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Armenia is one of the leading information technology nations among the neighboring CIS and Middle East countries. This potential was formed when Soviet Armenia has become a key science, R&D, and high-tech manufacturing location of the former USSR. At the peak of its growth in 1987, science and technology sector in Armenia employed, according to various estimates, around 100,000 specialists. The collapse of the Soviet Union, regional conflicts, and devastating earthquake in the north of the country brought enormous economic hardships to Armenia. The consequences for the high-tech sector were significant: the majority of science and R&D institutions had to curtail or shut down operations leaving thousands of people jobless. Independence of 1991 created completely new opportunities for the industry and particularly for entrepreneurs and IT professionals. Focus of the industry shifted from major manufacturing operations to the software and services segment, which has witnessed substantial growth during the last 10 years. Today, Armenian IT industry is one of the most dynamic and promising sectors of the economy. Past successes, qualified professionals, and Armenian entrepreneurial spirit position the industry to be successful in the years to come.




There are two principal stages in the development of Armenia’s technology sector: period under the Soviet rule and post-Soviet independent Armenia. During the first stage, Armenia was a major center for R&D and production in the areas of computer science and electronics. This potential has been created back in the 1950s when several major R&D and semiconductor manufacturing plants were established. These institutions operated for the Soviet Government and concentrated primarily on medium and large scale industrial and defense applications. Many organizations had in-house software development departments focusing on automation of accounting and other organizational functions. During the second stage, tech sector concentrated on outsourcing and offshore software development. During this period, potential of IT industry has been recognized by a larger number of investors, policy makers, and professionals. Armenia has become a location of choice for several multinational companies to outsource R&D, operations, and software development. Armenian Government declared support of the ICT sector as a key priority for its economic development policy.


SOVIET ARMENIA (1920 - 1990)


The roots of the industry can be traced back to the period before and during World War II when a heavy industrial expansion was underway in the USSR. This required educated technical specialists in different fields of the economy leading to the establishment of two primary educational institutions in Armenia: Yerevan State University (YSU) in 1919 and Yerevan Polytechnic Institute (currently State Engineering University of Armenia, SEUA) in 1933. Armenian Academy of Sciences (currently National Academy of Sciences, NAS) was formed in 1935. Foundation of YSU, SEUA, and NAS was a starting point in the long history of the development of science and technology in Armenia.
Era of computers and software development has begun in 1956 with the launch of Yerevan Scientific Research Institute of Mathematical Machines (YerSRIMM). The institute was specifically created by the decision of the Soviet Government to design and build electronic computers and related equipment. Already in 1959, YerSRIMM designed a first generation computer “Aragats” running on vacuum tubes; in 1961, a second generation computer “Razdan” on semiconductor elements was ready. During early 1960s, institute focused on the development of small and medium scale computers, and by the end of 1960s, it moved to the design of mainframes, automated control systems, as well as operating systems, networking and application software. YerSRIMM was the leading institution of the former USSR specialized in the development of microprogrammed computer systems “Nairi”, which received more than 40 patents and was presented at 20 international exhibitions. 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 IBM-360/370 compatible ES series of computer systems widely used in scientific and industrial applications throughout the Soviet Union. A significant achievement of YerSRIMM was a project to design a telecommunication system for the mission to the moon. In 1980s, YerSRIMM alone employed around 10,000 people, more than twice the size of the whole IT workforce today.
A number of production companies were established oriented towards R&D and manufacturing of electronics and semiconductor devices. “Transistor” semiconductor R&D and manufacturing plant (1958) was a USSR leader in the production of transistors and amplifier diodes. In 1964-65, “Sirius” radioelectronics plant making radio-electronic 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 of integrated circuits and other products based on silicon thin film technology. In 1986, Ashtarak semiconductor and electronics manufacturing plant was constructed with 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) was built in 1988 to make printed circuit boards and integrated circuits. After the liberalization of the Soviet economy in late 1980s, a number of new firms have been created to provide system integration and custom software development services. These companies focused mostly on services to the domestic market with very few of them doing business with foreign clients. Major areas of specialization at the time were accounting and financial applications targeted at the local customers, hardware assembly and sale, and some outsourcing services. The first private IT 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 considered a leading center of electronics and information technologies of the Soviet Union.




On September 21, 1991 Armenia declared independence from the Soviet Union.
Break-up of USSR and start of the era of personal computers led to the collapse of the Armenian technology sector that for many years has been concentrated primarily on large-scale manufacturing and R&D. The fact that major client of the industry - the giant Soviet military-industry complex - was no longer available exerted great pressure on the industry to shift its focus from large-scale military applications to market and customer driven solutions and services. Thus, gradually new companies have evolved to fill emerging opportunities locally and in foreign markets. The potential created during previous years was the major force, which enabled entrepreneurs and investors to start new business ventures in the fields of high tech and IT.
In 1990s, a new age in the industry development started when several U.S.-based software businesses opened branches in Yerevan including Boomerang Software (internet applications), Credence Systems (semiconductor design-to-test 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 memory IP), and others. Diaspora played a key role in the formation of Armenia’s fledgling software industry and was the primary factor behind the early establishments of many foreign companies in Armenia. 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 unprecedented growth of the worldwide IT industry. The potential of Armenia’s IT industry 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 pursue careers in the technology fields.
Existing strong scientific and educational base formulated the significant success of the semiconductor design industry, which has grown into a large revenue generating segment within the IT industry and attracted a number of large foreign direct investments. In 2000, U.S. 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. One of the key initiatives of the company was the formation of a specialized training center in cooperation with SEUA. At the center, students have an opportunity to receive high-quality engineering practice in the design of integrated circuits, related software and components. Armenia’s considerable expertise in the field of chip design attracted Synopsys Inc., a global leader in EDA and VLSI design. The company acquired Armenian operations of LEDA Systems and Monterey Arset (systems on a chip) in 2004 and HPL Technologies in 2005. Currently, Synopsys is the largest software firm in Armenia employing more than 400 professionals. Following the success of Synopsys and Virage Logic in Armenia, Mentor Graphics Inc. established a presence in Yerevan through the acquisition in May 2008 of Ponte Solutions Inc, a California-based developer of solutions for the manufacture and design of semiconductors with a major R&D center in Armenia. 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 tested equipment and develops virtual instrumentation software employed by engineers worldwide to design solutions for a variety of industries such as aerospace, automotive, communications, electronics, energy, industrial measurement and control, life sciences, semiconductors, and others. Today, NI Armenia is offering conceptual solutions for engineering firms engaged in the development of products and turn-key solutions for different industries, including aerospace.
In early 2000s, more foreign businesses launched development locations attracted by highly qualified labor force and competitive costs: CQG (analytics software and trading solutions), EPAM Systems (offshore software development), Lycos Europe (pan-European online network), Luxoft (software development and outsourcing), and others. Such major brands as Alcatel, Siemens AG, Microsoft Corporation, and Sun Microsystems Inc. operate representative offices in Armenia and are involved in various industry specific and educational initiatives. 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 is co-financed through the USAID/Armenia’s Global Development Alliance initiative, which supports public-private programs focused on democracy, economic growth, workforce development, education, and environmental issues.
Growing importance of IT industry led the Government of Armenia to declare ICT as one of the priority sectors of Armenian economy in 2000. Other key initiatives in the policy field include preparation of Armenia’s ICT Master Strategy and formation of Information Technologies Development Support Council (ITDSC) in 2001 and start 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 adopted a new industry development strategy focused on infrastructure, workforce, education, venture financing, e-society, and other areas.

In 2010, memoranda of partnership were signed by the Ministry of Economy, Ministry of Education and Science, Intel, Hewlett-Packard, EIF and Unicomp CJSC for the implementation of Teachers PC and Classmate PC pilot projects in Armenia. In 2012, the Government of Armenia, USAID, National Instruments (NI), State Engineering University of Armenia (SEUA) and Enterprise Incubator Foundation (EIF) jointly started the project of establishment of the Armenian National Engineering Lab (ANEL). The main goal of the Project is to meet the demand of the engineering industry in quality specialists and graduates. Armenian IT/High-Tech Representative office was officially launched in December, 2012, at Plug&Play Tech Center in Silicon Valley, California. The office will operate as a hub to foster the development of sales and investment opportunities for Armenian IT and high-tech companies in the US. In 2012, the first free economic zone (FEZ) was established in Armenia pursuing the goal to contribute to the increase in export volumes and creation of new jobs, as well as ensure sustainable economic development through attracting foreign direct investments and introducing advanced technologies. In 2013 Memorandum of Understanding was signed between the Government of Armenia and IBM on cooperation in sphere of education and R&D, specifically establishment of Innovative Solutions and Technologies Center. In December 2014 another Memorandum of Understanding was signed between the Government of Armenia and IBM on cooperation in the social services sector, including implementation of IBM Curam technology in Armenia, as well as establishment of Center of Excellence in Social Services.