How affected is Romania by the migration of israeli IT companies?

Romania, Bulgaria, and Poland have become the main destinations for hiring IT specialists in Israeli start-up companies, as the war in Israel has forced them to move part of their operations abroad to ensure business continuity, according to an article published in Calcalist, from which we have taken some of the following information.

Difficulties in the IT industry add to those in construction, agriculture, tourism, and services (cafes, restaurants, leisure businesses) in Israel, triggered since the outbreak of the war.

These sectors have been severely affected by the lack of workforce, business closures, and increased import costs for construction materials, especially due to a trade boycott imposed by Turkey and the evacuation of Palestinian workers.

In 2024, the Israeli high-tech sector saw a regression to 2018 levels in terms of business activity.

Notably, there was a sharp decline of 55% in investments in Israeli start-ups in 2023 and a 70% drop in venture capital fundraising compared to the 2018-2022 period.

• Israeli IT Companies' Preference for Eastern Europe

Israeli IT companies prefer Eastern Europe due to lower costs and a workforce similar in style and efficiency to that in Israel.

Romania and Bulgaria are favored for their lower salaries, which are approximately 40% of the salary costs in Israel.

Poland is more expensive but remains a frequent option.

Demand for hiring entire teams from these countries, including team leaders and project managers, has increased significantly as investors now require detailed business continuity plans. This demand has led to a fivefold increase in the recruitment of team leaders and about a 60% increase for technical staff abroad.

Before the war, Israeli companies were hiring staff abroad to reduce costs and due to the lack of qualified technical personnel in Israel. However, the war has accelerated this process, especially due to the military mobilization of many Israeli leaders and employees.

• Migration of Activities Outside Israel

The migration of activities outside Israel has become essential for companies, including start-ups, which have strict deadlines and depend on meeting them.

Israeli companies are not only transferring their technical activities but also hiring managerial staff, allowing foreign teams to operate autonomously, without depending on Israeli staff who may continue to be mobilized.

On the other hand, an increasing number of Israeli workers are requesting to be relocated outside Israel, particularly to locations such as Portugal, to continue working for Israeli clients.

This trend has been accelerated by the uncertainty caused by the war and the desire to work in more stable environments.

In the long term, this phenomenon creates turbulence in the labor market and businesses in Eastern Europe and simultaneously endangers Israel's technological ecosystem, as the migration of talent out of the country could affect the formation of new companies and innovation, which are essential for Israel's high-tech economy.

• Effects in Romania

In Romania, these shifts bring both advantageous and disadvantageous consequences.

✓Positive Effects:

1. Increased Employment Opportunities: More jobs in the IT sector and a potential rise in salaries due to increased demand.

2. Transfer of Knowledge and Technology: Romanian specialists gain access to the advanced expertise of Israeli companies, which can stimulate local innovation.

3. Infrastructure Development: Foreign companies might invest in professional training and infrastructure, strengthening Romania's technological capabilities.

4. Increased Visibility of Romania: Romania could be perceived as a global tech hub, attracting additional investments.

✓ Negative Effects:

1. Dependence on Foreign Companies: If these companies relocate their operations, Romania's labor market could become unstable.

2. Limitation of Local Initiative: Employment in foreign companies might discourage the creation of Romanian start-ups.

3. Wage Pressure on Local Companies: Romanian companies might struggle to compete with the salaries offered by foreign firms, losing local talent.

The conclusion is that while the hiring of local workers by Israeli companies brings short-term benefits, there are also long-term risks that could impact the sustainable development of Romania's technological ecosystem.