Amazon, in Local Hiring Spree, Lures Israelis From Startups With Extra-high Pay

Managers fret as U.S. giant looks to fill scores of positions quickly for new R&D centers

FILE - In this Wednesday, Oct. 11, 2017, file photo, an Amazon employee gives her dog a biscuit as the pair head into a company building, where dogs are welcome, in Seattle. Amazon says it received 238 proposals from cities and regions hoping to be the home of the company's second headquarters. The online retailer kicked off its hunt for a second headquarters in September, promising to bring 50,000 new jobs. It will announce a decision sometime in 2018. (AP Photo/Elaine Thompson, File)
Elaine Thompson/AP

A few months ago, Amazon offered an Israeli programmer a job no one in their right mind could refuse.

For an experienced programmer who has never held a management position, the going rate is already a generous 40,000 shekels ($11,370) a month, about four times the average Israeli salary. Amazon offered this programmer, who worked for an Israeli cybersecurity company, 60,000 shekels a month plus a signing bonus and a year-end bonus, each equal to one month’s salary.

That offer was no outlier. A semiconductor engineer at one of Israel’s bigger companies, with five years’ experience was offered 40,000 shekels a month, 20% above his current salary. Semiconductor engineers typically earn 28,000 shekels a month.

And Amazon hired a young salesman with the promise of a 40% wage hike, a signing bonus and Amazon stock down the road.

“It’s an offer that’s impossible to refuse — it would have taken him five years in the industry to reach that pay,” said an executive in the company, who asked not to be identified.

Multinationals discover Israel
Number of research and development centers that opened and closed in Israel by year, 1964-2016

Israeli tech companies have long had to compete with industry giants like Google, Facebook and Apple for the best and the brightest. With hundreds of multinational research and development centers based in Israel, almost all of the world’s big tech companies have a local workforce.

>> Are international R&D centers hurting Israel's local high-tech sector? <<

File photo: Google's office in Tel Aviv on Jan 26, 2011
Baz Ratner/REUTERS

Many people in Israeli high-tech are worried by the competition, although few are willing to talk about it publicly. Ronen Nir of Viola Ventures is an exception.

“For the past 25 years, the industry has maintained a delicate balance between the international companies and the local startup community,” Nir said.

“They competed for manpower and raised salaries, but they also contributed depth of management, acquired companies and grew entrepreneurs who left them and set up their own startups, so that even if there was competition every day, there is a delicate balance that we all manage to live with. Now we’re starting to worry that it’s being undermined,” he said.

Amazon’s hiring drive, which began several months ago for its new R&D operations in Tel Aviv, is especially aggressive, say industry insiders.

“Amazon is breaking down all the walls. You can’t compete with it — you have to hire people abroad,” said one venture capital investor last week. “They’re chasing after people and offering them 100,000 shekels a month on average. I have companies and CEOS that are very worried.”

The founder of one Israeli cybersecurity company said that two of his top employees in their fields were targeted as recruits by Amazon and received generous offers never seen before in the industry. The head of a key programming team was offered 74,000 shekels a month, plus signing and other bonuses that raised the effective monthly salary to 92,000 shekels, he said.

“The only tool we have for compensating employees is stock options. We’re doubling our valuation every year, but we don’t stand a chance of coming close these amounts,” the founder said.

“It takes us 1,000 CVs and 30 interviews to find the right programmer. These are strategic positions and it’s hard to fill them in our special operating-system environment. We’re left with no other choice but to export jobs to Ukraine, Poland, China and India,” he said, recalling that five years ago salaries were 40% lower and it took no more than four months to hire someone.

The hiring plans by the giant online retailer were first revealed by TheMarker in December, when Amazon founder and CEO Jeff Bezos made a secret visit to Israel. In July the company completed two giant real estate deals back-to-back. It rented a building in Haifa’s Matam Technology Park with 10,000 square meters of floor space, as well as 25,000 square meters in the Azrieli Sarona Tower in Tel Aviv.

Jeff Bezos, chief executive officer of Amazon.com Inc. and founder of Blue Origin LLC, smiles while speaking at the unveiling of the Blue Origin New Shepard system during the Space Symposium in Colorado Springs, Colorado, U.S., on Wednesday, April 5, 2017. Bezos has been reinvesting money he made at Amazon since he started his space exploration company more than a decade ago, and has plans to launch paying tourists into space within two years. Photographer: Matthew Staver/Bloomberg
Matthew Staver/Bloomberg

In October Amazon announced it was setting up a dedicated R&D center to develop products for its Alexa Voice Shopping service, which as its name suggests allows users to place orders by speaking, rather than typing. Assaf Ronen, an Amazon vice president based in the United States, was put in charge of the Israeli operation.

Since then the company has hired Yoelle Maarek as vice president of research for Alexa Shopping and Eyal Itah as general manager for Alexa Shopping product engineering.

Amazon got its start in Israel with the 2015 acquisition of Annapurna Labs for $360 million. Today the company employs close to 200 people developing chips that make better use of Amazon servers used in its retailing and cloud computing businesses.

Amazon also has a small development operation dedicated to its Amazon Go initiative for brick-and-mortar stores with completely automated checkout. Lab 126 is working on computerized vision for its Echo line of smart loudspeakers that connect to the voice-controlled intelligent personal assistant service Alexa.

Assaf Ronen, Amazon's vice president of Voice Shopping.
Ofer Vaknin

Amazon’s willingness to pay outsize salaries in Israel seems to be a function of its overall strategy, which is to tolerate lower levels of profitability than other technology giants would allow themselves and are even lower than the traditional brick-and-mortar retailers it competes with. In the first nine months of this year, its net profit was a wafer-thin $1.2 billion on sales of $117 billion.

Amazon’s hiring, it appears, targets specific companies, human resource managers who spoke with TheMarker say. One who works for an Israeli startup said the U.S. company held a conference for recruits and invited more than 10 of the programmers at her company, a fifth of its entire Israeli payroll.

“They identify who they want and approach them proactively through LinkedIn. Today, every other startup is in SaaS [software as a service] and that makes them a customer of Amazon Web Services cloud computing services. We’re customers, too,” she said. “In terms of company relations, when a supplier tries to recruit your employees, it’s not nice.”

The human resources manager, who asked not to be identified, said the big difference between Amazon and other global tech companies hiring in Israel is less the high salaries that Amazon offers and more the sheer size and scale of what it is doing.

“What’s new in Amazon’s case is that they’re setting up an R&D center and they need masses of people,” she said.

“So they are headhunting. When Microsoft recruits, it already has a lot of employees, and it doesn’t work that way. The same goes for Google, which even has a waiting list of prospective hires. Amazon is very focused and it approaches specific people, in a certain field and with a certain background.”