Battle for tech talent in Israel heats up as war in Ukraine rages — report

Israel’s tech industry has been gearing up for a hiring spree in 2022 amid a chronic shortage of talent in the sector, while also closely watching developments in Ukraine and navigating their effects on the local tech economy, according to a new report by Israeli venture firm OurCrowd published Tuesday.

OurCrowd’s quarterly High-Tech Jobs Index, based on surveys with over 170 portfolio companies, looks to track vacancies and hiring patterns across the industry. Data for the newest report, Q4 2021, was gathered and analyzed before Russia’s invasion of Ukraine on February 24 and showed that Israeli companies were reviving ambitious recruitment and hiring plans.

Over 70% of companies polled said they increased recruitment in the fourth quarter of 2021, and 62% indicated that they planned to do more hiring in 2022, according to the report, which also noted the challenges of drawing qualified candidates for software and R&D positions. The Israeli government has been trying to address this talent shortage as well as a lack of diversity in the tech sector for years by promoting various programs and initiatives aimed at integrating members of underrepresented communities — including women, members of Israel’s Arab communities, ultra-Orthodox professionals, workers who reside in the so-called periphery, and workers over the age of 45 — into the industry.

The most recent figures, from 2021, show some 13,000 open positions in tech but observers say the actual number is much higher.

“The rising demand from Israeli high-tech companies is encountering a widespread shortage of qualified candidates, with software/R&D the most sought-after staff. By a margin of more than two to one, companies say they cannot find enough qualified applicants for open positions,” the OurCrowd report said.

The local tech industry, meanwhile, has sought to address the shortage by outsourcing some of the developer roles, including in Ukraine which has for over a decade been a popular information technology outsourcing hub for international firms.

According to a recent estimate by Start-Up Nation Central, Israel’s local tech sector has come to rely on the tech talents of tens of thousands of Ukrainian developers and engineers over the years.

Russia’s war on Ukraine, now in its fourth week, is having an important impact on Israel’s tech industry.

In the weeks before the war, and in its early days, Israeli companies raced to help their Ukrainian staff get to safety by financing relocations and organizing logistics for those who had to stay in the country.

Many of these companies, and others, have now turned to raising funds, organizing donations, and building initiatives to encourage the hiring of Ukraine talent, including those internally displaced to safer parts of the country and those who have been made refugees.

“The impact of the war is likely to make an already tight Israeli labor market much tighter,” OurCrowd CEO Jon Medved told The Times of Israel. “Israel is already short tens of thousands of programmers for its tech infrastructure and tens of thousands of programmers in the Ukraine who were supporting Israeli companies are now in distress. This is going to have an important impact on human resources for Israeli tech companies.”

The OurCrowd report Tuesday also showed that 64% of the Israeli companies surveyed have some employees located abroad, while 36% are entirely in Israel. In addition, in Q4 2021, over 75% of companies were still engaged in hybrid work where employees work remotely some of the time and on-site the rest of the time – a small decline from the peak of 83% in Q3. One-third of respondents said that the lack of full-time office work reduced productivity, while 27% say it had a positive effect.

“The conjunction of a job-seekers market, with the unfulfilled need for quality employees, and the continuous hybrid work-from-home model, has the potential of increasing a much-needed diversity in the workforce in terms of periphery, gender, and age,” said Laly David, a partner and head of business development at OurCrowd.

Medved estimated that, at least in the short term, the Russian war in Ukraine combined with worldwide inflation and continued supply chain difficulties was likely to have a “negative future impact on the overall Israeli job market.”