtheprivatesectorinbuildingstrongandviableIT industryanddevelopingArmeniaintoanadvancedinformationsociety. In 2002, Enterprise Incubator Foundation was established by the Government of Armenia and the World Bank to support the development of information technology industry in Armenia.EIFisthelargestdevelopmentinitiativewithintheITindustryinArmenia Information technology is considered by the Government as an important area for internationalcooperation.Variousprojectsareinitiatedinthisarea:theEuropeanRegional Institute of Information and Communication Technologies in Armenia (ERIICTA), which was established with the financial assistance from the European Union; Competitive ArmenianPrivateSectorProgram(CAPS),aprogramfundedbythe UnitedStatesAgency forInternationalDevelopmentandimplementedbyNathanAssociatesincooperationwith J.E.AustinAssociates. In2008,theGovernmentadoptedanew10yearindustrydevelopmentstrategyfocusedon building infrastructure, improving quality of IT graduates, creating venture and other financingmechanismsforstartupcompanies.Themaingoalsofthisnewstrategyare:build adevelopedinformationsocietyinArmenia,makeArmeniapartoftheknowledgecreation global network, and form a strong and advanced information technology sector. The strategyaimsatincreasingtheratesofcomputerandinternetpenetrationinallsegmentsof theeconomy,buildingnewtechnoparksandincubators,establishingamajorventurefund, developing domestic market for local IT products and services, increasing FDI, and other measurestargetingtheexpansionoftheICTsector,andontheotherhandthedevelopment of an IT society in Armenia. The Government body responsible for the implementation of thisstrategyandoverallITindustrydevelopmentistheMinistryofEconomy. Since 2008, allocations have been made from the National Budget to the RA Ministry of Economy for providing government support to the development of the IT sector. Those
36
funds are used for IT industry research, industry status survey, guidelines of the industry and enterprise rates; organization of industry related events of local, regional and internationalimportanceexhibitions,forums,conferencesandcompetitions;participation of Armenia in major international events abroad; and as well cofinancing of joint projects and events with foreign governments, international institutions and multinational organizationsofITindustry. ArmTech, the Armenian hitech international congress and DigiTech, the specialized information, telecommunications and hitech expo, arranged and implemented in close cooperationwiththeGovernmentofArmenia,haveestablishedatradition. ArmTech is intended to highlight the growth in hitech industry having a strategic importance for the Armenian economy, promote the international collaboration and attraction of investments, foster the cooperation between IT specialists and turn the Armenian hitech industry globally recognizable. The annual forum is organized sequentiallyinArmenianandUSA. ThemaingoalofDigiTechexpoistocreateafavorablecommunicationenvironmentforhi tech companies, business consumers and the general public. The expo serves a floor for studyingandunderstandingthe real picture, identifyingthe achievements,challenges and opportunities of the Armenian ICT sector, and tends to facilitate the market entry of IT companies, the exhibition of their products and services and the strengthening of internationalrelations. InrecentyearstheGovernmentofArmeniahassignedanumberofcooperationtreatiesand memoranda of understanding with governments including the Republic of India, Arab RepublicofEgyptandothers,aswellas withworldknowncompanies,such asMicrosoft, Aclatel,HewlettPackard,SunMicrosystems,NationalInstruments,MentorGraphics,Cisco, Intel,Synopsys,Dlinkandothers. The Government of Armenia implements targeted projects for development of IT sector infrastructure. Particularly, in 2008, the Government of Armenia approved the Concept PaperandtheActionPlanforreconstructionofGyumri(Shirakmarz,RepublicofArmenia) to a technocity. Since 2008, allocations have been made from the National Budget to the MinistryofEconomytoprovidestatesupporttotheactivitiesofGyumriTechnopark TheprogramaimsatturningGyumriintoaCenterofExcellenceaTechnocityreputedas an international business environment with large education centers, research centers and strongfacilitiesfordevelopment,testing,realizationofinnovative,informationandhitech projectsandstartinglargescaleproductionandsmallandmediumhitechcompanies. Within the framework of Gyumri Technopark project, DLink International opened the regional software development laboratory in 2011. Given the huge success of the accomplished projects, DLink plans to build one of its international centers in Gyumri in thenearfuture.
37
EnterpriseIncubatorFoundationArmenianInformationTechnologySector OneofthegoalsofthenewICTDevelopmentStrategyadoptedbytheGovernmentofArmenia istoformanEsocietyinArmenia,specificallythesignificantexpansionofthecomputerusage andinternetaccess.ToachievethegoalComputerforAllprogramhasbeenlaunched,which intendsto: Makecomputersaffordableandaccessibletothepopulation, Trainskillfulusersoftherespectivecomputerhardwareandsoftware, EnhanceinternetaccessibilitytoandtheuseofEservicesbythepopulation, Reducethepropagationofnonlicensedsoftware. The program is implemented by the Ministry of Economy and EIF jointly with international andlocalICTcompanies,banksandotherpartners. In 2010, memoranda of partnership were signed by the Ministry of Economy, Ministry of Education and Science, Intel and HewlettPackard, EIF and Unicomp CJSC for the implementationofTeachersPCandClassmatePCpilotprojectsinArmenia. BasedontheGOADecree#7(February25,2010),theGovernmentofArmeniaapprovedthe ArmenianEsocietyDevelopmentConceptPaperforthenextfewyears. To foster the use of electronic management systems to the fullest extent, in 2010, the GovernmentofArmeniaintroducedthewww.egov.amelectronicmanagementportalwith the intention to unify all electronic management tools and databases of the Armenian governmentauthoritiesandprovideacomfortableenvironmentfortheiruse.Thesiteallows electronic applications for license, electronic registration of organizations, electronic tax reportselectronicvisaapplications,electronicapplicationstoIntellectualPropertyAgency, issue of electronic signatures, electronic procurements, etc. New services are being continuouslyaddedtotheelectronicmanagementportal.Atpresent,worksareunderway tointroduceehealth,eeducation,epensionandeidentificationservices. To achieve the aforementioned objectives and implement other industry development programs and projects, the Government of Armenia signed a credit agreement with the European Bank for Reconstruction and Development, under which the Armenia ESociety and Innovation for Competitiveness Program started in 2011. The Program consists of severalprojectsaimedatstrengtheningtheICTinfrastructureinArmenia,takingactionsto foster the industry development, formation of esociety, etc. Specifically, the program includes the following projects: PanArmenian Broadband Access and Management Network, Introduction of Certification Center in Armenia, Computer for All, Gyumri Information Technologies Center, Financial Support to Companies Needing Innovative KnowledgeandTechnologies,AssistancetoIT/ResearchIndustryDevelopment,andothers. In 2011, the USAID funded Economic Development and Market Competitiveness (EDMC) project was launched, targeting SME capacity building in IT sector among others. The overallbudgetoftheprojectis$17million. BelowtableprovidesITindustrygrowthtargetsthrough2018.
38
MainIndicators
Homecomputerpenetration Educationalcomputerpenetration Centralandlocalgovernmentcomputerpenetration PopulationInternetpenetration StateentityspendingonlocallydevelopedITproducts,%ofnational budget DomesticspendingonlocallydevelopedITproducts,%ofGDP Shareofeservicesinallservicesprovidedby governmentauthorities NumberofITcompanies withforeigncapital ITworkforce Productivity,outputperemployee Industryrevenues Exports Companieswith1,000employees ITcompaniesofferingR&Dservices Technocity TechnoParks&incubators Venturecapitalfundscommitted Localopenjointstockcompanies(registeredatArmenianStock Exchange) Localopenjointstockcompanies(registeredatinternationalstock exchanges)
2018
70% 100% 100% 90% >1% >2% 80% 1000 200 20000 50,000USD 1mlnUSD 700mlnUSD >1 100200 >1 >10 >700mlnUSD 50100
>5
39
APPENDICES
ARMENIA,KEYFACTS RepublicofArmenia,formerlyoneofthefifteenSovietrepublics,declareditsindependence onSeptember21,1991,basedontheresultsofthenationwidereferendum(99%ayevote). CapitalandthelargestcityisYerevan. GEOGRAPHY ArmeniaislocatedintheSouthCaucasusregionofEurasiacontinent.Bordercountriesare Azerbaijan(eastandsouthwest),Georgia(north),Iran(south),andTurkey(west).Landarea isapproximately25,800squarekilometersor11,500squaremiles.Armeniaisamountainous regionwiththeaverageelevationabovesealevelof1,800metersor5,900feet.Theclimateis sunny,dry,continentalwithhotsummersandmoderatetocoldwinters. POPULATION Accordingtothe2002data,thepopulationis3.2millionwithapproximately67%residingin cities and towns. Armenian is the official language. Armenians are fluent in Russian, and many, especially in Yerevan, are also proficient in English. The population of Armenia is highlyeducatedwith98%literacyrateforresidentsover17yearsold.Educationalsystemof Armeniahastwolevels,whichincludessecondaryandhighereducationalinstitutions.The largestuniversitiesareYerevanStateUniversityandStateEngineeringUniversity.Armenia wasthefirstcountrytoofficiallyadoptChristianityasitsstatereligionin301A.D. GOVERNMENTSYSTEM Armeniaisanindependent,democratic,socialandlawfulstate.Thestatepowerisexercised undertheConstitutionandlaws,ontheprincipleofseparationoflegislative,executiveand judicial authorities. The president of Armenia is the head of the state. The president is elected by the citizens of Armenia for a five year term and maximum of two consecutive terms.ThePresidentofArmeniaisSerzhSargsyan,whowaselectedonFebruary19,2008. TheGovernmentofArmeniaistheexecutivepower.TheGovernmentconsistsofthePrime Ministerandministers.BasedonthedistributionofdeputyseatsattheNationalAssembly and consultations with parliamentary factions, the President appoints Prime Minister the personenjoyingthetrustofthemajoritydeputies,otherwisethepersonhavingthetrustof the biggest number of deputies. The President appoints and dismisses the members of the GovernmentontherecommendationsofthePrimeMinister. The supreme legislative power is the singlechamber National Assembly. It consists of 131 members,whoareelectedbypeoplefor5yearterm.ThelatestelectionstookplaceinMay 2007.
40
ECONOMY Major industries: nonferrous metallurgy, electric energy, electronics, electric engines, chemical and petrochemical, metal cutting machine tools, software development, wood working,mining,buildingmaterialsandconstruction,furniture,watches,healthcare,food processing and beverages, jewelry, instruments, diamond cutting, textiles and shoes, silk fabric, tobacco, tourism and tires. According to the 2010 Index of Economic Freedom12 compiledbytheHeritageFoundationandtheWallStreetJournal,Armeniaisthe36thfreest economyintheworld(Norway30,Latvia56).
MainEconomicIndicators13
GrossDomesticProduct, (GDP),billionUSD RealGDPgrowth, %changeoverpreviousyear Inflation,annualaverage Unemploymentrate Averagewage,annual average,USD Exports, billionUSD Imports, billionUSD ExchangerangeUSD/AMD, reportingperiodaverage 2003 $2.80 13.9% 4.7% 9.8% $674 $0.68 $1.27 578.80 2004 $3.56 10.1% 7.0% 9.4% $980 $0.72 $1.35 533.45 2005 $4.87 13.9% 0.6% 8.1% $1,365 $0.95 $1.77 457.69 2006 $6.41 13.4% 2.9% 7.4% $1,846 $1.00 $2.20 416.04 2007 $9.20 13.8% 6.0% 7.1% $2,718 $1.16 $3.28 342.08 2008 $11.9 6.8% 9.0% 6.3% $3,582 $1.06 $4.41 305.97 2009 $8.54 2010 $9.39 19.7% 2.6% 5.1% 8.2% 6.9% $3,363 $0.68 $3.31 363.28 7% $3,496 $1.01 $3.78 373.66
BUSINESSENVIRONMENT The following are major taxes in Armenia, which are considered rather low compared to thoseadoptedinmanyothercountries: multilevelpersonalincometaxhasthemaximumrateof20%; valueaddedtax(VAT)is20%; corporatetaxrateis20%;and employeesocialsecuritytaxeswiththerateof3%areimposedonemployees;aspecific scaleisappliedforemployers. Around20%ofITcompaniesareinvolvedinactivitiessubjecttolicensing,i.e.datatransfer andinternetaccessservices.TheLawOnLicensingprovidesthelistofbusinessactivities subject to licensing. Armenia offers several incentive programs for foreign investors. In particular, no duties on statutory capital, no barriers on investment entry, and a 5year protectionclauseintheLawonForeignInvestments.Additionally,companiesoperatingin Armeniahaveanoptiontocarryforwardtheirtaxlossestothefollowingfinancialyear. There are incentives available to exporters such as no export duty, and VAT refunds on goodsandservicesexported.ImportsofafewITproductsareexemptfromcustomsduties
12 13
Source: the Heritage Foundation, http://www.heritage.org/index/ Source: the Central Bank of Armenia, www.cba.am, Armenian Statistical Service, www.armstat.am
41
EnterpriseIncubatorFoundationArmenianInformationTechnologySector and taxes. VAT is deferred on some products, such as computers, when they enter the country. According to the Armenian customs code, the value of contents of computer software is not included in the customs value, which is limited only to the value of the carrier media. This provision is in accordance with WTO/GATT customs valuation agreements. KeyIndicatorsforOpeningandOperatingaBusinessinArmenia14
Indicator StartingaBusiness:Time(days) StartingaBusiness:Cost(GDPpercapita,%) HiringCost(%ofsalary) FiringCosts(weeksofwages) EnforcingContracts:Time(days) EnforcingContracts:Cost(%ofdebt) Armenia 15 3.1 17.5 8.7 285.0 19.0 Europe& CentralAsia 16 8.5 26.7 26.2 408.8 15.0 14 5.3 21.4 31.3 351.2 11.2 OECD Countries
INTELLECTUALPROPERTYRIGHTS Armenia has started reforming its intellectual property regime in the last ten years. It has created a modern system that protects intellectual property rights. Currently, intellectual propertyrelatedmattersinArmeniaareregulatedbytheCivilCode,LawonCopyrightand RelatedRights,LawonPatents,LawonTradeNames,LawonTrademarks,ServiceMarks andAppellationsofOrigin,LawonProtectionofTopographiesofIntegratedCircuits,and Law on Protection of Economic Competition, as well as by a number of international treaties. Armenian legislation on intellectual property has been harmonized with the requirements of the Agreements on Trade Related Aspects of Intellectual Property Rights (TRIPSAgreements).SinceFebruary2003,ArmeniahasbeenamemberoftheWorldTrade Organization(WTO). INTERNATIONALORGANIZATIONS Armenia has a membership in a number of international organizations, agreements, and treaties including Commonwealth of Independent States (CIS), Council of Europe (CE), Economic Commission for Europe (ECE), Eurasia Economic Community (EurAsEC), Black Sea Economic Cooperation Organization (BSEC), International Monetary Fund (IMF), Interpol, International Atomic Energy Agency (IAEA), International Civil Aviation Organization (ICAO), International Fund for Agricultural Development (IFAD), International Organization for Standardization (ISO), International Telecommunications Union(ITU),OrganizationforSecurityandCooperationinEurope(OSCE),UnitedNations (UN),WorldBank(WB),WorldIntellectualProperty Organization(WIPO),World Health Organization(WHO),WorldTradeOrganization(WTO)andothers.
14
Source: The World Banks Doing Business database, http://www.doingbusiness.org
42
In 2011, Armenia took the position of the coordinator of Information and Communication TechnologiesworkinggroupoperatingundertheBlack Sea Economic Cooperation(BSEC) Organization.InNovember2011,the20112013roadmapwasapproved,whichwasdrafted and submitted by the coordinating country Armenia in compliance with the Joint Declaration adopted by the foreign ministers of BSEC member countries and the Joint Declarations.
43
SCIENCEANDTECHNOLOGYINARMENIA,TIMELINE
Year
1919 YerevanStateUniversity(YSU) 1924 DepartmentofPhysicsandMathematicsatYSU 1933 YerevanPolytechnicInstitute(StateEngineeringUniversityofArmenia,SEUA) 1935 ArmenianbranchofUSSRAcademyofSciences 1942 YerevanPhysicsInstitute 1943 ArmenianAcademyofSciences(NationalAcademyofSciences,NAS) 1946 ByurakanAstrophysicalObservatory 1955 NASInstituteofMechanics 1956 YerevanScientificResearchInstituteofMathematicalMachines(YerSRIMM) 1957 InstituteofInformaticsandAutomationProblems 1958 TransistorsemiconductorR&Dandmanufacturingplant 1959 FirstgenerationcomputerAragatsonvacuumtubesatYerSRIMM 1960 NASInstituteofRadiophysicsandElectronics DepartmentofCyberneticsatSEUA 1961 SecondgenerationcomputerHrazdanonsemiconductorsatYerSRIMM 1963 DevelopmentofmicroprogrammedcomputersNairiatYerSRIMM 1964 SiriusradioelectronicsplantincityofAbovyan 1965 PosistormicroelectronicsfactoryincityofAbovyan 1966 InstituteofMicroelectronics,ScientificResearch,andTechnology 1967 NASInstituteofPhysicalResearch 1971 NASInstituteofMathematics DepartmentofInformaticsandAppliedMathematicsatYSU 1972 DepartmentofRadioEngineeringatSEUA 1973 S1030computer(IBM360/370)atYerSRIMM 1976 Nairi3computerwithsharedusagecapabilitiesatYerSRIMM 1978 YerevanTelecommunicationsResearchInstitute S1045computer(IBM360/370)atYerSRIMM 1979 DepartmentofCalculatingTechniques(ComputerSystems)atSEUA 1980 NASInstituteofAppliedProblemsofPhysics 1981 Nairi4computer(PDPcompatible)atYerSRIMM 1984 S1046computer(IBM360/370)atYerSRIMM SEUAbranchesincitiesofKapanandGoris 1986 Ashtaraksemiconductorandelectronicsmanufacturingplant($120millioninvestment) 1987 FirstArmenianprivateITfirmArmenianSoftware 1988 Marsintegratedcircuitsandelectronicsmanufacturingplant($300millioninvestment) 1990 NASengineeringcenterMashtots(atomicoptics,thinfilmphysics)
SovietArmenia
establishmentsandevents
44
Year
IndependentArmenia
establishmentsandevents
1991 ArmeniadeclaresindependenceonSeptember21 AmericanUniversityofArmenia(AUA) 1992 YerevanAutomatedControlSystemsScientificResearchInstitute(YerACSSRI) Arminco(leadingISPinArmenia) 1994 MSHAK(ArmeniasleaderinCNCsystemsandtools) 1995 HPL(U.S.,yieldmanagementsoftware;acquiredbySynopsysin2005) ArmenTel(Armeniasleadingtelephonecompany) 1997 RussianArmenian(Slavonic)StateUniversity 1998 AcquisitionofArmenTelbyGreektelecomOTE CredenceSystems(U.S.,semiconductordesigntotestsolutions) Representativeoffices:Alcatel,SiemensAG 1999 VirageLogic(U.S.,advancedembeddedmemoryIP) 2000 UnionofInformationTechnologyEnterprises(UITE,ArmenianITassociation) ViasphereTechnopark(U.S.,commercialtechnologypark) LEDASystems(U.S.,digitalstandardcellsandI/Olibraries;acquiredbySynopsysin2004) EpygiTechnologies(U.S.,IPPBXs) 2001 MicroelectronicCircuitsandSystemschairatSEUAincooperationwithLEDASystems ICTMasterstrategyandInformationTechnologiesDevelopmentSupportCouncil(ITDSC) EuropeanRegionalInstituteofInformationandCommunicationTechnologiesinArmenia (ERIICTA) 2002 EnterpriseIncubatorFoundation LycosEurope(Germany,panEuropeanonlinenetwork) 2003 EPAMSystems(U.S.,globaloffshoresoftwaredevelopmentfirm) 2004 SynopsysInc.(U.S.,worldleaderinsemiconductordesignsoftware) CQG(U.S.,analyticssoftwareandtradingsolutions) 2005 VivaCell(secondmobileoperatorinArmenia) Luxoft(Russiasleadingsoftwaredevelopmentfirm) 2006 MicrosoftCorporation,representativeoffice AcquisitionofArmenTelbyRussianmobileoperatorVimpelCom(Beeline) 2007 NationalInstrumentsCorporation(U.S.,globalleaderinvirtualinstrumentationsolutions) Macadamian(Canada,fullrangesoftwaredevelopmentandrelatedservicesfirm) AcquisitionofVivaCellbyRussianmobileoperatorMobileTeleSystems(MTS) 2008 MentorGraphics(U.S.,aworldleaderinelectronichardware/softwaredesignsolutions) NewITindustrystrategyadoptedbytheGovernmentofArmenia OrangeSA(FranceTelecom)wonthestatetenderforthethirdmobileoperatorinArmenia 2009 iCONCommunicationsWiMAXnetworkinYerevan OrangeArmeniasnationwide3G+network NewfiberopticchannelbyGNCAlfaconnectingArmeniatotheglobalinternet UCOMCommunicationstripleplayfibernetworkinArmenia 2010 SynopsysInc.acquisitionofVirageLogic 2011 OpeningofMicrosoftInnovationCenter OpeningofArmenianIndianCenterforExcellenceinICT EstablishmentofRegionalMobileApplicationsLaboratory OpeningofDLinkInternationalregionalsoftwaredevelopmentlaboratoryinGyumri AcquisitionofiCONCommunicationsbyUcomCommunications OfficialannouncementofSTKinetics(SingaporeTechnologiesKineticsLtd)oneofthelargest engineeringcompanysentryintoArmenia
45
MINISTRYOFECONOMYOFTHEREPUBLICOFARMENIA
The history of the Ministry of Economy dates back to 1965 when Material and Technical Supply Department within the government of the Soviet Armenia was established by the decreeoftheSupremeCouncilofArmenianSSR.In1978,theDepartmentwasrenamedto MaterialSupply StateCommittee, and laterin1992the Committeebecamethe Ministry of MaterialResourcesoftheRepublicofArmenia.Inthe periodof19952002,theMinistry of MaterialResources,theMinistryofTrade,andthedepartmentofForeignTourism,andlater the Ministry of Industry, and the Ministry of Economy merged and later in 2002 were reorganized into the Ministry of Trade and Economic Development. According to the PresidentsDecreeonApril21,2008,theMinistrywasrenamedtotheMinistryofEconomy oftheRepublicofArmenia. Today the Ministry covers a number of areas including economic policy, regional development, science and innovation policy, foreign cooperation and investment policy, information technology industry development, relationship with EU and WTO, natural resources,tradepolicy,standardizationandmetrology,intellectualproperty,tourismsector development,andothers. The3yearstrategyoftheMinistryrecentlyadoptedbytheGovernmentisintendedto: createaproductiveandtransparentmanagementsystem, formanenvironmentsupportivetothesustainableandproportionaldevelopmentofthe Armenianeconomy, buildanentrepreneurialandinvestmentfriendlybusinessenvironment, supportproductivepublicprivatesectorcooperation, promotetheintegrationintheglobaleconomyparallelwithimprovingthe competitivenessofArmenia, designandimplementadiversifiedindustrialpolicyaimedatdevelopingpriority sectorsoftheeconomy, supportthetransitionofArmeniatowardsresourcesavingandknowledgebased economy. MinistryofEconomyoftheRepublicofArmenia 5MherMkrtchyanstreet,Yerevan0010,Armenia Phone:+37410566185,Fax:+37410526577 http://www.mineconomy.am/
46
ENTERPRISEINCUBATORFOUNDATION
Enterprise Incubator Foundation or EIF is a business development and incubation agency operatinginYerevan,Armenia.EIFwasestablishedbytheGovernmentofArmeniawithin the framework of the World Banks Enterprise Incubator project to support the development of Information Technology sector in Armenia. EIF objectives are to improve competitiveness of Armenian IT companies in the global marketplace, build linkages with business communities in key technology markets, improve access of local companies to knowledge and information on best practices and experience, and assist Armenian firms withattractinglocalandforeigninvestors. Enterprise Incubator provides a comprehensive package of services via its two major components: Business Services focus on assisting Armenian technology firms in a variety of areas including business development, marketing and promotion, management, accounting and finance, legal, and other areas vital to the success of a company. Business Services component helps existing companies in growing their businesses within Armenia and internationally, facilitates the development of startups, and assists local entrepreneurs in buildingtheirideasintosuccessfulbusinesses.Aspartofitsassistance,EIFhelpscompanies toimproveprofessionalandbusinessskillsoftheemployeesandmanagersviaprovisionof shortterm advanced trainings and seminars and creation of learning partnerships within theindustryandtheuniversities. Facility Services component provides highend facilities to existing technology companies and newly created startups. Options included in the base package are highquality office space,sharedmeetingandconferencerooms,sharedresourcecenterwithaccesstoliterature andotherinformationresources,highspeed Internetconnection,receptionistandsecurity, and 24hour access to the facility. The facilities are located at the premises of the Russian Armenian(Slavonic)University. EIFsignifiesthedevelopmentoflongtermrelationshipswithorganizationsandindividuals worldwide interested in mutually beneficial business collaboration. It works closely with many technology companies in Armenia and may serve as a major channel to creating successfulpartnershipswithArmenianenterprises.Individualsandcompaniesinterestedin developingpartnershipsorinvestinginArmeniaareencouragedtocontactEIFatthebelow address. EnterpriseIncubatorFoundation 123HovsepEminstreet,Yerevan0051,Armenia Phone:+37410219797,Fax:+37410219777 Email:info@eif.am,http://www.eifit.com DirectorBagratYengibaryan
47
UITE,ARMENIANITASSOCIATION
The Union of Information Technology Enterprises (UITE) is the primary IT Association in Armenia. It was formed in 2000 as a nonprofit association of Armeniabased ICT companies. UITE was established by the private sector to consolidate industrys advocacy efforts, facilitate business, and encourage advancement of research in the ICT sector. Member firms are involved in Internet applications, ecommerce, IT services, chip design, andotherareas.FromMay2004,UITEisamemberofWorldInformationTechnologyand ServicesAlliance(WITSA). UITEisinvolvedinavarietyofactivitiessuchas: advocacyofmemberinterests, organizationoftradeshowsandprogrammingcontests, workforcedevelopmentthroughcustomtrainingprograms, designofonlineinformationandcollaborationportalsonITsector, conductingindustrysurveysandresearch, assistingitsmemberswithbusinessdevelopment. UITEleadsanumberofpolicyrelatedinitiativesaimedatthedevelopmentofICTsectorin Armenia.Aspartoftheseinitiatives,theassociationformedsevenworkinggroups,which will formulate Armenian ICT sector development strategic plans and activities. Groups coverdifferentareasvitaltothesectordevelopmentincludingregulatoryenvironmentand advocacy,ethics,globalmarketingandpromotionoftheindustry,educationandworkforce development,telecommunicationsinfrastructure,domesticICTmarketdevelopment. Oneofthekeyeventsorganizedbythe associationistheannualDigiTecExpotechnology tradeshow, which was first held in September 2005 in Yerevan and has turned into an annual event. The exhibition attracts a variety of domestic and foreign businesses, educationalinstitutions,andotherorganizationsactiveintheICTsector.TheDigiTec2011 ExpowasparticipatedbyArmenian,Singaporean,Taiwanese,Russian,PolishandGeorgian companies,115intotal,whichwashigherby70%versusthepreviousyearparticipationof 68 companies. The number of visitors to the exhibition is growing from year to year: the 2011expohostedmorethan18,000visitors. UnionofInformationTechnologyEnterprises 29Nalbandyanstreet,suite36,Yerevan0001,Armenia Phone:+37410548881,Fax:+37410548882 Email:info@uite.org,http://www.uite.org CEOKarenVardanyan
48
METHODOLOGY
Inthissection,wedescribehowwehaveestimatedvariousindustryfigures,whatsourcesof information and data were used, as well as the assumptions, various issues relating to collectionandanalysisofinformation,aswellasotheraspectsimportantforunderstanding thevalueandlimitationsofthisReport. InformationandData While developing the Report, we had to rely on the data provided by the industry representatives during their interviews. Although we believe that information and data gathered during those interviews were mostly reliable, however, not all of the companies providedalltheinformationwerequired.Sinceinanumberofcases,wedidnothavedata atall,wehadtoextrapolatevariousfiguresbasedonwhatwehadathand. Therefore, because of the unavailability and, in some cases, unreliability of the data, the Report was based, to some extent, on our estimates and analysis. However, based on our experience with the industry, estimates provided in other reports and publications, and othersources,webelievethattheReportoffersreliabledescriptionoftheindustry,itsmain trendsandcharacteristics,aswellasoverallprospects. Unlessotherwisespecified,allinformationanddatainthisreportarebasedonEIFestimates and analysesandare forthe period 20082010. Allmonetary units areintheUnitedStates dollars. Definitions SoftwareandITconsultingsegmentoftheinformationtechnologyindustryisdefinedasthe cluster of companies engaged in software development and maintenance; provision of software related services, consulting and integration; development of graphics, animation, multimedia applications; chip design; and provision of engineering and R&D services. Internetserviceprovidersofferaccesstointernet(wholesaleand/orretail)throughvarious channels; this group does not include VoIP businesses or Internet cafes. While companies included in our research may be engaged in a number of other activities within the technology sector, the above two components generate the major share of the firms revenues. Respectively, only software and ISP segments of those companies were used in estimatingindustryfigures. Locally owned or local companies are defined as Armeniabased enterprises, and at least 51% of their equity is owned by citizens or permanent residents of Armenia or locally ownedfirms.ForeignbranchesorcompaniesaredefinedasArmeniabasedenterprises,and atleast51%oftheirequityisownedbyforeigncitizens,residents,orfirms.
49
EnterpriseIncubatorFoundationArmenianInformationTechnologySector AssumptionsandEstimationMethods Industryrevenueswereestimated,whenwedidnothaveaccuratedatafromthecompanies, basedonthenumberofemployees,averagesalarylevels,aswellasnonwagerelatedcosts, and respective profit margins. We tested our assumptions against reliable revenue figures from several companies, and, therefore, we believe that our industry revenue estimates provide reasonable approximation to the actual amounts. Our calculations did not include hardwareandhitechcompanies,aswellastemporarydonorfundedsoftwareprojectsfor theGovernment. Productivitywasestimatedbasedontheannualrevenuesperemployee.Twosetsoffigures were calculated: one was a mere division of all industry revenues by the total workforce; second was the annual revenue of each company per employee, which was then averaged for the total industry using revenues as the weight factor. While the second estimation providesabetterpictureoftheproductivity,itcomplicatestheforecastingoftheindustrys growth. Therefore, industry projections are estimated using the first set of figures. Productivity calculations were made only for software development companies because significantdifferencesexistedbetweenthosefirmsandISPsintermsofhowtheirrevenues weregenerated. Workforce was estimated, when we did not have data from the industry, based on the average number of employees per company. Average figures were calculated using a sample of local and foreign companies, where the outlier companies with largest and smallest staff were excluded. This method allows estimating average employee quantities thatbetterreflecttheactualstateoftheindustry. For forecasting the industry growth, we assumed that the local and international demand fortheproductsandservicesfromArmeniancompaniesmatchedthesupply,and,therefore, wedidnotconsiderdirectlythedemandsideinourforecast. OutlineofIndustrySurvey ThisreportisbasedontheindustrysurveyconductedbyEIFinNovemberDecember2011. Thesurveycoveredthreemaingroups:companiesengagedinsoftwaredevelopmentandIT consulting, internet service providers, and IT related faculties of major educational institutions. The surveys included a number of areas important to the development and growth of the industry such as business and legal environment, revenues, educational framework,humanresources,exportandothers.ThereportalsousesinformationfromEIF previousindustrysurveysconductedin20032010. The 2011 survey covered 230 software, IT consulting, and internet service firms, and IT relatedfacultiesofmajoreducationalinstitutions. SurveyCoordinatorSophiaMuradyan,EIF. DataAnalysisandIndustrySurveyReportSophiaMuradyan,ZhenyaAzizyanandSona Kochkanyan,EIF.
50
INDUSTRYSTATISTICS
OperatingCompanies Industrytotal Localfirms Internetserviceproviders(ISP) Foreignbranches Internetserviceproviders(ISP) 281 174 20 107 12 100% 62% 7% 38% 4% 175 119 20 56 3 100% 68% 11% 32% 2% 61% 46% 0% 91% 300% 17.1% 13.5% 0.0% 24.1% 58.7% 2011 %from Industry 2008 %from Industry %change 2011/2008 CAGR2011/ 2008
Breakdownofforeignandlocallyownedcompanies Industrytotal Armenia USAandNorthAmerica Europe RussiaandCIS Other Foreignmarkets(millionUSD) Industrytotal Armenia USAandNorthAmerica Europe RussiaandCIS $89.7 $51.6 $23.2 $5.5 $9.3 100% 58% 26% 6% 10% $69.4 $41.0 $12.7 $11.8 $4.0 100% 59% 18% 17% 6% 29% 26% 84% 53% 134% 8.9% 8.0% 22.5% 22.3% 32.7% 281 170 54 31 16 10 100% 60% 19% 11% 6% 4% 175 119 36 9 10 1 100% 68% 21% 5% 6% 1% 61% 43% 50% 244% 60% 900% 17.1% 12.6% 14.5% 51.0% 17.0% 115.4%
Productivity(averageoutputpertechnicalemployee,excludingISPs),millionUSD Industrytotal Localfirms Foreignbranches $36,311 $36,508 $36,115 2011 $205.1 $87.0 $118.1 $115.4 $58.0 $40.0 $18.0 $57.4 $13.4 $44.0 $89.7 $18.9 $70.7 $205.1 $143.1 $62.0 100% 101% 99% %from Industry 100% 42% 58% 56% 28.3% 19% 9% 28.0% 7% 21% 44% 9% 34% 100% 70% 51 30% $26,115 $22,366 $29,757 2008 $111.3 $50.1 $61.2 $41.9 $31.1 $21.4 $9.6 $10.8 $5.1 $5.7 $69.4 $19.1 $50.3 $111.3 $96.0 $15.3 100% 86% 114% %from Industry 100% 45% 55% 38% 28% 19% 9% 10% 5% 5% 62% 17% 45% 100% 86% 14% 39% 63% 21% %change 2011/2008 84% 73% 93% 175% 87% 87% 87% 431% 162% 673% 29% 1% 40% 84% 49% 304% 11.6% 17.7% 6.7% CAGR2011/ 2008 22.6% 20.2% 24.5% 40.2% 23.1% 23.1% 23.1% 74.5% 37.8% 97.7% 8.9% 0.3% 12.0% 22.6% 14.2% 59.3%
Turnover,millionUSD
Industrytotal Localfirms Foreignbranches Localmarket Localfirms SoftwareandITconsulting InternetServices Foreignbranches SoftwareandITconsulting InternetServices Exports Localfirms Foreignbranches TotalIndustryTurnover SoftwareandITconsulting InternetServices
HumanResources
IndustryTotal Technicalprofessionals Managementandadministrative SoftwareandITconsulting Localfirms Foreignbranches InternetServices Localfirms Foreignbranches Localfirms Technicalprofessionals Managementandadministrative Foreignbranches Technicalprofessionals Managementandadministrative Technicalprofessionals Technicalprofessionals Managementandadministrative InternetServices Technicalprofessionals Managementandadministrative
2011 6,760 5,226 1,534 5,060 2,516 2,544 1,700 638 1,062 3,154 2,373 781 3,606 2,928 678 5,060 3,972 1,098 1,700 1,254 436 Total, 2011 18% 3% 6% 9% 8% 14% 6% 17% 5% 7% 7%
%from Industry 100% 77% 23% 75% 37% 38% 25% 9% 16% 47% 35% 12% 53% 43% 10% 75% 59% 16% 25% 19% 6% Local, 2011 10% 1% 5% 6% 6% 10% 4% 13% 4% 5% 3% 2%
2008 4,890 4,250 640 4,220 2,100 2,120 670 360 310 2,460 2,110 350 2,430 2,140 290 4,220 3,680 540 680 580 100 Foreign, 2011 8%
%from Industry 100% 87% 13% 86% 43% 43% 14% 7% 6% 50% 43% 7% 50% 44% 6% 86% 75% 11% 14% 12% 2% Total, 2008 23.2% 3.9% 1% 3% 2% 4% 2% 4% 1% 2% 4% 8.1% 7.4% 8.4% 10.2% 6.3% 12.6% 4.9% 6.7% 8.4%
%change 2011/2008 38% 23% 140% 20% 20% 20% 154% 77% 243% 28% 12% 123% 48% 37% 134% 20% 8% 103% 150% 116% 336% Local, 2008 13.7% 1.4% 7.0% 3.5% 6.0% 7.4% 5.3% 10.2% 4.6% 5.3% 4.6%
CAGR2011/ 2008 11.4% 7.1% 33.8% 6.2% 6.2% 6.3% 36.4% 21.0% 50.7% 8.6% 4.0% 30.7% 14.1% 11.0% 32.7% 6.2% 2.6% 26.7% 35.7% 29.3% 63.4% Foreign, 2008 9.5% 2.5% 1.1% 3.9% 2.5% 2.8% 1.1% 2.5% 0.4% 1.4% 3.9%
CompanySpecializations, %ofCompanies
Customizedsoftwareandoutsourcing Chipdesign,testingandrelatedactivity Internetservices Networkingsystemsandcommunications Internetapplicationsandecommerce Itservicesandconsulting Accounting,bankingandfinancial software Webdesignanddevelopment Computergraphics,multimediaand games Databasesandmanagementinformation systems Other
Breakdownofcompany specializationsbyrevenues,million USD

Customizedsoftwareandoutsourcing Chipdesign,testingandrelatedactivity Internetservices
Total, 2011 $38.0 $29.0 $62.0
Local, 2011 $20.8 $0.9
Foreign, 2011 $17.2 $28.1 $44.0
Total, 2008 $22.9 $17.5 $15.3
Local, 2008 $10.1 $1.1 $9.6
Foreign, 2008 $12.8 $16.4 $5.7
52
$18.0
Networkingsystemsandcommunications Internetapplicationsandecommerce Itservicesandconsulting Accounting,bankingandfinancial software Webdesignanddevelopment Computergraphics,multimediaand games Databasesandmanagementinformation systems Other
$9.9 $5.1 $17.1 $10.0 $14.0 $3.7 $6.2 $10.1
$7.6 $2.8 $8.0 $7.0 $7.9 $3.0 $4.9 $6.1
$2.3 $2.3 $9.1 $3.0 $6.1 $0.7 $1.3 $4.0
$10.6 $9.3 $7.0 $7.1 $3.9 $3.5 $3.1 $11.1
$2.2 $1.6 $5.2 $5.9 $2.9 $3.4 $2.4 $5.7
$8.4 $7.8 $1.7 $1.2 $1.0 $0.0 $0.7 $5.4
53
ArmeniaontheInternet
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. www.ada.am,ArmenianDevelopmentAgency www.aitc.am,ArmenianIndianCenterforExcellenceinICT www.armeniainfo.am,InformationaboutArmenia www.armeniapedia.org,EncyclopediaaboutArmeniaandArmenians www.armenica.org,InformationonandhistoryofArmenia www.arminfo.am,www.armenpress.am,www.arka.am,MajorArmeniannewsagencies www.armstat.am,NationalStatisticalServiceofArmenia www.banks.am,Informationaboutbanksandfinancialinstitutions www.bisnis.doc.gov/bisnis/country/armenia.cfm,USBusinessInformationServiceon Armenia www.cba.am,CentralBankofArmenia www.cia.gov/cia/publications/factbook,CIAWorldFactbook www.customs.am,ArmenianCustomsService http://directory.google.com/Top/Regional/Asia/Armenia,GoogleonArmenia www.gov.am,GovernmentofArmenia www.imf.org/external/country/ARM,InternationalMonetaryFund www.mfa.am,MinistryofForeignAffairsofArmenia www.micarmenia.am,MicrosoftInnovationCenterinArmenia www.mindiaspora.am,MinistryofDiasporaofArmenia www.mlabeca.com,RegionalMobileApplicationLaboratoryforECA www.parliament.am,NationalAssemblyofArmenia www.president.am,PresidentofArmenia www.spyur.am,ArmenianBusinessDirectoryandYellowPages www.taxservice.am,StateTaxInspectionofGovernmentofArmenia www.uite.org,UnionofInformationTechnologyEnterprisesofArmenia www.un.am,UnitedNationsinArmenia www.usaid.am,USAID/Armenia www.worldbank.org.am,WorldBanksMissioninArmenia
54
Abbreviations
ADSL ASSR AUA CAD CAGR CAPS CIS CMMI ECM EDA EIF EU GDP I/O ICT IT Ltd NAS NGO SEUA SME UITE UN USA USSR VAT VLSI YSU AsymmetricDigitalSubscriberLine ArmenianSovietSocialistRepublic AmericanUniversityofArmenia ComputerAidedDesign CompoundAnnualGrowthRate CompetitiveArmeniaPrivateSectorproject CommonwealthofIndependentStates CapabilityMaturityModelIntegrated Electroniccomputingmachine ElectronicDesignAutomation EnterpriseIncubatorFoundation EuropeanUnion GrossDomesticProduct Input/Output InformationandCommunicationsTechnologies InformationTechnology LimitedLiabilityCompany NationalAcademyofSciences NongovernmentalOrganization StateEngineeringUniversityofArmenia SmallandMediumEnterprises UnionofInformationTechnologyEnterprisesofArmenia UnitedNations UnitedStatesofAmerica UnionofSovietSocialistRepublics ValueAddedTax VeryLargeScaleIntegration YerevanStateUniversity
55

Armenian Information Technology Sector: 2011 State of of Industry Report

Încărcat de

Informații document

Descriere originală:

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Armenian Information Technology Sector: 2011 State of of Industry Report

Încărcat de

Drepturi de autor:

Formate disponibile

2011Stat teofIndustr ryReport

EnterpriseIncubatorFoundationArmenianInformationTechnologySector ARMENIANINFORMATIONTECHNOLOGYSECTOR SoftwareandServices 2011StateofIndustryReport 20042011EnterpriseIncubatorFoundation

OperatingCompanies Industrytotal Localfirms Foreignbranches

2011 281 174 107

%from Industry 100% 62% 38%

2008 175 119 56

%from Industry 100% 68% 32%

%change 2011/ 2008 61% 46% 91%

CAGR 2011/ 2008 17.1% 13.5% 21.1%

100% 42% 58% 100% 56% 44% 70% 30%

100% 45% 55% 100% 38% 62% 86% 14%

100% 86% 114% 100% 87% 13% 50% 50%

39% 63% 21%

11.6% 17.7% 6.7% 11.4% 7.1% 33.8% 6.2% 6.3%

HumanResources(persons) Industrytotal Technicalprofessionals Managementandadministrative Localfirms Foreignbranches StudentsinITrelatedspecialties atmajorArmenianuniversities (2011)

6,760 5,226 1,534 3,154 3,606

100% 83% 17% 46% 54%

4,890 4,250 640 2,460 2,430

38% 23% 140% 20% 20% 0%

FORE EIGNOWNEDCOMPA ANIES

EnterpriseIncubatorFoundationArmenianInformationTechnologySector serveeitherasthefinalusersoftheproductorasliaisonsbetweenArmenianandWestern companies.

Localfirms,2008 Foreignbranches,2008 Localfirms,2011 Foreignbranches,2011

Enterpr riseIncubat torFoundat tion A ArmenianIn nformation nTechnolog gySector

ArmenianI A ITIndustr ryTurnove er

220 200 180 160 140 120 100 80 60 40 20 0

111 1.3 69.4 41.9

2011Stat teofIndustr ryReport

EnterpriseIncubatorFoundationArmenianInformationTechnologySector considerabledropininternetconnectioncosts.Moreover,additionalnetworkswerebuiltto connectArmeniatomajorinternethubsinRussia,Europe,andUS.

Localfirms,2008 Foreignbranches,2008 Localfirms,2011 Foreignbranches,2011

62.1 40.1 5.7 5.1

2011Stat teofIndustr ryReport

ExportRe E evenues:Geograp phicalDistributio on

Export Geography, 6% % Eu urope,26%

USA A&North Am merica,58%

Enterpr riseIncubat torFoundat tion A ArmenianIn nformation nTechnolog gySector

PRO ODUCTIV VITY

2549,14% >=100,5% 5099,4%

Source: SEUA, http://www.seua.am

Source: National Statistical Service of Armenia, http://www.armstat.am

Source: The World Banks Doing Business database, http://www.doingbusiness.org

Breakdownofcompany specializationsbyrevenues,million USD

Total, 2011 $38.0 $29.0 $62.0

Local, 2011 $20.8 $0.9

Foreign, 2011 $17.2 $28.1 $44.0

Total, 2008 $22.9 $17.5 $15.3

Local, 2008 $10.1 $1.1 $9.6

Foreign, 2008 $12.8 $16.4 $5.7

$9.9 $5.1 $17.1 $10.0 $14.0 $3.7 $6.2 $10.1

$7.6 $2.8 $8.0 $7.0 $7.9 $3.0 $4.9 $6.1

$2.3 $2.3 $9.1 $3.0 $6.1 $0.7 $1.3 $4.0

$10.6 $9.3 $7.0 $7.1 $3.9 $3.5 $3.1 $11.1

$2.2 $1.6 $5.2 $5.9 $2.9 $3.4 $2.4 $5.7

$8.4 $7.8 $1.7 $1.2 $1.0 $0.0 $0.7 $5.4

S-ar putea să vă placă și