When the news emerged some three weeks ago that the Israeli startup Datorama was being acquired by Salesforce.com for a reported $850 million, it wasn’t only the employees at Datorama’s Tel Aviv headquarters who were celebrating.
There were celebrations in Nazareth as well. That’s because Datorama outsources some of its projects to a company called Galil Software, which offers research and development and outsourcing services to Israeli startups, including Datorama.
Because they are not employed directly by Datrorama and therefore don’t have shares in the company, they are not among the employees who will profit directly as a result of the sale. Nevertheless, as a unit of Salesforce, Datorma will be expanding and hiring, and Galil will almost certainly be one of the beneficiaries.
The fact that Galil is in Nazareth and more recently has opened branches in Acre and the village of Yafa an-Naseriyye — all of them far from Israel’s high-tech epicenter in and around Tel Aviv — is due to the company’s special mission, which is to create high-tech employment in Israel’s periphery, especially for Israeli Arabs, most of whom live in the north or the south of the country.
Founded in 2008, Galil Software employs some 200 people and counts among its 40 customers SimilarWeb, the taxi-hailing service Gett, Taboola and Western Digital. 90% of its staff is Israeli Arab.
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“We enable people living in the periphery to work in high-tech,” said CEO Dror Goen. “For someone who lives in [the Tel Aviv suburb of] Petach Tikva it’s easy to find work. For someone from the Arab community in the north, it’s not. There will always be people who are willing to move to the center of the country, but for someone who wants to continue living in his community, we’re a great option.”
Israeli high-tech industry suffers from a chronic labor shortage. Galil’s business model is similar to that of the outsourcing companies in Eastern Europe, especially in Kiev, that many Israeli tech companies use to alleviate the local labor shortage.
The company also serves as a catalyst for bringing Israeli Arabs into high-tech.
A decade ago just 200 Israeli Arabs worked in high-tech; today 4,000 do, said Zeevi Bregman, Galil’s chairman. But that is still only a tiny number. According to Finance Ministry data only about 58% of Arab university graduates in tech-related fields actually work in high-tech, compared to 75% for Israeli Jews.
Only about 1.4% of Israeli tech workers are Arab, a fraction of their 20% share of Israel’s population.
“Our value proposition is that we’re a geographical bridge, an bridge to the high-tech industry in the center of Israel to a population isn’t close by,” said Ameen Abu Leil, vice president for customer projects. “Customers come to us and say they want diversity, and want to hire Arabs, but they claim that they don’t get resumes. ... After they start working with us, they tell us they are slowly succeeding in recruiting Arab staff.”
Galil’s labor costs are higher than their Eastern European counterparts, but 20% less than in the Tel Aviv area. Moreover, but it has the advantage of being physically closer to its customers and its employees all speak the same language.
“When we started, we understood our value was mainly about price, but since then we’ve learned that the right value isn’t price but professionalism,” said Bergman.
Indeed, he dislikes using the term “outsourcing” and its connotations of low cost to describe what his company does. He prefers to call it “research and development extension.”
Indeed, in many ways Galil resembles a startup. Employees get stock options and Bergman said the company plans eventually to float shares. It’s raised $2.2 million to date, from investors like Zohar Zisapel, Oren Zeev and Zohar Gilon. It is also developing an automated testing product called Shield 34.