Armenian IT sector shift from attacking to defending
IT companies in Armenia have suffered greatly because of the situation on the currency market: the devaluation of the dollar has deprived them of almost all the advantages they once had. In recent months, most companies have incurred losses of 20-25 percent, some have closed down altogether, and those that are still holding on are facing serious problems today.
IT and economic growth in Armenia
The IT sector, according to its representatives, has played a big role in the economic growth registered in Armenia this year.
“If Armenia hadn’t positioned itself as an IT country, an IT hub, so many companies from Russia, Belarus and Ukraine wouldn’t have decided to move here, and it was thanks to them that the economy registered such growth,” DataArt Director Arsen Baghdasaryan told journalists.
But today, when the IT sphere is facing serious challenges because of AMD rise in price, the government doesn’t take necessary measures to help the sphere, which is so important for the development of the country.
According to Baghdasaryan, representatives of the IT sphere started talking about the problems that they faced 5 months ago, but the government did nothing. During those 5 months the situation has only worsened: most of the companies started working with losses, closed down or started to reduce their staff.
Even the only project that was supposed to somehow help IT companies was not implemented: it was planned to give profit taxes back for September-December to IT companies. However, so far the project has not been submitted to the government.
Armenian start-ups will suffer in the coming years
The future of economic growth in Armenia has a lot to do with startups developing and attracting investment. According to Rem Darbinyan, founder of SMART CLICK, the current situation can hurt start-ups as well, with all the ensuing consequences.
“At the end of the 20th century, traditional businesses were in the top 10 in the United States in terms of capitalization, and in the last ten years, technology organizations – Google, Facebook, etc. – have taken their place. Tech companies are growing very fast because they are constantly attracting investment from venture capital firms.
Usually startups raise enough money to last 1-2 years. But it turns out that Armenian startups, which already received investments and had a good idea how much they will grow and where they will be in 2 years, now face a problem, because due to the fall of dollar there will be 20 percent less money in the payroll. This will result in either the startups not reaching their goals, or they will close, or their price will drop in the market and they won’t be able to attract new investment. This is a big problem, because if we look at the technology market, we don’t have a lot of opportunities for horizontal growth. Armenian startups will suffer a lot in the coming years because of the falling dollar, and it will be very difficult to increase the number of startups in Armenia,” the specialist said.
The IT sector has shifted from attack to defense
When the situation in the country and the financial market was more favorable, IT companies in Armenia grew, expanded and gained new markets and attracted new specialists, including newcomers. Now, as the founding director of Alexan Realty, Armen Adamyan, noted, the policy of these companies has changed: instead of playing actively, they switched to defense.
“For example, we expanded in Gyumri, Stepanavan. Last year we worked with about 40 start-up professionals, some of whom stayed with us, while some went to other companies. And now we have moved to a defensive and passive policy, we cannot attract new people,” he said.
Adamyan reminded that some companies are on the verge of closure today. There are companies which are still hanging on by their reserves, but if the problematic period will last long, their reserves will not be enough. And shutting down such companies would do great damage to the country’s economy.
“It’s your own fault”
IT companies are sometimes blamed for the problems they face.
“They tell us – you didn’t assess your risks. But how long can even those companies that have assessed their risks survive in the face of 25% losses? The reserves of these companies are not eternal,” said Rem Darbinyan.
He recalled that most of Armenian IT companies work with foreign customers and are paid in foreign currency. Since the dollar-dram exchange rate has dropped by 25%, the income of these companies has dropped by the same amount.
“If we saw that the prices of goods imported from abroad were falling in Armenia, maybe we could have reduced the salaries of our employees. But with us, on the contrary, everything has gone up in price, and employees are asking to revise their salaries, because they can buy less goods today than yesterday,” Darbinyan said.
In his turn, Director of DataArt Arsen Baghdasaryan said that if the problem is not solved, many companies and specialists will simply leave the country.
“In the past, partners saw Armenia as a country of cheap labor, but over the past 10 years we have managed to prove that there are knowledgeable, problem-solving specialists in Armenia.
The salaries of IT specialists are the same in almost all countries, and the location of such a specialist does not matter, because he can work from anywhere in the world. In recent years, we have brought many companies into the tax field; now there is nothing to stop them from going back into the shadows and switching to the freelance option. Also nothing prevents them from emigrating from Armenia.”
Source: https://tech.news.am/eng/news/265/why-does-it-sector-in-armenia-shift-from-attacking-to-defending-and-what-can-governments-slowness-lead-to.html
