Israelis Offshoring Engineering To America

As the shekel continues to advance against most major currencies and especially against the US dollar, Israeli exporters are suffering. As Katsman wrote recently about software integrator, BluePhoenix (BPHX), currency issues are partly to blame as certain firms feel the pinch on shekel-based research costs and the double-whammy of a macro slowdown.

I’ve heard of Israeli start-ups beginning to hire more employees in the U.S. The wage differential is almost gone and given the onus of larger benefits packages for Israeli employees, Israeli firms are turning to offshore part of their engineering staff to America.

Imagine an engineer based in the Valley being cheaper than his counterpart in Tel Aviv?!

It’s nuts.

In today’s Globes, we read of a recent study backing up these numbers. According to the article, U.S. and Israeli salaries are about reaching parity and seem to be driven by the strength of the shekel (weakness of the dollar?). I’d like to posit that as the Israeli economy is currently running on all cylinders, it’s also become quite hard to find quality technical people — a classic supply/demand issue.

Regardless, it will be interesting to see how this plays out. Right now, though, the trend of Israeli high-tech firms offshoring to America will continue to pick up speed.

Disclosure: Author’s fund has a position in BPHX as of 6/23/08.

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