“Armenia should pay attention to outsourcing of business processes”

Vahan Vardanian has been with Renaissance Capital since 2004, where he began as the Head of Strategic Projects. In 2005, Vahan was appointed as Group Chief Information Officer.
Since joining Renaissance, Vahan has transformed the IT function from a tactical support solution provider to a strategic business partner. The function has enabled the Group to double its trading volumes year over year, expand globally in CIS, Sub- Saharan Africa and Middle East, launch derivatives trading business, on-line electronic execution capability and client relationship platform amongst others

In 2008, Vahan won the IT Leader 2008 award in the Financial and Investment Services category “for outstanding contribution of Russian organizations to development of information technologies in the country” and in 2008 Vahan was named as the best IT Director in the Financial Services industry in Russia by Kommersant Daily.

Prior to joining Renaissance, Vahan Vardanian worked in BearingPoint and KPMG where he managed a variety of IT strategy development, enterprise integration and data warehousing projects for a wide range of Financial Services, Telecommunications and Government sectors in the USA, Russia and CIS. In 2002, Vahan, within the framework of USAID Tax and Customs Reforms program , provided consultations to the Customs Committee of Armenia as to issues of building a new technologic platform.

Vahan holds systems engineering degree from Armenian State Engineering University, MBA from Bentley University, McCallum Graduate School of Business in Boston, USA and most recently graduated from Harvard Business School’s Advanced Management Program.

Interview of Vahan Vardanian to Mediamax

- One gets the impression that IT does not yet play an important role in business development in Armenia. Why?

- Information technologies develop successfully in counties, which have a strongly developed domestic market. Armenia’s scales and the level of the country’s economic development are objective factors hindering IT development in volumes, in which they exist in the USA and in developed European counties.

There is another aspect as well: we talk much about the fact that IT is one of the priorities of the Armenian economy, however, as to the volumes, there are not many people involved in this sector yet.

- Full-fledged development of IT in business, most likely, is impossible without normal development of internet. This year, a few new providers entered the market in Armenia, the players, who have existed in the market for a long time, expand their range of services. Can this become a catalyst for more active implementation of IT in business processes in Armenia?

- Promotion of telecommunications networks and internet became a reason for active development of outsourcing services in the world. Communication channels made it possible to create and operate applications and development centers  outside the country. There was monopoly for telecommunication services in Armenia for a very long time, which became a reason for serious slow-down in technologic development of the country in general and of the IT industry in particular.

Demonopolization of internet services, undoubtedly, will give companies the chance to go to a new quality level in development. This factor opens up prospects for organizing outsourcing not only for software development services, but for business processes as well. Here we can talk about organizing call-centers, setting up financial institutions’ back office operations, etc. I think that business process outsourcing may well be that additional impetus to expanding and strengthening high tech services industryin Armenia..

- Who should put forward the initiative of developing outsourcing of business processes? Should those be private companies, or should the government create certain conditions for that?

- The initiative should be coming from the private sector, and the task of the government is to establish enabling  environment and favorable conditions at the initial stage. I do not know of any country, except for, probably, Singapore, where such business initiatives would be put forward by the State..

Unfortunately, in the recent years the Armenian business is too withdrawn into itself and does not pay due attention to what is happening outside the country. When we talk about outsourcing, we very often focus our attention only on software programming. In case of business processes outsourcing, there are a few good examples. For instance, certain U.S. clinics provide their primary diagnosis, or the analysis of X-ray for outsourcing to qualified Indian medical centers.  For Armenia, the prospects of providing outsourcing engineering, architectural and designer services can be interesting as well.

I believe that successful business ventures iowned or managed by Armenians worldwide , can also contribute to development of various business processes outsourcing initiatives.
- Let’s suppose outsourcing of business processes in this or that form becomes one of the priorities for Armenia’s economic development. Another issue is of no less importance. How competitive is Armenia for major international players?

- I believe that Armenia’s weakness is the lack of relevant track record and  relatively low level of business discipline. One should realize that outsourcing of business processes provides for working under very strict controls and in conditions of constant time pressure

Armenia’s strengths are the availability of qualified specialists in a number of spheres. But their problem is that they work mainly for relatively small domestic market, and they should be “turned around” in the direction of global markets. At present, Armenia fares  competitively  as to service and personnel cost, but it is necessary to constantly trace market conditions, related to reduction of the costsfor such services in other counties and appearance of other new players in the given market, for instance, such as Vietnam or Argentina.

- What is the level of IT penetration in Armenia’s financial sector and how open are market participants to using new technologic solutions?

- Armenia’s financials sector is quite developed as compared to other economy spheres. As far as I know, one cannot state yet that the majority of Armenian banks today meet the best international standards in the sphere of automated processes and IT implementations. On the other hand, banks always take up the role of the litmus test for the economic situation. If the economy is strong, it needs a strong financial system and it sets tougher requirements. I believe that involvement of foreign participation and capital in Armenians banks is a positive aspect, influencing this industry, which undoubtedly contributes to increase of competitiveness, appearance of new services and implementation of new technologies.

The peculiarity of the Armenian financial system is that banks mainly maintain operations only within the country, and they lack sufficient international customers and operations, and all this limits the demand  for accelerated technologic development. Taking into account the number of transactions and the customers, the level of automation in Armenian banks, I think, is at an acceptable level.

- It is expected that the All-Armenian Bank will become a global retail bank, providing services to Armenians irrespective of their country of residence. Do you think establishment of such an institution could stimulate technologic development of the financial sphere?

- The idea of the All-Armenian Bank looks very interesting. The sphere of banking technologies has been very actively developing over the past 10-15 years, and there are a number of global solutions, which major banks use. I believe that in case with the All-Armenian Bank, one should use this gained experience and not reinvent the wheel. It is difficult to expect that the establishment of the All-Armenian Bank will become a major push for IT development in Armenia in general, but, undoubtedly, it will contribute to increasing requirements as to the quality of telecommunications, control systems and processes. Providing services to foreign customers, the bank, most likely, will need to meet the regulatory requirements of the countries, the citizens of which its customers will be.