Current Situation and Challenges of the IT Workforce

The positive IT climate in Armenia is the reason for the software boom which we have seen recently. The software industry has seen steady growth over the last several years. IT is among the fastest growing industries and benefits from a favorable environment, high quality infrastructure, competitive prices and a skilled IT workforce.

Software development and outsourcing is a major part of Armenia’s IT sector totaling more than $550 million turnover in 2016. Around two thirds of Armenian IT output is exported to over 20 countries. There are more than 450 IT companies (over 95 percent based in Yerevan) which are employing more than 10 thousand software developers and engineers. Additionally, salaries for software engineers and developers are considered to be one of the highest in Armenia, compared to other industries.

There are more and more local and foreign startups, IT companies with global influence and large IT outsourcing companies; they all rely on the exceptional talent and professionalism of Armenian IT specialists.

In 2015-2016 alone, 80+ new companies were established, creating nearly 800 new jobs in the IT industry. Besides the new ones, existing IT companies also expanded their operations and created around 600 new jobs. On one hand, these trends are good but on the other hand, they are creating conditions for fierce competition for finding and keeping talent. For startups or medium sized IT companies, the competition to find a top-notch software developers is really challenging. The best developers and even graduates are snatched up by large Armenian companies.

According to a survey prepared by the Enterprise Incubator Foundation, 70 percent of respondents emphasized the challenges related to attracting a highly qualified workforce; 59 percent said it was a major impeding factor for growth.  A technical workforce with superior qualifications and experience is clearly a critical need.

 

Will the Armenian IT sector need thousands of software developers and engineers?

Currently there are more than 10 thousand software developers and engineers. Tripling the number of software developers and engineers means increasing it by 20 thousand. Will there be such a big demand for software developers in Armenia in the next 7-8 years? In my humble opinion there definitely will be for two reasons:

 

- The demand for software developers and engineers will continue to grow globally. For instance, in the U.S. and Europe alone, there will be 2.5 million positions for software developers which will not be covered by corresponding professionals. This creates big opportunities for Armenia to attract Western companies to establish their software development offices and R&D centers in Armenia. Western companies are starting to see that Armenia is a good option to supplement their Indian, Chinese and Israeli offices. Office rents are cheap and interconnection of Armenia with CIS (Commonwealth of Independent States) countries gives those companies a good base to work in the CIS market.

- Additionally, there is a constant demand for 2,000 software developers and engineers in Armenia which, over the past few years, has not been decreasing. There are two main reasons for this gap: the industry is growing rapidly and the quality and the quantity of students produced by the education system is not enough to meet the demand.

 

 

Tripling the number of software engineers is not an easy job, but in 7-8 years it is doable if all stakeholders contribute towards this.

If there are 30 thousand software developers in Armenia, this will create a competitive advantage for Armenia regionally. Also a country where 1 percent of the population is in the IT sector is attractive for overseas companies to take risks and open their engineering offices in Yerevan or throughout Armenia, as they will know that they are meeting the challenge to find talent and grow their teams. Western companies will bring in a new working culture and approaches to product development, design and customer service. This will definitely impact positively on non-technical directions and the startup culture.

Increasing the number of software engineers will positively impact the IT industry and will have a spillover effect elsewhere:

 

- Social impact:  Imagine in 7-8 years we triple the number of software developers and engineers; this means that 30 thousand people will be earning an average $1,000 monthly salary. More people with high income will definitely in the long run impact the transformation towards high quality education, cultural environment, etc.

- Economic impact:  As per current statistics, 10 thousand software developers and engineers produce more than $0.5 billion annual turnover. This means that 30 thousand will produce more than $1.5 billion turnover. This money in the Armenian economy will impact other areas indirectly. Additionally, those companies will pay approximately $100 million income tax to the state budget annually.

- More software developers and engineers in the market means a number of experienced ones will continue their journey in very high demand niches (blockchain, AI/ML). Focusing on developing several hundred qualified workers in these high demand niche fields can put Armenia on the map, not only in the region but globally.

 

What should be done to increase the supply of software engineers?

It’s clear that fundamental changes need to be realized by all stakeholders - government and the private sector. In general there are two main streams to triple the number of software developers and engineers by 2025. Both streams should be carried out in parallel to increase the number of engineers in Armenia. 

 

- Internal – transforming the education system fundamentally. This requires a separate analysis, therefore will not be covered in detail here.

- External – attracting an IT workforce from overseas, especially regional countries: Iran, Moldova, Georgia, Russia, Belarus, etc.

 

Education is a long-term game plan and many things have to be reformed in all layers of the education system over the long haul. Some important changes/actions worth mentioning are: change of STEM curriculum, education of a new generation of tech teachers/professors, bringing industry problems to academia to solve, etc. But if our target is that high and ambitious (tripling the number of software developers and engineers by 2025), some immediate actions, new pilot programs and experiments, need to be implemented now - yes in 2017, rather than next year or the year after. Assuming that students should have basic skills when they are accepted to university, one of the immediate actions would be introducing computer science courses in 10-20 schools as a pilot project. Here the government and Ministry of Education should have an incentivising role. It is important to encourage youngsters to be interested in IT, have more centers such as Tumo and schools such as Quantum, AYB School, Physics and Mathematics school etc. and do lots of “Hour of Code” events. In 2014-2016, MIC Armenia in partnership with AYB School has already given 1,000 school children an opportunity to become acquainted with the basics of computer science during those “Hour of Code” events.

Another immediate action that could be done by bypassing bureaucracy systems are:

a) establishment of non-profit initiatives aiming to increase interest in coding among young people (similar to code.org, whose goal is to get every public school in the U.S. to teach computer science);
b) establishment of new coding schools, vocational educational institutions, modern hackerspaces teaching tech/engineering;
c) sponsoring coding bootcamps like MIC Armenia’s coding bootcamp, to extend their operations. For instance each year MIC Armenia produces over 150 skilled junior developers through coding bootcamps, which has an almost 100 percent employability rate. But this number is very insignificant to meet industry needs in a few years; it is a small drop of water in the ocean.

 

The argument of “education is not supplying the necessary IT workforce” assumes that there should be a strong cooperation between industry and academia. But in Armenia there is no debate between the public and private sector on what is the goal of public education at the university level. In my opinion, the private sector is mostly ready to cooperate. But the education system is so slow that the private sector mostly avoids dealing with educational institutions. Some of them solve their business problems, but this cannot be scalable and produce thousands of software engineers annually.

Another challenge regarding education is the shortage of skilled teachers and professors. To solve the shortage of teachers there could be different opportunities such as bringing the collective intelligence and resources of the Internet into the classroom. Maybe some schools are behind, but surely there are forward looking schools that have dedicated time and other resources and are willing to use technologies to enhance their teachers’ skillset. Plus, let’s not forget that two Armenian startups - Sololearn and Codefights - are globally focused on tech education; schools can leverage their knowledge and experience to “upgrade” their teachers’ skills.

Immigration: This is the other stream to increase the number of software developers and engineers. There is a large and qualified pool of talent in the region (Moldova, Iran, Russia, Belarus, etc.) which could be attracted to Armenia. So it should be positioned as a destination country for labor and business migration. The government should create an attractive environment for software engineers from the region to come to Armenia and also provide tax incentives for companies to hire engineers from abroad. If we look at the Estonian example, the country is relaxing its immigration rules, making it super-easy to get residency and work permits. This makes it easy for talent from the region to move and work in Estonian companies. On the other hand this is making it easier for startups to attract foreign talent.

Here in Armenia there could be income tax incentives for employees and tax relaxations for employers for each overseas employee. Or granting temporary residence permit for employment could become more easier. Or startups bringing their engineering teams from overseas to Armenia could be granted tax benefits. Here we have much to learn from Estonia, this small country that has become a test-bed for new innovative technologies and a magnet for software engineers. Besides this, another bonus effect is that a multicultural environment usually brings diversity to the employment culture.

 

A historic opportunity for rapid economic growth

 The Armenian IT success story could not be possible without strategic moves undertaken both by the public and private sectors - highly developed IT infrastructure, ease of doing business - all these factors influenced the IT industry’s growth and prosperity. The biggest advantage of Armenia is its hardworking software developers, engineers and mathematical thinking in our DNA.

Armenian developers are known by the quality of their solutions and their ability to deliver on time and on budget. So taking into account the trends on the growing need for talent, there will be a capacity for 30 thousand software developers to be employed in the sector. It will have various positive social and economic impacts. And to address the shortage of software developers and engineers we really don't have time to have a perfect plan. We should experiment, be ready to fail and learn and move on.

Currently we are in the 4th Industrial Revolution which enables Armenia to have an unbelievable opportunity of rapid economic growth, in spite of the fact that we don’t have many natural resources and are in a “bad” geographical position. And yes, having 30 thousand software developers and engineers in Armenia will significantly accelerate the economic growth of the country and will lead to the ARMENIAN DREAM of building the “Silicon Mountains.” 

 

 

 

 


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