Recruiting offshore workers for the Israeli hi-tech industry was a major issue even before war broke out in Eastern Europe, due to rapid growth of the tech sector and lack of experienced workers. Now, with Ukraine’s future shrouded in doubt, the issues has become an urgent problem.
Ukraine was in recent years the main site for Israeli hi-tech companies seeking skilled developers, with more workers than Israel and lower costs than Israelis. Although developer wages in Ukraine increased and it has become more difficult to locate workers, many Israeli companies kept increasing their workforce in the country, now estimated at a total of 15,000. Concurrently, there were those who began to employ workers in other countries in the region, such as Poland, Bulgaria, and Romania.
But current developments in Ukraine forced companies who had planned to continue recruiting workers there to reconsider their options. The bitter experience of companies who relied almost solely on Ukrainian work teams has brought the term ‘diversity’ to the fore: Companies operating abroad must diversify their human capital and employ workers in different locations, argue sources in the human resources field. In other words – spread your risks.
“Israeli companies employed workers in Ukraine in three ways: Through HR companies, by opening a subsidiary, or by employing individual developers,” Miri Gal Burt and Oded Rosenblum, owners and co-CEOs of EER Global, a recruitment company that serves Israeli firms operating abroad. “Now, despite the situation, we believe that they won’t want to shut down activity in the country – definitely not considering the professional and personal relationships they’ve built over the years, and they’ll prefer to offer them a relocation to a neighboring country, such as Poland.”
“A company that has, say, 50 workers in Ukraine, can’t recruit a similar number elsewhere. It’s a long process. It will continue with the same workers – no matter where they are located geographically. But concurrently, we project that these companies will open other centers elsewhere – the next recruitments won’t be in Ukraine,” says Rosenblum. “A similar thing happened with the developers in Belarus: Whoever had the option, ran away from there and began working from elsewhere” as soon as the situation in the country deteriorated.
About half a year ago, EER decided to branch out into Poland, due to the high demand for workers in the country and the advantages of the local market. “There are some 70 Israeli companies in Poland employing workers in different fields. The workforce is high-quality and seeking good jobs. They speak English. Over the years we have recruited in Poland and the results were always positive,” says Burt.
She adds that “in the past, wages were lower in Ukraine compared to Poland, but the gaps have closed. The pay in both countries was equal even before the war, standing at close to 6,000 dollars a month for programmers.”
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Like others in the industry, the two think that India can also become a more desirable location for outsourcing. “In India and Nepal wages are significantly lower, by about 50 percent, but the technological capabilities and communication with workers is simpler with those from Eastern Europe. In terms of time gaps, too, working with Europe is easier. However, sometimes companies prefer the time gap from India, as it allows for more continuous work.”
“We currently employ 120 developers in Bulgaria, and in addition we’ve opened a customer service center there, Contactics,” says Rami Nahum, owner of AppGreat. “The number of applications working there has grown sharply recently, mostly from cyber and gaming companies seeking developers.”
He says that, “We’ve managed to keep up with demand partly due to our activity in Macedonia – where we currently employ 30 workers. This is a country where opening a company is hard compared to other places, and it is a small market with high competition. The wages may be lower than in Bulgaria, but taxes are higher, so as an employer – costs in both countries are similar. Due to the constant rise in demand for developers in Eastern Europe, we’re also looking into beginning operations in Romania and Poland.”
Another European destination enjoying a period en vogue is Portugal. “In recent months many companies are looking into the possibility,” says Gal Burt. “It’s an emerging market, although there are fewer developers there than in Poland. The costs of employment in both countries are very similar.”
According to Ben Pasternak, CEO of Israeli AMAN Group, which provides IT services and employs some 3,500 people: “Our expansion plans in terms of human resources in 2022 are for Portugal and Poland. In Portugal costs are relatively low, and there’s enough of a skilled workforce. In Poland we employ around 350 workers, and in Portugal 400 – in Lisbon and Porto.”
“I just got off the phone with a client who has a large office in Ukraine,” says Nimrod Berger, co-CEO of Kavadev, along with Roey Ladelsky. “He plans to continue working in Ukraine – but understands that they need to open another office somewhere else. Israeli companies are diversifying their locations, and we are trying to bring Nepal to the forefront.”
About a decade ago, Berger was CEO of Tsunami Technologies, the only Israeli company to have a dev center in Nepal. Now he heads a company that employs developers in Nepal for hi-tech companies, and also serves as honorary consul of Nepal to Israel.
“We have dozens of clients and hundreds of developers in three dev centers in Kathmandu. We began operations four years ago, after seeking that quite a few American and Australian companies operate in Nepal – but almost no Israelis. When I was CEO I was exposed a little to what’s going on in Nepal, I provided some help to the embassy and the Israeli chamber of commerce, and after some time I was asked to serve as honorary consul. Since then, I’ve been promoting business ties between the two countries,” says Berger.
He says that “In Nepal you get developers with a different point of view, and that’s healthy. Part of how we operate is to start working for a client in small teams, and then to grow organically. In the past decade there has been a quantum leap in Nepal’s openness to the world: Many of the developers in the country graduated from good Western universities – about a quarter of our workforce. The others are graduating from quality colleges as well. We see American and Australian companies employing Nepalese programmers in fields like cyber and blockchain, which are at the forefront of tech.”
Berger adds: “We advise our clients to diversify their outsourcing, in case of a catastrophe. In Nepal, for instance, there was a huge earthquake when we had a team there. Just as companies know not to put all their servers in one place for security reasons, why should they do differently with their dev teams?”