Similar to other economic regions, the Central Asian and the South Caucasus regions are rapidly growing markets for IT and IT-enabled (ITES) services. The regions’ economies mainly Kazakhstan, Armenia, Georgia, Uzbekistan, Azerbaijan, and Kyrgyzstan are currently growing with strong domestic demand. This growth is translating into increased demand for IT and ITES services, which presents significant opportunities for foreign companies as well.
The main drivers of growth in the Eurasian IT and ITES market are rising incomes and expanding Internet access. Internet penetration in the region is still relatively low, but it is growing rapidly. The other key driver of growth in the Eurasian IT and ITES market is the region’s large population. With over 300 million people, the Eurasian market is one of the largest in the world. The region’s young population is particularly well-equipped to take advantage of the latest technology trends, and there is a growing demand for skilled workers in the IT and ITES sector.
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KAZAKHSTAN
In recent years, the ICT sector has become increasingly important in Kazakhstan. The telecom sector is the largest and most developed part of the ICT sector, with mobile penetration reaching around 80%. The sector is growing at a rate of 20-30% per year with market size of $2.2 billion in 2019. The sector is currently dominated by the mobile telecommunications and Internet segments, which account for 70% of the market. The government is committed to further developing the sector and has set a goal of reaching $5 billion in market size by 2025.
Some leading Kazakhstani telecommunications companies – KazakhTelecom, Beeline, Tele2 Kazakhstan, Altel, TNS Plus, Cell Systems, FLK Systems International, Nursat, Star Electro LLP, Fiberoptic Ltd, Line System Engineering, Alem Communications, Tandem TVS.
The IT sector is growing rapidly, with annual growth of around 20%. The ITES sector is on the rise as well, with strong demand for services such as web design, software development, and data analysis. IT and ITES exports from Kazakhstan grew by 20% in 2019, driven by demand for software products. The b2b marketplaces segment was the fastest growing, with exports growing by 34%. This was followed by the enterprise software segment, which grew by 31%. The strong growth in IT and ITES exports is a result of the government’s Digital Kazakhstan initiative, which is aimed at increasing the country’s competitiveness in the global IT market with a focus on e-government, e-commerce, and online services. The initiative includes a number of measures to support the IT sector, including investment in infrastructure, education, and research.
In addition, the Government has launched a number of initiatives to promote the use of ICT in education, health care, and agriculture.
The country has become an attractive destination for business process outsourcing (BPO) mainly due to its convenient location and competitive costs. Besides that, Kazakhstan offers a number of incentives for businesses to set up operations in the country, including tax breaks and access to a large domestic market.
The Kazakhstani BPO market grew at a compound annual rate of 13.8% between 2016 and 2021, reaching a value of $1.1 billion. This growth is being driven by onshoring trends among Western companies, as well as the government’s incentives for domestic and foreign investors. The vast majority of BPO services in Kazakhstan are currently provided to organizations based in North America and Europe. However, with the country’s expanding ICT infrastructure and capabilities, there is an increasing opportunity for Kazakhstani BPO providers to tap into new markets such as Asia-Pacific and Latin America.
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ARMENIA
Armenia is a telecom and IT powerhouse in the South Caucasus. Located at the crossroads of Europe and Asia, it has a wealth of talent and experience in telecom, IT, and ITES.
Armenia’s ICT sector is one of the fastest growing in the country and was worth $1 billion in 2021. The market size is still relatively small, but it is growing at a rapid pace. The sector is expected to grow even further in the coming years, with a recent study forecasting that it will reach $2.4 billion by 2025. This growth is being driven by a number of factors, including a rapidly expanding broadband infrastructure and a strong focus on education and training. The telecom sector is the largest contributor to the ICT sector’s GDP, followed by the IT and ITES sectors.
After years of rapid growth, the industry is now maturing and shifting towards onshore and nearshore locations. This is due to a number of factors, including wage inflation, political stability, and skilled labor availability.
The top telecom companies in Armenia are Ucom, Beeline Armenia, Orange Armenia, Veon Armenia, VEON Georgia Rostelecom, and Vivacel.
The country has also made significant progress in developing its IT sector.
According to the IT Industry Development Foundation, the Armenian IT market was worth an estimated $634 million in 2019, a significant increase from the $560 million reported in 2018. The majority of IT companies in Armenia are engaged in software development, followed by IT services and applications. The IT and ITES sectors together provide a wide range of services, including software development, web design, and e-commerce. The Armenian IT sector is highly export-oriented, with over 90% of companies operating in the export market. The main destinations for Armenian IT exports are the United States, Russia, and Europe.
The b2b marketplaces are turning into one of the most prospective areas within the Armenian IT sector lately. Prominent deals that were closed in 2018-2019 include Jvaki’s acquisition by Russian UralPS (part of Plugin Solutions group) and Softamotive’s acquisition by Microsoft.
The country now become home to a number of world-class tech companies. The sector is also attracting foreign investment, with major firms like Google and Microsoft setting up research and development facilities in the country. There are a number of leading local companies in the sector, including PicsArt, Ucom, and TalentsBridge. The sector is also home to a number of innovative startups, such as Edamam, which is developing artificial intelligence technology for the agricultural industry.
Key IT and ITES players: Synopsis Solutions, AlarIT Solutions, Zangoo Technology Partners, Smarcomms, e-Legion, Renderforest, Spyur Informational system, Armenian Directory, Association of Audis-Visual Reporters, ARANET LLC, DigiSkills.me, INGO Armenia Insurance CJSC, Idram Payment System.
The government is supportive of the ICT sector and is working to create an enabling environment for businesses to flourish targeting both English and French-speaking countries. As a result of these trends, the market size for Armenia BPO is expected to reach $1.1 billion by 2025.
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GEORGIA
There is a nascent ICT community in Georgia, which is ready to take advantage of its strengths and existing opportunities. The ICT sector in Georgia keeps expanding with the market size that grew from $1.6 billion in 2016 to $2.2 billion in 2018. As a result of this growth, the ICT sector of Georgia now employs over 8,000 people and contributes 2.5% to Georgia’s GDP. The Georgian ICT market is projected to grow at a CAGR of 9.5% between 2020 and 2025.
The country has a well-developed telecom infrastructure, with a high penetration of mobile and fixed broadband services. This growth is driven by a number of factors, including the increasing use of mobile devices and the rise of e-commerce.
The most notable telecom companies in Georgia: ITI Communications, Georgia Telecom, GCI, MagtiCom, Geocell, Communications Commission, Veziri LLC, VEON Georgia, Georgian Integrated Systems, Open Net, InexPHONE for business, One Smart Start –Georgia, Phantel secure services, ITelephonic LLC, Formula.ge, Martv, CDN Caucasus Digital Network Ltd, Finex, GREENNET.ge, Georgian Public Broadcaster, TV Formula, NGT Group, Intellcom Group.
The IT sector is also developing with the presence of international IT companies – IBM, EPAM Systems, Booking.com, Microsoft, Robert Bosch, Wolt, and many others. The number of IT companies operating in Georgia has more than doubled in the past five years, and the sector is now worth an estimated $1.2 billion. Georgia is catching up with ITES, as a number of international call centers and BPO firms operate in the country. This growth is being driven by the increasing demand for software development, web design, and digital marketing services. Some of the established b2b market places in Georgia include healthcare IT, retail IT, and banking IT.
The BPO industry in Georgia is evolving rapidly. In recent years, the country has become an attractive destination for international companies seeking to outsource their back-office operations. This trend is partly due to the availability of skilled labor and favorable incentives offered by the government. As a result, the BPO sector has experienced rapid growth, with the market size nearly doubling from 2016 to 2019. While most BPO activity in Georgia is currently focused on customer service and technical support, there is also significant potential for growth in other areas such as finance and accounting, human resources, and research and development. Additionally, while many BPO companies are based in Tbilisi, there are an increasing number of firms that are setting up operations in other cities such as Kutaisi and Batumi. This provides greater opportunities for Georgians across the country to participate in the growing BPO industry.
Some Georgian IT and ITES companies – Liberty Forum ( b2b marketplace) Georgian ICT cluster, Start-up Georgia project by GoG, ATC, Lamda games, BIA, Pankisi.
The government offers a range of incentives to encourage companies to set up operations in the country. These include tax breaks, investment subsidies, and cheap land leases. The Georgian government has also been supportive of the ICT sector, providing tax breaks and funding for startups. As a result of these incentives, the ICT sector is booming, with many new businesses being created each year.
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UZBEKISTAN
The ICT sector in Uzbekistan is one of the fastest growing industries in the country driven by strong government support and a favorable business environment. The total market size was estimated at around $1.1 billion in 2018, and it is projected to reach $2.3 billion by 2025. In recent years, the government has made significant investments in telecom infrastructure, and as a result, telecom penetration has been increasing rapidly.
Leading telecom companies in Uzbekistan: Uzmacom, UMS, ITECOM, MegaCom, and a state-owned Uzbektelecom. Beeline Uzbekistan (part of VimpelCom), Ucell (part of TeliaSonera), and MegaCom (part of Turkcell) are foreign companies.
IT and ITES exports from Uzbekistan have increased in recent years, growing from $92 million in 2013 to $319 million in 2018. The ITES sector provides a wide range of services, including web design, software development, and cloud computing. Major growth areas include e-government, e-commerce, and digital services. There are also a number of initiatives aimed at promoting the use of ICT in education, healthcare, and other sectors.
This growth is attributable to a number of factors, including the increasing use of digital technologies by businesses and government agencies, the expanding pool of IT professionals, and the growing number of IT startups. The majority of Uzbekistan’s IT exports are software products, followed by IT services and b2b marketplaces. The United States is the largest market for Uzbekistan’s IT exports, accounting for nearly 60% of total IT exports in 2018. Other major markets include Russia, Canada, and the United Kingdom.
There are a number of local and international companies providing IT services in the country. These include conglomerates such as Amtel Group and MSD Capital, as well as smaller startups such as WebScout.
BPO is one of the most important subsectors, with a significant amount of onshoring and offshoring activity. The government provides a number of incentives for companies to invest in the ICT sector, including tax holidays and preferential loans. Businesses are drawn to Uzbekistan not only for its improving business environment but also for its demand for a skilled workforce and competitive costs.
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KYRGYZSTAN
The Kyrgyzstan ICT market size is estimated to be worth $485 million in 2019, an increase of nearly $100 million from the previous year. The ICT market is mainly being driven by the growing use of mobile devices and broadband Internet. The number of mobile subscriptions is increasing rapidly, as is the uptake of broadband services.
In 2019, the Kyrgyz government adopted the “Digital Kyrgyzstan 2019-2023” strategy aimed at the following targets:
- Improving digital infrastructure and internet connectivity.
- Ensuring “digital literacy” and providing IT education to promote domestic employment opportunities.
- Developing e-government services and platforms.
- Promoting economic growth through the digital transformation of the financial technology and banking sectors.
Leading telecom companies operating in Kyrgyzstan – Beeline Kyrgyzstan, Saima Telecom, ZTE Kyrgyzstan.
The IT market in Kyrgyzstan is enlarging. The growth of BPO is being driven by the rising demand for outsourced services, such as customer support, data entry, and telemarketing. In addition, the country’s relatively low labor costs and its proximity to major markets make it an attractive destination for BPO operations. The country has become a regional hub for BPO, with a number of international companies establishing operations there. This has resulted in the creation of thousands of new jobs, as well as an increase in the country’s ICT infrastructure and skills base.
Under the digital transformation roadmap, the Kyrgyz government is targeting ICT modernization of customs and logistics centers, healthcare service centers, educational institutions, and transport hubs. In 2015 IT and ITES exports constituted 5% of the country’s GDP. The b2b marketplaces became the most significant contributors to this growth. In 2018, software exports from Kyrgyzstan grew by 30%. The main IT services exported from Kyrgyzstan are web development, mobile app development, and e-commerce development. The main markets for Kyrgyzstani IT services are the United States, Canada, Europe, and Australia. There are more than 200 IT companies in Kyrgyzstan. The majority of them are small and medium-sized businesses.
The top 5 IT companies in Kyrgyzstan are Itransition, CleverTech, Oxagile, Alta Solutions, and Quytech. These companies account for more than 50% of the country’s IT export revenue.
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AZERBAIJAN
The size of the Azerbaijani ICT market was estimated at $1.4 billion in 2018, and it is projected to grow at a compound annual growth rate (CAGR) of 9.5% from 2019 to 2024. The telecom and IT sectors are particularly booming. This figure is expected to grow significantly in the coming years, as more businesses adopt ICT solutions and services.
Azerbaijan has been making strides in recent years to develop its telecom and IT industries. For telecom, Azerbaijan has been working to improve infrastructure and roll out new services. International companies show interest in investing in Azerbaijan’s infrastructure and human resources. In terms of IT, business services account for the largest share of the ICT market, followed by IT services and software. The country is home to a number of world-class IT companies (Microsoft, Cisco Systems, Meta, and many others), and it is also making great strides in e-government.
Key telecom players with operations in the country – Azerconnet LLC, Azercell Telecom LLC, Bakcell, Azercosmos, AzerTelecom, Nar (Azerfon), Aztelekom, VOIDA International LLC, AzIn Telecom, Mobitel, Sigma Technical Services LLC, Delta Telecom LTD, Baktelecom, Estet MMC, Digital Services LLC, Naxtel 4G, Avand Technology LLC, Azstarnet MMC, Avirtel LLC, Enginet LLC, CaspianSat LLC.
The IT sector accounts for 1.1% of GDP. The IT and ITES exports account for $ 72.6 million or 2%, which is a significant increase compared to previous years. Software development, e-commerce, and b2b marketplaces are the most rapidly developing sectors of the Azerbaijani IT industry.
Azerbaijan’s BPO industry is still in its early stages of development. Businesses in Azerbaijan have started to outsource their non-core functions to specialist providers, and this is driving growth in the BPO market. The country has a large pool of young, English-speaking workers, and its location makes it an ideal base for businesses looking to serve the European market. The government is supportive of the BPO industry and has implemented various initiatives to promote its growth. These include tax exemptions, preferential financing, and training programs.
Today, about 200 IT companies are operating in Azerbaijan which are involved in software development, system integration, e-commerce, ICT infrastructure, and IT consulting. 30 data processing centers are currently operating in Azerbaijan. Two IT parks operate in Baku and Ganja.
Some known IT and IT consulting companies – AzEduNet LLC, RCOM LLC, AzQTEL Wimax ISP.
OPPORTUNITIES:
In 2020 the total population of Central Asian countries represented by Uzbekistan (34 mln), Kazakhstan (19 mln), Tajikistan (10 mln), and Kyrgyzstan (7 mln), and Turkmenistan (6 mln) amounted to 76 mln people. As for South Caucasus, in the of 2020 the region was estimated at 16,7 mln people – Azerbaijan (10 mln), Georgia (3,7 mln), Armenia (3 mln). When compared with the volume of the ICT markets of each country, the rating of countries comes as follows:
- Kazakhstan – $5 billion in 2021.
- Georgia – $2.2 billion in 2018.
- Azerbaijani – $1.4 billion in 2018.
- Uzbekistan – $1.1 billion in 2021.
- Armenia – $1 billion 2021.
- Kyrgyzstan – $0,4 billion in 2019.
Prospects for Canadian exporters include broadband internet access technologies, consumer electronics, educational software, fintech, and banking services and hardware, analytical software, ICT equipment, cyber security solutions, and legal and financial services.
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