ARMENIA’S IT INDUSTRY: Seeking the Economic Revolution

by Eliana Berger

At the Mergelyan Cluster, somewhere in the north of Yerevan, old Soviet Union and modern Armenia suddenly seem just a corridor away from each other.

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Mergelyan Cluster, halfway to the right, photo: Eliana Berger

On the fourth floor, the hallway to the right looks like it has fallen out of time: walls and ground are covered with stone, tiles form dark patterns, the doors look heavy. Only half of the lamps are working.

The hallway to the left, in contrast, is painted bright white. The doors are semi-transparent, and one cannot but notice the words ‘Think Big’ written in bold red letters across the wall. Somewhere in the distance, behind a door that leads to a communal kitchen, people are playing table soccer.

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Mergelyan Cluster, halfway to the left, photo: Eliana Berger

Many years ago, the building was used by the Soviet regime for IT research. These days, start-ups and IT organisations have moved in. It is one of those places where Armenia, which was once labelled the ‘Silicon Valley of the Soviet Union’, is working on reclaiming its former status in the IT industry.

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Flora Babajanyan at Earlyone office, photo: Eliana Berger

“In Soviet times, many big innovations – like colour television – were made by Armenians,” says Flora Babajanyan. “I’m happy to live in an era when IT is supported to grow again.” Babajanyan is one of the co-founders of the Armenian start-up Earlyone, which has developed a customer flow management system designed to eliminate queues. More than 600 service centres in five CIS-countries use the application, among them many banks and governmental institutions. At the moment, Earlyone employs 30 people. “The whole IT sector is growing,” Babajanyan says. “It really is. And the new Minister of the High-Tech Industry puts in a lot of effort to help start-ups.”

For Armenia the focus on the IT sector seems to be a natural choice; like the one way to make the best of the difficult geographic and geopolitical environment the country has to deal with. In the Ministry of Foreign Affairs, Tigran Samvelyan, Head of the European Department, has a clear view on that: “Armenia‘s resources are limited. We have no oil, no gas, no whatsoever. The borders with two of our neighbouring countries – Turkey and Azerbaijan – are closed. IT is our window to the world.” Information Technology has one important advantage over physical goods: it doesn’t have to cross physical borders.

At the moment, around 15.000 to 20.000 Armenians are employed in the IT sector. According to the American market intelligence provider “Export.gov”, the ICT sector – information and communication technology – has maintained an annual ten percent growth rate through 2017. And now, in 2019, more than one year after the Velvet Revolution that brought the opposition to power, the new government seems to be putting more hope in this field than ever. Even though IT has been an important growth factor in Armenia for some time now (Prime Minister Nikol Pashinyan says that the sector has grown five times over the last seven years), it could now play an even more crucial role in the country’s future development. “After the political revolution, we are now seeking an economic revolution,” says Samvelyan.

For a long time, many ambitious, well-educated Armenians have been leaving the country – to rebuild their lives in another country, somewhere they see more opportunities for themselves. But since the revolution, Samvelyan says, there are more people coming back than leaving. “We need to make sure that the people and the country benefit from it. We need an economic boom. Which we don’t yet have.”

In a country that was long dominated by business oligarchs, small and medium enterprises are hoped to be “the main engine of the economy to develop,” as Tigran Samvelyan puts it. The IT-solutions have to be a part of that: “We are trying to put this e-approach everywhere,” he stresses.

There is a Ministry of High-Tech Industry in the new government. It is working together with private partners to build an Engineering City in Yerevan aimed to facilitate and accelerate the development of complex engineering solutions. This autumn, the capital of Armenia hosted the World Congress on Information Technology (WCIT), one of the largest ICT events in the world, with speakers like the Reddit co-founder Alexis Ohanian and celebrity Kim Kardashian West. The government has also renewed the tax privileges for start-ups: for an initial period, they pay no profit tax and only 10 percent income tax.

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Haik Varossian at ARize office, photo: Eliana Berger

“This is heaven, compared to other countries,” says Haik Varossian. He is a co-founder of the Yerevan-based “ARize” Augmented Reality Platform. The start-up provides a place where people can use augmented reality without code or programming. Once people download the application, they can, for example, take a picture of their business card and connect it to a video file. Since its foundation in 2017, the start-up has been supported by many different Armenian and EU programmes. The founders have participated in start-up weeks at Lake Sevan and in Berlin, in accelerator programmes that provide funding. At the moment, the six ARize employees work in a co-working space at the ISTC Foundation that consults and promotes start-ups.

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Tumo Center for Creative Technologies in Yerevan, photo: Eliana Berger

“Engineering is quite strong in the Armenian environment. We have tech guys. But for a long time we had no idea how to sell our products,” Varossian says. He is grateful for the support ARize was able to draw from, just like Babajanyan. Armenia is not the only post-Soviet country trying to lead in the IT sector – but for the people in the industry the numbers speak for themselves. “If you want to compare us to Estonia, we’re not there yet. But the development here is happening much faster than elsewhere.”

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Vahagn Bchtikian from Tumo Center, photo: Eliana Berger

At the Tumo Center for Creative Technologies in Yerevan, Vahagn Bchtikian agrees: “There are still many things that don’t exist in Armenia yet,” he says, “things that have existed outside the country for a long time. So just slight innovation can change a lot around here.”

And it’s not only the grown-ups that are encouraged to work on these innovations: the government has announced that by the end of 2019 half of the Armenian schools are expected to have IT laboratories. There are Digi-camps for children and places where they can pitch their ideas. The most famous for their educational impact, though, are the Tumo Centers that offer free of charge educational programmes to children. They can study robotics there, for example, or game developing, programming and drawing. They play music or learn how to create robots that filter water. Armenia has four Tumo Centers today. All in all, there are 19,000 Tumo-students, though the vast majority of them (15,000) attends the facility in Yerevan. The IT industry is heavily focused on the capital.

“Our students are way more competitive in the job market,” says Bchtikian, who is 21, plays in one of the Tumo bands and is already a start-up founder himself. “Here they get a general professional base before starting their career.”

The non-profit venture in Yerevan was founded by Sam and Sylva Simonian back in 2011. It has grown into a franchise: Paris and Beirut have already opened their own centers. Tirana will follow soon, and there are talks with the German Kreditanstalt für Wiederaufbau (KfW) to open a facility in Germany. The Armenian IT-knowledge is spreading out – over the physical borders. “The first and biggest resource we have is our minds. And we have learned how to use it,” says Flora Babajanyan. “We’re trying to change the way people think about Armenia. So it doesn’t look so little on the map.”

Foto Eliana BergerEliana Berger is a business editor at “Kölner Stadt-Anzeiger”, where she, among other topics, covers commerce and employment issues. She has also co-founded the “42 Magazine“, a trilingual interview journal. She has studied politics, sociology and psychology at the University of Bonn.

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