The presented table demonstrates that the IT sector registered 2.8% growth in 2020 in comparison to 2019. However, production in 2020 decreased by 40.3% compared to the previous year, trade decreased by 20%, while services increased by 8.1%.
It should also be noted that Armenia's software and services sector is quite young. Most companies, almost 95%, were founded in 2000-2018. The first private, local programming company was founded in 1987. The first branch of a foreign company was opened in Yerevan five years later. The technology sector experienced a rather difficult transition period in 1991-1997, when regional conflicts, a declining economy and the emigration of high-level professionals significantly hampered the overall recovery of the economy. In 1998, there were about 35 to 40 programming companies and Internet providers in Armenia, employing, according to various estimates, about 1000 specialists. The number of specialists working in the field in 1998 was significantly lower than in 1987, when the Yerevan Mathematical Machines Research Institute alone had up to 10,000 employees. Over the past eleven years, the sector has seen a sharp increase in the number of both local start-ups and branches of foreign companies. In 2017-2018, 150 new companies were established (18.8% of existing companies). During the same period, the number of jobs in the ICT sphere increased by about 4,200.
In 2020, the number of people employed in the IT sector was 14,755, of which only 95 were employed in the public sector, while 14,680 were employed in the private sector. For comparison, in January-March 2021, the number of IT employees increased by 4,202—more than 28%. It should also be noted that the IT sector is considered one of the highest paid sectors in the Armenian labor market. In 2020, the average salary for IT professionals was 411,927 AMD in the public sector and 638,756 AMD in the private sector.
Having a favorable environment for foreign direct investment in the ICT sector, Armenia has the following competitive advantages over other countries in the region:
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Ability to carry out scientific research and experimental work in accordance with international standards
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High quality and talented specialists
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University foundation programs in IT and other related specialties, low-cost labor force with a high level of competitiveness and low operating costs
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Tangible support provided by the state to the sector and the willingness to improve the investment field
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Sustainable and continuous development of the IT sector
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Presence of a strong and prosperous diaspora in Europe and North America
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Extensive experience in cooperating with large transnational companies
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A legal framework for the protection of intellectual property that meets the best international standards
The situation has significantly improved for local companies during the last five years: the number of employees has increased, venture investments have begun to flow, their technical skills and knowledge of the market have been improved and, moreover, they are implementing more complex and highly-valued projects. Armenian companies have become attractive for foreign venture investors.
Almost 73% of IT company representatives identify the lack of highly-qualified specialists as a problem, and 64.2% find attracting a highly-qualified labor force as problematic. The issue may be due to the continuous decrease in the number of students with technical specializations, along with the growth in demand for technical labor in the market.
According to 44% of IT companies, difficult access to financial resources and lack of support from state and non-governmental organizations hinders the growth of the software and services sphere.
About 23% of Armenian IT companies have certain problems entering the international market. At the heart of this problem is the fact that many international partners are unaware of Armenia or simply do not trust a representative from a low- or middle-income country.
The number of Armenian ICT companies developing their own products, and investing in scientific research and experimental work is growing year by year, which is a positive indicator that the ICT sector in Armenia is changing from an outsourcing platform for foreign companies to a center of technological development.
41% of operating companies generate revenue from their own products and services. In large companies, the amount of revenue from innovative activities is significantly correlated with the number of employees at the company; that is, the larger the company, the greater the amount of investment in scientific research and experimental work.
The number of local companies investing in scientific research has increased from 85% to 87%, which is due to the increase in start- up companies in the local tech sector.
Almost 63% of the 15,239 ICT technicians work in the software and services sector, while the rest of the technical workforce works in the telecommunications sector. The majority of ICT professionals in Armenia are male (68%). The average work experience of directors of IT companies is 13.4 years for local companies and 18.6 years for foreign companies. Local and foreign companies employ 52.5% and 47.5% of the IT workforce, respectively. This ratio was 50/50 in 2008.
Armenia is still considered a low-cost country for outsourced programming activities, with remuneration on par with major IT outsourcing countries such as India, Russia, Israel, Ireland, China and Central Europe.
In 2020, the average nominal monthly salary of IT workers was 646,563 AMD (gross), which is the highest in the Armenian labor market. It is noteworthy that, even during the difficult economic conditions of 2020, the salaries of employees in this sector increased by 7.1% on average. Research shows that the salary of technicians is conditioned not by their educational level, but by work experience.
