Israel’s high-tech center of gravity shifts to software

Hundreds of engineers and software developers have been laid off in recent weeks by Israeli technology companies and the local subsidiaries of multinationals.

But opposite this wave of layoffs, there are scores of Israeli tech companies – most of them young, fast-growing start-ups – that are taking on hundreds of new employees.

The division that has emerged in recent months is between old-line Israeli tech companies, including those in the fields of communications equipment and semiconductors, and young software companies specializing in security, mobile and Internet.

It is more than a shift in employment patterns; it reflects a shift in the center of gravity for Israeli – and global – high tech that began almost a decade ago from hardware to software.

That change has a direct impact on high-tech employment. In addition, the change has been reflected in a shifting balance of power between, on the one side, the big, veteran tech companies and the research and development centers of the multinationals, and, on the other side, the bustling horde of start-ups.

A back-of-the-envelope analysis of the recent wave of layoffs shows that they have occurred at companies with specific business challenges rather than as the function of a single trend.

“In the framework of global trends, the world of hardware, computerization, telecommunications and data storage is moving to standardization, so that all the value-added is moving to the software side, including processes that are based on virtualization,” says Gideon Lopez, CEO of IDC Israel, a technology market research firm. “Most of the global suppliers that have big R&D centers in Israel are engaged in software development. … In the past 10 years, there has been a transition from creating technology value-added to software. Less effort is being put into equipment and more on its being ‘smart,’ a factor that is separate from the equipment it operates on.”

This phenomenon is demonstrated, for example, by the recruitment efforts by companies backed by the Carmel Ventures fund. Ronit Amiaz, Carmel’s vice president of human resources, is responsible for recruiting employees for more than 10 companies in the fund’s portfolio. These days, she is in the process of recruiting more than 110 people, most of them in areas like the Internet, mobile and software. Some of the portfolio companies are experiencing hyper-growth and are taking on 20 or more staff members each


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