What’s the secret of this company’s growth? Research – lots of it

Estonia has scored a lot of world firsts: first online parliamentary elections, first secure citizen e-ID system, to name a few. Now, Cybernetica, one of the small local companies behind those innovations, is piling on the R&D to have impact outside Estonia.

Over two decades, the Tallinn-based company has ploughed substantial sums into research for e-government products and services. An early effort was its contract to develop the concept for Estonia’s well-known electronic ID, and a digital signature system that would make its use extremely secure. “A lot of research went into its development,” says CEO Oliver Väärtnõu.

The company also helped the country become first in the world to have its parliamentary elections enabled by Internet technologies. The system was launched in 2005 but “research was done years before to test the security of the systems,” says Väärtnõu.

Since then, every project that the company is working on “has an R&D element,” he says. “Research defines us.”  

The company is a spin-out of the former Institute of Cybernetics, which operated under the Estonian Academy of Sciences since 1969. After Estonia gained its independence, the government reorganised its research and development infrastructure and merged the individual academy institutes with universities. As the Institute of Cybernetics was heavily focused on applied research, in 1997 the researchers re-organised themselves as Cybernetica while keeping the R&D focus of the former institute.

Reinvesting in R&D

In 2016, 19 years after its founding, Cybernetica employed 120 people and says it has annual revenue of about €11 million. Most of the profits of the company are re-invested in its internal R&D department, the Information Security Research Institute, an independent entity that employs four senior researchers who bring in PhD and postdoc students to work on “strategic goals,” says Väärtnõu.

The institute is working closely with the University of Tartu and the Tallinn Technical University on various research projects, and since 2009 it has also working closely with DARPA, the US government agency for advanced military research. The work focuses mainly on cryptology, information security and cryptocomputing, which are the main technologies behind Estonia’s online voting system.

During its short history, the company has become one of Estonia’s main suppliers of digital government solutions, but it is expanding its reach to other regions in central Asia and southern Africa.

Cybernetica is also responsible for the core development of X-Road. Dubbed the backbone of e-Estonia, the X-Road links the nation’s public and private digital databases and enables the development and secure use of digital services.

More recently, the company developed another eID system for the government of Azerbaijan and will be working in Namibia to implement a product version of the the X-Road called Unified eXchange Platform. In addition, Cybernetica is working on new eID product in cooperation with SK ID Solutions, a local certification authority. “The new eID is based on a new split key technology, which makes smart device based authentication easier and more secure,” says Väärtnõu.

The company is also using European Union funding to develop Sharemind, a system that enables the processing of confidential data without revealing the sources of the data. This technology can be used for the anonymised analysis of medical and financial data, but also for secure cloud services.

Väärtnõu, a former member of the Research and Development Council of the Government of Estonia, has been running the company since 2014 and plans to expand the company’s R&D even further. The aim is to build new digital products and services and to export the Cybernetica’s experience in digital government solutions to other countries in Europe.

Correction: A previous version of this article mentioned that Cybernetica developed Estonia's electronic ID system. The company only did the research and proof of concept of the system, but it has developed the Estonian internet voting system and the X-Road.