Advancing the Digital Transformation of Armenian Businesses

Annex B. Armstat ICT survey

Eurostat ICT Usage in Enterprises database and Armstat's study

The ICT Usage in Enterprises database by Eurostat is a collection of comparable data on the use of ICT and e-commerce in enterprises. Through a yearly survey based on standardized Eurostat model questionnaires, it gathers information on the usage of ICT by enterprises across EU member states and other countries participating in the Eurostat program.1

Over 2021, Armstat, with the support of the World Bank, the EU, and the “Ecogeneration” environmental socio-economic development NGO,2 carried out a survey conducted using Eurostat’s 2021 methodology and a questionnaire developed on Eurostat's model.

The data collection was implemented in two phases: a first pilot phase involving 100 enterprises located in the capital city, followed by a second phase encompassing 1300 enterprises located in Yerevan and 600 dispersed across 10 cities in the regions. A stratified random sampling approach was employed to ensure the survey’s representativeness. This method accounted for territorial coverage, type of economic activities, and enterprise size classes based on average annual number of employees (very small, small, medium, large).

Sample of surveyed enterprises

Of the total 1974 enterprises that completed the questionnaire, 1377 were located in Yerevan and 597 outside the capital city. It is noteworthy that, unlike Eurostat’s standard survey, the Armenian sample encompassed microenterprises with less than 10 employees.

SMEs constitute the majority of the sample, comprising 96% of the interviewed businesses, with small enterprises representing 44% of the total. Among the surveyed enterprises, only 30% are located in the regions, with the rest of the enterprises operating in Yerevan. Finally, the wholesale and retail trade sector represents 31% of the sample, followed by the manufacturing and information and communication sectors, which account for 16% and 10% respectively. Together, these industries form the most represented business sectors, comprising more than half of the sample (Figure A B.1).

Figure A B.1. Sample distribution

Note: Other industries include electricity, gas, steam, and air conditioning supply; water supply, sewerage, waste management, and remediation activities; real estate activities; and other service activities.

Source: (ARMSTAT, 2023[1])

Armenian businesses adoption of digital technologies

Technology uptake significantly varies across industries

As emerged from the WB study cited in Chapter 3 (World Bank, 2020[2]), Armstat’s survey confirms that different sectors of economic activity exhibit varying levels of technology adoption rates (Figure A B.2). Notably, while basic technologies exhibit high adoption rates, there are significant disparities among sectors. Conversely, the adoption rate of more advanced digital tools is lower and shows less variation.

Seventy-seven percent of Armenian enterprises provide Internet access to their staff for business purposes, a proportion comparable to that of businesses in Latvia (Eurostat, 2023[3]; ARMSTAT, 2023[1]). However, certain sectors, such as information and communication, accommodation and food services activities, and professional, scientific, and technical activities, prioritise Internet provision, while others, such as water activities and transportation and storage, lag behind. Despite this widespread Internet provision, the adoption of advanced digital technologies remains limited. Only 9% of enterprises reported e-commerce activity in 2023, with a mere 2% utilizing AI. Similarly, the employment of software aimed at enhancing efficiency and reducing operational costs, such as CRM and ERP, is not widely embraced across all sectors.

The information and communication sector stands at the forefront in terms of integrating digital solutions into day-to-day operations, adopting advanced tools and software such as CRM, ERP, and AI. Similarly, the accommodation and food service activities sector demonstrates strong adoption of basic technologies like websites and social media platforms (52% and 77% respectively), especially for digital marketing purposes.

Figure A B.2. Adoption rate of selected technologies, by sector

Percentage of enterprises using the technology, 2023

Source: (ARMSTAT, 2023[1])

Geographical location impacts substantially on adoption of digital tools

Businesses located in Yerevan tend to integrate digital tools in their operations more extensively respect to enterprises in the regions (Figure A B.3). This can be partly attributed to the concentration of businesses operating in more technologically advanced sectors, such as information and communication, administrative support services, and real estate, are primarily concentrated int the capital (ARMSTAT, 2022[4]). Interestingly, the adoption of IoT technology appears to be more widespread among businesses located in the regions as opposed to those operating in the capital.

Figure A B.3. Adoption rate of selected technologies, by region

Percentage of enterprises using the technology, 2023

Source: (ARMSTAT, 2023[1])

Technology adoption rates differ significantly between SMEs and large firms

In general, large firms exhibit a higher propensity for adopting digital technologies and more complex technological solutions. Conversely, SMEs, particularly micro-enterprises, predominantly rely on basic services such as providing internet access to employees and utilizing social media platforms. Whilst internet provision reaches 62% among Armenian SMEs, all other technology adoption rates remain below 30%.

Interestingly, medium-sized enterprises in Armenia come close to matching the adoption rates of large businesses, and in some instances, even outperform them. For instance, medium enterprises excel over large firms in areas such as providing internet access to employees and implementing IoT solutions.

Figure A B.4. Adoption rate of selected technologies, by enterprise size

Percentage of enterprises using the technology, 2023

Source: (ARMSTAT, 2023[1])

In general, SMEs in Armenia demonstrate a delayed adoption of digital technologies in comparison to counterparts in the EU and Visegrád Group countries (Figure A B.4). This trend holds true across all selected indicators, with the exception of social media usage, which is notably high among Armenian SMEs.

However, as technology advances, particularly in the realms of IoT and AI, the levels of adoption in Armenia converge with those observed in V4 countries. Notably, although overall adoption rates remain lower, the disparity between SMEs and large firms in Armenia is narrower compared to the EU and V4 countries.

Figure A B.5. Adoption rate of selected technologies among Armenian, EU and V4 businesses, by enterprise size

Percentage of enterprises using the technology, 2023 or latest available

Note: 2021 data for IoT uptake in EU and V4 countries.

Source: (ARMSTAT, 2023[1]), Eurostat for EU and V4 countries.

References

[1] ARMSTAT (2023), On information and communication technologies (ICT) usage and electronic commerce in enterprises conducted in the Republic of Armenia, https://armstat.am/en/?nid=546.

[4] ARMSTAT (2022), Marzes of the Republic of Armenia and Yerevan city in figures, https://armstat.am/en/?nid=82&id=2526.

[3] Eurostat (2023), ICT Usage in enterprises, https://ec.europa.eu/eurostat/databrowser/view/isoc_ci_it_es__custom_11056852/default/table?lang=en.

[2] World Bank (2020), ICT Usage in Households, by Individuals and in SMEs in Armenia.

Notes

← 1.  Countries covered by the ICT Usage in Enterprises are: Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden, Norway, Bosnia and Herzegovina, Montenegro, Serbia, Türkiye.

← 2.  The "Ecogeneration" environmental, socio-economic development NGO is an organisation funded by the EU in the framework of the “Economic Governance, Business Environment, & Justice Reform” project.