Under COVID, more Israeli start-ups outsource talent abroad

But the decentralized office brings up a new question: Does your team even need to be in the same country anymore?

(L-R) eTeacher CEO Yariv Binnun, Eastern Peak CEO Alexey Chalimov, and Appniv CEO Ido Niv (photo credit: Courtesy)
(L-R) eTeacher CEO Yariv Binnun, Eastern Peak CEO Alexey Chalimov, and Appniv CEO Ido Niv
(photo credit: Courtesy)
One of the effects of the coronavirus pandemic has been the rise of remote work: with offices closed for weeks and months at a time, businesses had no choice but to move to work-from-home models, and often they were pleasantly surprised with the results.
But the decentralized office has brought up a new question: does your team even need to be in the same country anymore?
“I can get two good developers abroad, and sometimes three, for the same cost as one good developer in Israel,” eTeacher CEO Yariv Binnun said in a phone interview. “We outsource a lot of our jobs, and now that we are working remotely on everything, we understand that location is simply not as important anymore.”
A Ramat Gan-based online company that teaches online classes to more than 30,000 students a year, eTeacher hired 16 new employees around the world last year in Europe, South America and Africa, and has teams in India and Ukraine. The company’s teaching staff includes more than 350 teachers located in the USA, Brazil, Seoul, Europe and elsewhere.
“We found that it is best to maintain a small team locally, and expand abroad,” Binnun said. “We outsource just about everything – customer service, marketing, HR, R&D and more.”
Binnun is one of several CEOs we spoke with who said that hiring abroad offers a number of advantages including the cost of salaries, as Israeli salaries are higher than those in many nearby countries. Availability of good talent is another.
“Israel is known as the Start-up Nation, but companies looking to hire developers in Israel know that there are just not enough good quality programmers around,” said Ido Niv, CEO of AppNiv, a custom software development service provider. “There are plenty of less-talented developers available, but the market for high-quality talent is very limited.”
Binnun agreed. “The talent we have in Israel is great, and I have a lot of respect for them, but it is very costly, and there is a shortage of talent that makes it really hard to hire,” he said. “This is a big problem for the Israeli economy.”
With more Israeli start-ups raising money from investors in 2021, it is getting harder for a company to put together a development team, noted Alexey Chalimov, CEO of Eastern Peak, which builds and manages work teams for companies. “Usually, it takes an Israeli company about three months to fill a senior development position,” he said. “We can build a team of 5-10 programmers in Ukraine in about a month, at about half the price. Location doesn’t really make a difference anymore, and at this point, 40%-60% of Israeli companies are using outsourcing in some way.”

SALARIES can be significantly lower in nearby countries with larger employment pools. Ukrainian developers cost about half the price of comparable Israeli talent, Chalimov said, while Niv said a developer in Romania runs about 60% of the cost of an Israeli one.
The strengthening shekel in recent months has made wages even cheaper due to international currency rates, Binnun added.
Niv does most of his company’s hiring in Romania, to where he has frequently traveled for more than 10 years. “I find Romania to be the market closest in culture to Israel and Europe,” Niv said. “The Czech Republic has a similar culture, but it’s more expensive than Romania. Ukraine, Bulgaria and Poland are popular places to hire, and Ukraine especially has a lot of programmers available, but I find that culture there is different than the Western way of thinking, and it is hard to build communication with staff there.”
For Niv, the main challenge of building a remote team is establishing proper communication and trust.
“In this type of environment, ‘soft skills’ like good communication are even more important,” he said. “It used to be that part of the R&D process was done in the hallway or near the coffee machine, in the spontaneous process of workplace interactions. Now, that’s all done using productivity tools like Slack and Asana.
“If you want a team to be productive, it has to be actively maintained, and you have to have people who are committed to your product and work well together. But different cultures have different approaches to subtle things like transparency, and those have to be understood and managed.”
For those reasons and others, farther regions like the Far East are less enticing for Israeli companies looking to hire staff. “Most Israelis prefer to stay within one or two time zones, which is also important for collaboration,” Niv said.
There are disadvantages of remote work, particularly the loss of the social outlet that an office provides, Binnun noted. “You have to expect a higher amount of turnover when you commit to a path of hiring remote teams,” he said. “But the advantages more than make up for the losses.”