Transitioning from outsourcing to in-house technologies: Why it's necessary and how to achieve it? Interview with Armen Baldryan

Armenia's main task today is to learn how to create its own complex technology products, rather than limiting itself to outsourcing. This requires real cooperation between companies, investors, and the state. One of the main goals of the RISE platform is precisely to bring them together under one roof and help them see each other's opportunities.

Armen Baldryan, Chairman of UEICT, Director of Unicomp CJSC, told NEWS.am Tech, the information partner of RISE, about this, commenting on the event's objectives, the prospects for transitioning from outsourcing to producing proprietary technologies, and the challenges related to developing cybersecurity.

RISE as a platform for creating complex Armenian products

According to Baldryan, Armenia today indeed has many strong specialists and healthy technology "cells," but the results of their work largely flow into the global economy rather than remaining within the country.

That is why, he believes, RISE should become a platform where participants in the technology industry can see what is already being created in Armenia and understand how to combine their own developments with solutions from other companies.

Investors and investment funds can play a special role here. Sometimes engineers and manufacturers themselves do not notice opportunities to combine their technologies, while an outside perspective allows them to see promising combinations and help create a more complex product that is competitive on the international market.

Why outsourcing companies want to produce their own products

During the RISE forum, the idea was repeatedly voiced that Armenia should gradually transition from a model of a country engaged in outsourcing to a model of a producer and exporter of its own products.

But are the companies themselves interested in such a transition?

Baldryan believes that companies operating under the outsourcing model almost always dream of becoming product companies. The problem is that desire alone is not enough.

Transitioning to an own product requires meeting a number of conditions. It is necessary to understand whether global demand exists for the future product, address market entry issues, and take on significantly higher financial and time risks. Fulfilling an existing order is much simpler than creating a product whose demand has yet to be proven.

At the same time, Baldryan noted that the most competitive companies are often those whose own idea is born first, and only then a market is found for it. If a company chooses a product that already exists on the market, it finds itself in a competitive environment from the very start.

According to Baldryan, the main advantage of working on one's own product compared to outsourcing lies in profitability.

He noted that from a market-finding perspective, outsourcing is significantly easier, but producing one's own product is much more profitable in terms of earning returns.

Therefore, each company has to find a balance between the additional costs required to transition to a product business and the advantages it will gain in the future — greater profits and greater independence.

Cybersecurity becomes the main front of hybrid warfare

During the RISE forum, Armen Baldryan moderated a panel discussion on cybersecurity issues.

According to him, threats in this area are becoming increasingly serious as technology and artificial intelligence develop. At the same time, responsibility for protecting critical infrastructure lies not only with government bodies but also with businesses.

He emphasized that if we are living in an era of hybrid warfare, then their front line is precisely cybersecurity, adding that everything begins with cyberattacks and defense against them.

Today, users constantly face internet outages, receive questionable information, and do not always know which sources to trust. Problems exist simultaneously at the level of individual citizens, companies, and the state.

At the same time, in Baldryan's opinion, Armenia's state cybersecurity system is still in its formative stage.

The state must act together with the private sector

Baldryan is convinced that existing problems can only be solved through genuine cooperation between the state and private companies.

Moreover, he emphasized that this concerns specifically Armenian specialized companies, since security issues must be addressed with local expertise.

He noted that it is often the private sector that possesses the knowledge and practical experience that state structures lack. Therefore, first professional companies must help the state understand the scale of modern threats, and only then participate jointly in forming requirements for other market participants.

According to Baldryan, action must be taken quickly. If the state spends too long discussing regulatory mechanisms, the country could suffer serious losses by the time decisions are made.

Companies should not wait for large losses

Based on Baldryan's observations, many companies start taking cybersecurity seriously only after they have already suffered significant losses.

He cited banks as an example, noting that they now have a high level of protection precisely because they had previously experienced such incidents.

He believes other companies should not go through the same painful experience before taking action.

The state should not only explain existing threats but also, in some cases, require companies to provide at least minimum cybersecurity standards.

The law has already been passed, but speed remains the main problem

Responding to a question about possible mandatory requirements and certification in the field of cybersecurity, Baldryan recalled that the cybersecurity law in Armenia has already been passed.

However, in his opinion, this is not enough.

Even minimum standards become outdated very quickly. While they are being developed, agreed upon, and implemented, technologies manage to change.

Therefore, Baldryan considers speed to be the main problem.

He noted that if six months after the law's passage the state is still discussing specific standards, that pace is too slow.

According to him, the state needs faster decision-making procedures and much closer interaction with the professional community.

At the same time, he acknowledges that even after new requirements are adopted, businesses will need time to prepare: companies must allocate the necessary resources, funding, and make organizational changes.

That is why business representatives should participate in discussions of future requirements at the development stage. Then new rules will not come as a surprise, and companies will be able to prepare for their implementation in advance.

Furthermore, Baldryan believes that not every company should create its own cybersecurity department. It is much more efficient to develop specialized companies that will professionally provide such services to other market participants.