During the last 10 years, the computer-related field in Armenia, excluding internet service providers, has grown at a compound annual rate of 22 percent. At the end of 2015, the number of computer services-related companies was approximately 450. About 13 percent of these companies operate in the field of high technology, while the rest are Information Technology (IT) companies. The revenues generated by the software and services sectors as well as the internet service providers were 4.3 percent of Armenia’s Gross Domestic Product (GDP) in 2014, and increased to 5 percent in 2015.
One of the reasons for this fast growth has been the availability of relatively cheap and competitive human resources, which has attracted foreign IT companies to establish branches and operations in Armenia. IT/high-tech is a high value-added sector, and increasing jobs in this high-paid sector will have a positive effect for the economy as a whole.
Armenia has a competitive workforce in comparison to the international market with a relatively favorable trade environment and regulations. Quality education is a key ingredient for a thriving IT sector in Armenia.
Growth of the IT Sector
The outsourcing model has attracted the attention of international companies, which has led to foreign investment during the last several years. However, the IT sector in Armenia is currently undergoing a major transformation. Companies are trying to shift from the outsourcing model to a more value-added and higher margin product development. This model requires a higher level of knowledge as well as new skills, such as sales and entrepreneurship.
The presence of international companies, which bring specific work and development culture into the country, has had its impact on the move toward value-added activities. This shift could potentially cause more growth. As the business model changes, and in order for the IT and high-tech sectors to stay competitive, the education sector needs to adapt to the new challenges.
The increasing demand for IT skills is a global trend, but in Armenia it is more constraining due to the small size of the labor force. The shortage of skilled workers is increasing as the industry is becoming more sophisticated. This lack of skilled IT workforce is a key factor that hinders sector growth.
In 2014, approximately 11,500 people were employed in the IT sector, which accounted for about 10 percent growth compared to 2013. In 2015, the number was 15,000. The number of annual graduates with IT specialization is higher than the annual demand, but only 45 percent of graduates are considered qualified by various companies.
Synopsys is the largest software company in Armenia with 650 employees, and its operation in Armenia is the largest office outside the United States. Synopsys entered the Armenian market in 2004, after it acquired Monterey Arset and Leda Design. Later, Synopsys enlarged its presence in Armenia by acquiring HPLA in 2005 and Virage Logic in 2010.
The limited supply of qualified labor is inflating salaries; however, current salaries are still considered competitive. In 2014, the monthly salary of IT employees was between $300 and $3,500, whereas the average monthly salary in Armenia in early 2015 was about $341, which is almost equal to the lower range of the average IT sector salary. The monthly salary of some well-qualified and knowledgeable specialists can reach up to $4,500.
Average labor productivity in the IT field is almost five times higher than the general average of the economy. Productivity is growing as well, which is a sign of the sector’s maturity.
Universities with Computer Training
Approximately 8,500 students were enrolled in computer-related studies in the 2013-14 academic year, which is about 10 percent of the total student population. In comparison, approximately 20 percent of students were in the fields of economics and business management.
Annually, 1,700 well-paid jobs are created in the IT sector and there are about 2,000 graduates from various universities, hence only the best ones are hired for these openings. The number of graduates in IT-related fields has been stable since 2010, even though the total number of students is declining due to low birth rate and emigration. Because not all of the graduates are qualified to work in IT companies, there were approximately 2,000 unfiled positions in the sector in late 2015—when there was double-digit unemployment in Armenia.
There are five universities that have most of the students in the field of computer-related studies. There are also several smaller schools with limited capacities and infrastructure. The five large universities are the State Engineering University of Armenia, Yerevan State University, Russian-Armenian (Slavonic) University, American University of Armenia, and European Regional Academy.
Yerevan State University (YSU)
YSU was established in 1919 and is the largest university in Armenia with more than 12,000 students. The university offers programs in different specializations in a wide variety of areas, including economics, history, linguistics, legal studies, mathematics, biology, and physics. The Mathematics and Physics Department, which was established in 1924, and the Informatics and Cybernetics Departments, which started in 1971, provide courses in the field of IT.
The Information Technologies Educational and Research Center was established in 2007 to provide programs in tutoring/mentoring, continuous education, and scientific research, as well as development and installation of information systems. The center also offers online and distance learning courses.
State Engineering University of Armenia (SEUA)
This university was established in 1933 (formerly Yerevan Polytechnic Institute) and offers degrees in engineering and science. The main campus is in Yerevan with branches in several other cities. Presently, approximately 10,000 students are enrolled. SEUA offers courses in computer systems, design and installation of networks, artificial intelligence, study and development of dynamic systems, analyses and synthesis of management systems, microelectronics, and microchips techniques.
American University of Armenia (AUA)
AUA was established in 1991 and initially offered only graduate programs in accordance to U.S. educational standards. In 2013, AUA started providing undergraduate programs including computer science. Presently there are 1,000 undergraduate and 500 graduate students.
Russian-Armenian (Slavonic) University
The Slavonic University was founded in 1997. Programs include mathematics and math modeling, software development, electronics, information and telecommunication, and chip design, in addition to non-computer related programs. Presently about 425 students are enrolled in various programs.
European Regional Academy
The European Union established this academy in 2001 and offers computer programming and IT business management. It also has programs in three foreign languages: English, German, and French. Currently, 250 students are enrolled in various programs.
Quality of Education
Despite the recent reforms in the education system, the instructional methods that are currently used in the universities do not fully satisfy the demands of the IT sector for highly qualified specialists. Funding is the main hurdle for improving the quality of education in universities. The government provides limited funds to the universities, and these funds are not adequate. Universities are not able to raise tuitions either, as most of the students cannot afford to pay even the existing tuitions.
Another issue that effects education is the low faculty salaries and the aging staff. Salaries are especially low in the larger universities, such as SEUA and YSU, due to higher overhead costs and laboratory expenses. Other issues include the lack of textbooks and specialized literature, as well as inherent difficulties associated with private sector cooperation.
There is hardly any financing from private donors for various educational programs. Only a small number of companies have established joint programs with the universities, such as R&D projects or competitions for students.
The World Economic Forum has ranked 140 countries for 2015-16 and, according to their rankings, primary education in Armenia is in 68th place, with higher education in 72nd place. The quality of math and science education is ranked 47th.
Training by Private Companies
Because the current educational system is not able to produce graduates who possess the required skills, some companies have established in-house training programs to prepare their future employees. Some students attend these training programs right after high school without attending any additional formal training at a university.
Many companies provide unpaid internships for new graduates. It is a common practice to recruit interns and train them to take part in small projects at a company, then select the best ones for permanent positions.
The objective of such trainings is to prepare entry-level specialists for Armenia’s IT companies. These types of educational establishments do not charge any tuition but have limited openings and select only the best candidates. Class sizes are kept small to allow for quality training and one-to-one interactions with instructors. After graduation from the company training center, the best graduates generally receive job offers; the rest have no legal obligations to the training company and are free to find employment in other IT companies.
Specialized company labs have been established and financed in the universities by private companies to provide training to students. These labs are mainly aimed at preparing specialists for the investing company. Due to the more certain future employment possibilities under this model, company labs are in high demand among students. The best-known lab is the one established by Synopsys Armenia at SEUA. A disadvantage of such labs is that they provide specific training geared to the needs of the company, which may not be applicable for other companies.
While training by private companies generates employees with basic IT skills, the ever-increasing sophistication of IT products will require a strong multi-disciplinary educational background that can be provided only by universities.
Other Training Facilities
The Armenian National Engineering Laboratories (ANEL) was founded in 2013 as a joint effort of the government of Armenia, USAID, National Instruments, the State Engineering University of Armenia, and Enterprise Incubator Foundation. It is a center of excellence that hosts 30 state-of-the-art education and research laboratories on the campus of the State Engineering University. The main goal of the ANEL is to meet the demands of the engineering industry by providing quality specialists.
There are also training centers supported by government/donor and international corporations, such as the Microsoft Innovation Center, the Armenian-Indian IT Center of Excellence, and mLab ECA.
Faculty of Universities
The average gross salary of a full-time professor in the large universities ranges between $300 and $500 per month, whereas the average IT sector salaries could potentially be 10 times higher. This imbalance in compensation makes it hard for universities to hire well-qualified specialists for various teaching posts.
Less than one-third of university lecturers have ever been employed in the sector or have hands-on experience in the industry. This, in combination with the high average age, implies that the teaching methodology is rather theoretical. Younger faculty members mainly work part-time in the university, as they are also employed in private companies. Part-time faculty members that work in the field could teach the latest techniques and innovations to the students, but they may not engage in academic research due to a lack of academic career priority, which could affect teaching quality.