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Armenian Information Technology Sector Software and Services MINISTRY OF ECONOMY OF THE REPUBLIC OF ARMENIA ARMENIANARMENIAN INFORMATIONINFORMATION TECHNOLOGYTECHNOLOGY SECTORSECTOR SOFTWARE AND SERVICES 2009INDUSTRY REPORT ARMENIAN INFORMATION TECHNOLOGY SECTOR SOFTWARE AND SERVICES © 2004 - 2009 Enterprise Incubator Foundation Armenian IT Sector Enterprise Incubator Foundation 123 Hovsep Emin Street, Yerevan 0051, Armenia Phone: +374 10 219 797 Fax: +374 10 219 777 E-mail: [email protected] http://www.eif-it.com All rights reserved. This Report may be freely copied and distributed as long as the original copyright is displayed and no modifications are made to its content. Copies of the Report are available for download from http://www.eif-it.com. All respective trademarks, brands, and names are the property of their respective owners. Enterprise Incubator Founda- tion does not guarantee the accuracy of the data and information included in this Re- port. The Report was developed as of November 2009 and, unless otherwise speci- fied, is based on information available at that time. This report was supported by the Ministry of Economy of the Republic of Armenia, (http://www.mineconomy.am) and USAID/Armenia Mission (http://armenia.usaid.gov/). The publication of this report has been made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this publication are the sole responsibility of the authors and do not necessarily reflect the views of USAID or the United States Government. 2 2009 STATE OF INDUSTRY REPORT CONTENTS CONTENTS ................................................................................................................... 3 FOREWORDS ............................................................................................................... 4 SECTOR AT A GLANCE ............................................................................................... 6 COMPETITIVE ADVANTAGES OF ARMENIA ..................................................................... 7 2009-2006 MAIN INDICATORS ..................................................................................... 8 INDUSTRY OVERVIEW .............................................................................................. 10 HISTORY................................................................................................................... 10 SOVIET ARMENIA (1920 - 1990) ................................................................................ 11 INDEPENDENT ARMENIA (1991 - 2009) ...................................................................... 12 INDUSTRY BACKGROUND ........................................................................................ 15 COMPANY FOUNDATIONS .......................................................................................... 15 COMPANY OWNERSHIP GEOGRAPHY ......................................................................... 16 DIASPORA ................................................................................................................ 17 SPECIALIZATIONS ...................................................................................................... 18 TECHNOLOGIES ........................................................................................................ 19 TURNOVER ............................................................................................................... 19 DOMESTIC MARKET................................................................................................... 23 EXPORTS .................................................................................................................. 24 PRODUCTIVITY .......................................................................................................... 25 WORKFORCE ............................................................................................................ 26 EMPLOYEE DEVELOPMENT ........................................................................................ 30 OTHER AREAS ........................................................................................................... 32 MANAGEMENT PRACTICES ........................................................................................ 32 RESEARCH AND DEVELOPMENT ................................................................................. 32 TELECOMMUNICATIONS .......................................................................................... 34 EDUCATIONAL SECTOR ........................................................................................... 35 UNIVERSITIES ........................................................................................................... 35 FACULTY AND TEACHING METHODS ........................................................................... 37 COOPERATION WITH INDUSTRY .................................................................................. 38 STUDENTS ................................................................................................................ 38 POLICY DEVELOPMENTS ......................................................................................... 40 APPENDICES .............................................................................................................. 43 ARMENIA, KEY FACTS ............................................................................................... 43 SCIENCE AND TECHNOLOGY IN ARMENIA, TIMELINE .................................................... 47 FDI CASE: SYNOPSYS INC., UNITED STATES .............................................................. 50 MINISTRY OF ECONOMY OF THE REPUBLIC OF ARMENIA ............................................. 52 ENTERPRISE INCUBATOR FOUNDATION ...................................................................... 53 UITE, ARMENIAN IT ASSOCIATION ............................................................................. 54 METHODOLOGY ........................................................................................................ 55 INDUSTRY STATISTICS ............................................................................................... 58 COSTS OF OPERATING A SOFTWARE COMPANY IN ARMENIA ....................................... 62 ARMENIA ON THE INTERNET ....................................................................................... 63 ABBREVIATIONS ........................................................................................................ 64 ENTERPRISE INCUBATOR FOUNDATION ARMENIAN INFORMATION TECHNOLOGY SECTOR 3 FOREWORDS Armenian IT Sector Information technology has become one of the major sectors of Armenian economy contributing to the technological innovation and productivity growth in the country. IT industry, together with the telecom- munications sector, is one of the fastest expanding segments of the economy, and it has been identified by the Government of Armenia as a key area for the economic well being of our nation. With its rich scientific research traditions and highly skilled labor force, Armenia turned into a destination of choice for many global technology firms. A number of high-tech companies from Europe, Russia, and the U.S. are operating large development and R&D centers in Armenia. These centers work on cutting edge technologies and tools em- ployed by many corporations around the world to develop products and ser- vices or solve various business problems. The new comprehensive IT sector strategy adopted by the Government of Armenia in 2008 focuses on developing telecommunications and business incubation infrastructure, improving the quality and increasing the number of technical graduates, expanding support and financing mechanisms for tech- nology start-ups, as well as developing other areas important for the growth of Armenian IT industry. At the Government, we believe that the successful implementation of this strategy is the key to the transformation of Armenian IT sector into a highly competitive and recognized player among other tech- nologically advanced nations around the globe. Sincerely, Nerses Yeritsyan Minister of Economy of the Republic of Armenia 4 2009 STATE OF INDUSTRY REPORT Enterprise Incubator Foundation is a business devel- opment and incubation agency supporting technolo- gy companies in Armenia. Our objectives are to im- prove 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 infor- mation on best practices and experience, and assist Armenian firms with attracting local and foreign in- vestors. An important part of our strategy is provision of research and analyt- ical publications about Armenian IT industry. The goal of this Report is to help better understand Armenian IT sector, recognize its main needs, as well as gain insights on possible solutions to its key problems. The Report is based on our surveys of the sector conducted in 2004 through 2009. It covers key aspects of the industry including history, revenues, prod- uctivity, workforce, educational sector, policy developments, and others. Appendices section contains information about Armenia, timeline of key his- torical dates, an FDI success story, detailed statistics, as well as definitions, key assumptions, and estimation methods. The Report could not have been prepared without numerous interviews with managerial and professional staff of IT companies, faculty and students of educational institutions, representatives of development
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