Hrach Bayadyan talks to Ashot Khachatryan, president of Armenian Programs

Have sales gone up for Armenian Programs? Do you have new versions out?

Armenian Programs turned eighteen years old this spring. During this period, we've only worked on writing programs for financial applications, and that, too, in mainly two areas - banking systems and accounts. We are the clear leaders in both fields; we hold the largest share in the market. Ten out of nineteen banks use our banking program, as do ten loan offices. Regarding our second area of interest, all the large corporations use our programs. Small and medium enterprises are growing at an amazing rate nowadays, and the demand for accounting programs is increasing. The big new project in the last one or two years is that we have developed a new program to automate accounts in small and medium enterprises, and it entered the market with great success and is swiftly replacing other programs used previously. This is our main showing on the market.

Last fall we completed another good program that we had been developing for almost a year - this one is meant for trade organizations. Strangely enough though, it hasn't been selling well. This is for a number of reasons. Trade organizations are quite well developed - they are computerized and use different programs, like Excel and so on, but they aren't ready to pay large amounts of money, say 400 dollars. Another factor is that we aren't known for our programs in the sphere of trade. Therefore, it simply requires a little more time, and I believe that in a year or a year and a half we will reach the same sales volume as with the accounting program for small and medium enterprises.

We did a very interesting project with Zigzag. It is a sales program ordered especially by Zigzag. They have many outlets, a central office, supply centers, warehouses, and a service center. The program was meant to network all of that. For example, if a customer buys a refrigerator, this information is passed automatically through the network to the warehouse, delivery is carried out at a specific time, and the installer arrives at that specific time. All that, which is usually organized in person and over the telephone, is done automatically. It's a very good system, but it cost us a lot, and we nearly came out of it with a loss. Unfortunately, we don't know who we might sell it to next. In any case, we can now at least prove that we are capable of such things as well.

There is also another new thing relating to accounting in banks. Although this is an established field, it needs to change with the times. There are greater possibilities now, as well as a larger variety of services and technical progress. There are banks today that serve up to 250,000 accounts through a central base, that process 12,000 documents daily, which is a huge number in itself. By Russian standards, this would be in the large banking sector. Our aim is to raise our system's productivity to 1.5-2 million accounts.

Continuing on that, do you see niches in the market, waiting for you to fill them, which are neither trade related nor financial in nature, but near these fields?

Programming is a very wide field, you know. For example, our financial programs differ from other areas in programming as much as they do from, say, the shoe industry. I mean, we don't have to look very far, we can look right in front of us - that is, in the fields of trade and finance.

Are state governance tasks included in those fields?

All right, let me make it clear that our current fields aren't purely banking or accounting, but include governance as well. There is something important here that needs to be emphasized. That is that our programs are written based on the latest technology, in a way. Let me explain. In the same way that before making an automobile one sets up a factory and assembly line, so that manufacturing cars becomes much faster, more reliable, and so on, we have succeeded in developing the technology to provide financial solutions. In order for you to have some idea of how complicated this is, let me say that in all the post-Soviet republics, only three or four companies in Moscow have managed to do this. Our AP-3X technology includes subprograms and document circulation for all the banking and accounting systems. A great deal of work has been done, and it is possible to develop governance programs based on this.

Is there any competition among local companies?

As far as product sales are concerned, there is a certain amount of competition among some local companies - Lsoft, Softmaster, and us. And also with some other companies who resell the Russian 1C accounting program. We had a very powerful accounting program earlier, but it was also quite expensive. Many consumers preferred Softmaster or 1C only because of our price. We lost many orders because of this. However, our accounting program for small and medium enterprises has been on sale for two years now, and is a lot better than the others as far as functionality is concerned, and a number of times cheaper. And that took care of that. Our internal competition is between the banking and accounting programs. There is also another internal market, relating to Microsoft programs. Things are going to get very interesting there soon. Of course, no local company here can write an operating system or create another Word. That company understands very well that this region is poor and cannot afford to buy their programs, so they are not exerting too much pressure and letting their products make their way through the market. But when things get to a certain level, they will take definite steps.

We are Microsoft's certified partner. We represent them and sell their products here.

Could you provide us with a short summary of the competition between local and international companies?

We understood from the very beginning that the market in Armenia is very small (we became market leaders very quickly here), and that monopoly is not a good thing, there is a risk of stagnation. Realizing this, we create competition for ourselves, so that we can gauge our own competitiveness. We participate every year in the exhibition of accounting programs held in Moscow, we keep up with all the news and new solutions on the internet, and have an abundant library. Thus, we know very well what is going on in the world. I can say that our programs are very effective for the Armenian market, and from the point of view of functionality and pricing - very convenient. This is why nobody from the outside can get in. We are thus looking carefully around us and are always on our guard.

Have you tried selling your products in other countries, where the conditions are similar to Armenia?

We still have a lot to do in the Armenian market. Journalists here like to talk about foreign countries, but in reality, limiting import is the same thing as exporting. We provide for the circulation of half a million dollars locally. If it weren't for us, international companies would have taken away five million dollars from here. This doesn't seem to interest anyone. But if we were to export 50,000 dollars, everyone would talk about it.

One needs free resources in order to enter foreign markets, while our resources are limited. At the moment we are looking at the urgent needs of our country and covering them. We have the latest technology and are ready to go to other countries. We are considering entering Georgia first, but have come up against a number of difficulties. Let's see. We are also seriously considering southern countries like the United Arab Emirates, Kuwait and Qatar.

What are your relations with educational institutions like?

We provide universities and educational institutions with our programs free of charge, for the purpose of education. We sponsor some of their events.

Let me take this opportunity to mention also that we aren't just a business company but, in these fields, we're also a research institute of sorts. We have two-degree candidates working for us, both will soon defend their dissertations. We have seven or eight graduates who will also complete their dissertations soon. Ten people who work with us teach at the Faculty of Applied Mathematics at YSU. I guess you could say that we have accumulated the scientific potential of this field.

A lot has been said about the bright future that awaits the Armenian programming industry. There are statistics that confirm the rapid growth of the sector. Could you give us an assessment of the general trend in this field?

I can't talk about specific data, nor would I like to comment on the number of excellent programmers that have left Armenia, but I feel that the boom we had five or six years ago is over. At that time, the government opened its eyes and saw that a programming industry had developed. Then they decided to lay claim to that victory, which had been achieved without their contribution, because they hadn't interfered yet, and because there still were human resources. Now, the trend is negative; there has been a decline since 2000.

The state has deemed information technology (IT) the best sphere to develop, and itself the omniscient and omnipotent force capable of doing so. Naturally, a question arises-when and where did they learn to develop IT?

This led to the creation of all sorts of different structures - the ministry of something or other, a prime ministerial commission, the Incubator, and so on, all of which have done serious harm. They feed off loans that the economy provides. Those people go to exhibitions, take business trips, and buy expensive computers and laptops for themselves. The budget of the Incubator (the Enterprise Incubator Fund), which is five million dollars, is more than the total turnover of all of the local companies today. Wouldn't it have been better to give that enormous sum to these companies, or to lower their taxes? But they gave it to a bunch of people who are supposed to support business and information technology enterprises, but who know nothing about business, know nothing about IT, and it's all happening at our expense, we're bearing the burden.

A recent example - the government has denied private companies the right to teach candidates seeking specialized education. This is probably for the reason that privatization is considered a bad thing for education. On one hand, there is ongoing privatization in the country, but on the other hand, private enterprises are not being allowed to develop. And IT, which was declared the best sphere to develop, is completely in the private sector. The most outstanding experts leave the country during their third or fourth year of college. They don't utilize the best programmers that get drafted into the army, even though there's a huge demand for them in the military. They send them to the ranks, and ordinary guys get the "soft" duty meant for programmers. That's why programmers are leaving the country. This is yet another example of the "support" that our government gives the IT field. If it goes on like this, every step they take will have the opposite effect. If we produce ten professionals a year, twenty of them leave the country.

These are typical examples of how the Armenian government understands "support" with regard to the field of IT.

As a result, there are only three Armenian programming companies - Armenian Programs, Lsoft, and Softmaster. The rest are branches of American companies here.

Let's talk about the investment and involvement of international organizations. They have been working actively in various spheres for years and have implemented numerous programs. What role do you think the World Bank, UNDP, and other organizations have? What can be expected from the work they're doing?

Unfortunately, that information is completely off-limits; there is no way of knowing how they spend their funds. There is no way to see, for example, the computers that have been bought for various schools and what configuration they have, or the kind of consultations that have been paid for, and so on. Let me give you an example that concerned us. A few years ago, a tender was announced for the automation of the treasury, which was a great contract for local companies. The World Bank had offered a $300,000 loan. This was a very tempting offer for us, because the treasury works both as an enterprise and as a bank, and we specialize in both areas. For some reason, the conditions of the tender stated that only two local and four international companies would make it to the second round. The results of the first round were as follows - first place went to Lsoft, second to some company that had been founded only two weeks earlier, and the third spot went to Armenian Programs, which has fifteen years of experience.

In the second round, they looked at and rejected both of the Armenian companies. It was expected that the organizers would then introduce the next Armenian company on the list, but instead they allowed two American companies to participate. In the end, an Indian company won, which we looked into and found out that it didn't really exist. We protested. The tender was cancelled as a result, but no new tender was organized. There is money, and they want to line their pockets with it, but they shouldn't use our name to support their illusion of a tender. And it wasn't a grant; it was a loan, which they had to return to the creditor through different means, including the taxes we paid. This was the second tender the treasury announced - the first was similar, an American company won, but it fell apart later.

First, we have to get rid of all the hype surrounding IT. Education has to get the attention it deserves. The number of places for students can be increased, if they are all paid. For some reason, rich fathers prefer to pay $10,000 to ensure that their children get scholarships, instead of paying $2000 tuition for four years of education. This has a negative effect on the rest in every way... It's a haven for bribery. No students should get scholarships, but companies should approach colleges and students and sign contracts with them, wherein they cover the students' tuition. After graduating, the students should work for the company for a pre-determined salary until they cover the company's expenses.

How are relations between the fields of programming and science nowadays?

Today, Armenia has great scientific potential - we have academicians and doctors of science. The bonds between science, educational institutions, and companies are very strong. Academician Samvel Shukuryan, for example, is the head of a department at the university, and also heads a department at the company Virage Logic. We have to work towards developing this trend. Because they aren't paid well, many scientists are forced to seek such second employment, which is a very good thing.

To be honest, the conscription issue helps science a little as well. There are smart boys, who could make a lot of money as programmers even from their second year of college, but are forced to study and get good grades, so that they can then get into post-graduate programs and do research dissertations. Companies suffer because of this, as do we, but science has a lot to gain. And this could do a lot of good for Armenia in the long run. If the question of mandatory military service didn't exist, we might not have these ten people either - they would have become well-paid programmers a long time ago, but would have left academia and would not teach.

What future do you see as far as gathering and organizing this small wealth of programmers is concerned?

That is a complicated question. The country has to develop. Here's the most important point I want to make about the matter-there aren't any problems that are specific to information technology. There are issues that concern the country and the nation as a whole. If we solve those, it will have a positive effect on IT right away, because that's the area with the most potential.