How Armenia and Estonia can work together in IT

Just recently, in  November 2012, Priit Turk the new Estonian ambassador to Armenia mentioned that he would “spare no efforts to develop and expand the relations” between the two countries. Estonia and Armenia maintain a cordial relationship according to Panorama.am. It just so happens that on the same day I was looking at the  Armenian-Indian Center for Excellence in ICT (AITC).

If you are not aware, AITC  was officially launched on November 7, 2011 and is a joint project of the  Governments of Armenia and India, which is implemented by Enterprise Incubator Foundation (from Armenian side) and C-DAC center (from Indian side).  The Center is located at Yerevan State University and delivers both short-term and long-term courses designed to fit a wide variety of audiences. It is a true success of  efforts to develop and expand the relations between Armenia and India. It’s mission is…

Our main purpose is to help people get better at what they do professionally.  We are helping IT professionals get to the next level by providing an extensive range of training services including highly operational open source software courses, while being in tune with their actual needs, and by always delivering on what we promise.

AITC stands as a shining and tangible example of how diplomatic and economic efforts can create can make a difference. So how does this relate back to a meeting between Estonian and Armenian diplomats you ask? Glad you asked.

First, let’s look at Estonia

Estonia has a population of  1.2 million which is smaller than Armenia’s 3.26 million and more like Yervan’s 1.12 million.  But as the chart below indicates, Estonia has done exceptionally well since independence. What is behind it’s economic success? Estonia successfully implemented liberal trade and investment laws, a balanced state budget and joined the euro zone in January 2011; much credit to economic growth has been the embrace of technology and it’s start-up business culture.  And, according to the Wall Street Journal, Estonia produces more start-ups per head of population than any other country in Europe.

Source: Gapminder/World Bank

What is it about this former Soviet state, with an obscure language and unenviable weather, that produces so many start-ups? Of the 20 finalists in January’s Seedcamp, an entrepreneur-mentoring program, four were Estonian—including the eventual winner, GrabCAD, a social network for engineers which has 10% of the world’s mechanical engineers registered. According to Antti Vilpponen, CEO and cofounder of ArcticStartup, a site that follows entrepreneurship in the region, Estonia has three things in its favor: political leadership, the success of Skype, and its culture.

A big influence is Skype. The internet-telephony company (now part of Microsoft) runs on software written by four Estonians and has its headquarters in the capital, Tallinn. Daniel Vaarik, a local tech guru, says the founders “look like rock stars” to Estonians and inspire imitation. Estonia is also home to the biggest development center of Playtech, the world’s largest publicly traded maker of gambling software.

It’s difficult to estimate how many start-ups are currently in operation in Estonia due to a fairly rapid expansion in their numbers in the last few years - according to Enterprise Estonia, 10 to 20 new tech start-up companies are set up every year.  The most successful start-ups in Estonia are online service providers, or those who work in the fields of social networks and software development (although there are many examples of companies that have chosen a different path to success).

In the social field there’s Zerply, a business network for creative professionals, and others like Techstars and Seedcamp, and have raised millions of dollars in Silicon Valley funding, including an investment from Yammer founder and serial investor David Sacks.

In software development, there’s also ZeroTurnaround, a rare example of a self-funded Estonian start-up that has broken through on the global scale. The company provides time-saving tools for Java programmers, and its customers include Bank of America, American Airlines, Lufthansa, Oracle, IBM and others.

The other big name on the scene is Pipedrive, which creates business management software and has customers in over 70 countries. One of the pioneers of Estonian start-ups, Erply, is also gaining momentum globally with its software for the retail sector.

Estonia has also spawned a number of interesting online services companies, including Transferwise – which, like many other Estonian start-ups, was co-founded by a former Skype engineer – a money transfer business that has already got backing from IA Ventures and Index Ventures. Another example is Fortumo, which is focusing on mobile payment systems and has partnered with Rovio, Badoo, Digital Chocolate and others.

 How and why Estonia?

There is some other government support for would-be start-up owners: Estonia has some state-backed organizations and foundations that provide informational and financial help for entrepreneurs and start-ups such as the Estonian Development Fund and Enterprise Estonia. But so does Armenia and almost every country in the world now.

Mainly it is the culture and community. Estonia has a healthy number of start-up conferences, seminars and other related events being held regularly with the start-up community, mostly based in the capital city of Tallinn.

Among the focal points of the community is a science park next to the Tallinn University of Technology called Tehnopol, a business hub that houses over 150 technology companies; while in the city center lies Garage48 Hub, a community-led co-working space for over 20 companies.

The ultimately, answer is that just like Silicon Valley, Estonia has developed a technological Eco-system. It is not just one or two companies, but all the players working together to thrive. It is having all of the ingredients mixed together and working with each other that make it successful.

 

There is a problem in paradise

Despite its burgeoning start-up social scene, the size of the talent pool in Estonia has become an issue for new tech businesses, despite the staffing costs being relatively low compared to other European centers. While in recent years the state, universities and local IT companies have heavily promoted IT studies by creating new scholarships for students and tempting people into the field with incentives such as free laptops, it’s a trend that comes in response to Estonia’s skills shortage. According to recent research, the country is currently in need of over 2,000 IT specialists.

Again, How does this relate to Armenia?

Well, lets go back to the beginning of our story and the diplomatic meeting between Ambassador Turk and the foreign minister and his desire to spare no efforts to develop and expand the relations. Well Mr Ambassador, here are a few ideas that come to mind:

  • Estonia needs affordable and talented programmers to support your growing IT industry. Armenia can provide a large pool of  highly talented and motivated programmers that are culturally similar.
  • Armenia needs help in developing a start-up culture and growing it’s own IT industry, especially in other areas of the country outside of the capital Yerevan. IT needs to be the economic engine for a land locked country like Armenia.
  • We can learn and replicate from the success of the Indian-Armenian AITC center, but focus on the business and start-up aspects of the technology industry, not not just technical traning.

In this issue we are also introducing the Gyumri Information Technology Center [GTech], which is a very innovative two year technical training program. What do you think about creating a start-up institute within GTech? Even if it is online and virtual, the exchange will reap incredible benefits to both countries and peoples. So Ambassador Turk, here is a perfect way to develop and expand the relations between old friends Estonia and Armenia.

Please comment below to start putting the Idea in Motion…

 

 

 

 

This post is also available in: Armenian