Israeli hi-tech companies that consume software development services outsourced from Eastern Europe are nothing new. However, an interesting trend in the field has been evident in recent months, where we are witnessing an increase of tens of percent in Israeli high-tech companies that move their activities mainly to Poland, the Czech Republic, Slovakia, Romania and another destination that has not yet made headlines – Bulgaria.
why is it happening? The lack of workers in the high-tech industry in Israel and the growing competition for quality personnel are causing more and more high-tech companies to transfer their software development and technical support tasks to Eastern Europe. In the spirit of the times, with the transition to remote work which does not require the entire team to arrive at a single location, in one city or even in one country, and in order to speed up the recruitment of the team of experts (Time To Market), companies that recruit in Eastern Europe are expanding the search for experts to Bulgaria as well. There, it turns out, there is a pool of talented and professional software people.
The corona virus has catapulted the online culture forward. This need resulted in an increase of approximately 35% in the development of websites and applications for the purpose of trading, receiving information and performing remote operations. The increase caused a strain on the Israeli software development companies, which rushed to recruit employees and developers to meet the growing demand. The change in the working method and the transition to hybrid work, where there is no obligation to come to the office on a daily basis, allowed those programmers and developers to provide the service from home and basically from anywhere. The load on the Israeli development market with the new way of working has become a significant recruitment advantage, which allows you to recruit employees and talents from different parts of the world.
Discover Bulgaria
The Russian invasion of Ukraine last February posed a considerable difficulty for the Israeli high-tech companies, a significant part of their development services were in the attacked country and now they were required to find an alternative solution and quickly. Most of the companies found the solution in the technological fathers, mainly in Poland, and to a lesser extent also in the Czech Republic, Slovakia, Romania and, surprisingly, also in Bulgaria.
Under the radar, in small but steady steps, Bulgaria has become one of the countries that offer high-level software development and technical support services, small in the field of its neighbors, but certainly of high quality. According to World Bank data, each year approximately 200,000 students graduate from higher education institutions in the country, and approximately 5% of them also graduate from high-tech studies.
One of the Israeli companies that recognized the potential in the quality market in Bulgaria is the AllStars-IT company – an Israeli software development and outsourcing services company, which invested approximately NIS 4 million in expanding its existing development center in the capital city of Sofia.
“The expansion of business activity in the company’s development centers in Eastern Europe provides an answer to the shortage of IT personnel in Israel,” explains Shlomo (Salomon) Amar, the founder and CEO of the company. . With the massive shift of talent to hybrid work, the issue of location has become less relevant. The name of the game for those who want to win in the software market is the availability of the engineers and the quality of their work, not their physical location. Working with talent pools from several countries, including Bulgaria, is for us a complementary goal to our large centers in Poland and Ukraine, and allows us to continue to reduce recruitment times for each open position.”
The company, which has been operating in Eastern Europe for over a decade, recognized that Bulgaria is a quality complementary market (about 70 thousand software people) to the significantly larger market in Poland (about 450 thousand software people). When establishing distributed groups in Eastern Europe for its Israeli clients, it leverages its recruitment capabilities from its centers scattered throughout Eastern Europe, including in Bulgaria, in order to produce faster and better quality recruitment for the client. Therefore, the company decided to significantly expand its development center in the region.
In addition, the company operates a technological hub in Poland, large development centers in Ukraine with 800 employees and development centers in Romania, the Czech Republic, Slovakia and Portugal, with more than 1,000 employees. All of them provide services to leading Israeli and American companies in the fields of high-tech, cyber, cloud technologies, fintech, insurtech, medical systems, semiconductors, management systems, banking and more. Development centers of large and well-known companies, such as HP, SAP and Microsoft, operate in Bulgaria, so establishing the center in the country was a necessary step.
Talents and competition
“As a company that has been operating throughout Eastern Europe for many years, we have noticed that in the last two years there have been far-reaching changes in the industry that affect the ability to recruit high-quality, professional and above all loyal personnel to the employer,” notes Amr, “including salary comparisons between experts from different countries, beyond an almost uniform global salary For experts with a similar specialization, hybrid work, resistance to returning to the offices and quiet resignation. The success of the business activity of any company depends on its ability to maintain an available, high-quality and stable workforce over time.”
According to IDC – International Data Corporation, the leader in the field of consulting services and providing market data for the information technology, communication and consumer behavior markets, the information technology and communication industry in Bulgaria has registered a 300% increase over the past seven years with an activity turnover estimated at approximately 2.5 billion euros.
The ICT (Information and Communication Technology) industry in Bulgaria has proven in the last decade that it maintains stability and growth, and has managed to emerge as one of the most profitable industries in the country, with the software business considered to be the area that provides the best performance in the industry. According to the EUROSTAT website, the official statistics website of the European Union, in the ICT industry in Bulgaria today about 2.3% of all employees in the country (about 70 thousand employees) are employed – a figure that is admittedly below the average of the European Union, which is 3.5% of all employees. but is characterized by constant growth.
The Bulgarian companies very quickly realized the advantages of the ICT industry in the country, advantages that the Israeli and American companies realized late and are only beginning to implement in recent years – something that increases the competition between the various companies, opens up new positions in the economy and provides new opportunities for hiring employees in a variety of relevant positions, with an emphasis on talents local Added to this is the fact that the Bulgarian government is subject to EU directives and legislation on the digital economy, and that the corporate tax rate is only 10% – one of the lowest among EU member states.
saving expenses
Investment in technology in Eastern European countries has increased significantly, and the activities of local companies have expanded accordingly – making the young people working in the IT sector motivated employees who are hungry for success. When you add to the equation the short geographical distance between Bulgaria and Israel as well as the fact that there are no time differences, you find that outsourcing work with Bulgaria is a WIN-WIN situation.
“Bulgaria is an attractive destination close to home with working hours that are synchronized with the Israeli market and with English-speaking, professional, loyal programmers who tend to stay on the job longer compared to Israeli workers in the same position,” says Amar. “When the average salary in Bulgaria is significantly lower than the average salary of a high-tech worker in Israel, it is possible to reach up to a 40% discount in the company’s expenses section and without harming the quality of the work.”
The advantages of employing workers in Bulgaria for Israeli companies are many and clear: geographical proximity to Israel and neighboring European countries without time differences, availability of work for engineers and multilingual programmers, a stable political and economic environment and compliance with the very strict privacy protection regulations according to the European Union standard – all these together, in combination Low employment costs make Bulgarian talents highly sought-after employees in the IT industry.
It’s no secret that recently many Israeli hi-tech companies have decided to deal with the crisis in the industry by making a long series of cuts, while other companies have continued to routinely outsource software engineers, engineers and back office personnel and optimize work processes.
Some data: towards the end of the first third of the year 2022, a shortage of 32.9 thousand jobs is estimated in the high-tech market, with two-thirds of these jobs being technological jobs, so it can be clearly seen that the demand for programmers, devops and product people still exists and is even increasing. Although the recruitments have decreased, they still continue, just in a different format.
There is no crisis in high-tech
“This is not a crisis in the high-tech industry at all, as the headlines of the newspapers and economic websites were quick to point out,” insists Amr. “This is a call for efficiency in the industry, and the companies are now doing what they should have done a long time ago, which is to optimize work processes. The recruitment processes are becoming focused, more accurate and irrelevant to the geographic location of the employee. These processes allow the company to refine its recruitment goals and sparingly choose the The best talents for her.”
Is it easier to recruit talent abroad than in Israel?
“This is another change that becomes possible with the entry of the companies into Bulgaria – the possibility to recruit talents that were previously difficult to reach in other places, and not only to recruit good employees, but loyal employees who will stay with the company for a longer time. The process of recruiting employees and keeping them in the country makes it possible to recruit the relevant employees for the appropriate positions, offer They have good conditions and above all stability – which will significantly reduce the percentage of people leaving.”
And the right way to retain employees is necessarily outsourcing?
“In the days of economic instability on a global level, high-tech companies that want to continue to exist and run efficiently must find creative ways to recruit and retain employees. It seems that the best way to do this is to use outsourcing services in Eastern Europe in general and in Bulgaria in particular as a complementary market to the leading markets in Eastern Europe.”