The high-tech company Elementor, which produces an online platform that helps people create WordPress websites, recently launched a customer service assistance center in Sderot, a town of some 28,000 residents in the Western Negev.
An increasing number of tech companies are establishing outposts in Israel’s periphery, far from the cluster of firms concentrated in the coastal center in what has become known as "Silicon Wadi."
Hiring away from the Tel Aviv rat race ensures a more diverse workforce and comes with financial advantages.
Elementor, which was founded in 2016 by Haredi entrepreneurs from Bnei Brak, just east of Tel Aviv, has a regional office in nearby Ramat Gan.
It has completed a first phase of filling approximately 20 “Tier 1” positions in Sderot, which entail being first in line to handle customer inquiries, with plans to hire dozens more.
“The matter is very important to us, being able to reach other areas in Israel, especially with the COVID crisis leaving so many people out of work,” says Paula Goldberg, HR business partner dedicated to the customer experience group at Elementor.
“We want to make a social impact and we believe that improving diversity is how we grow.”
Ron Sherill, head of customer experience at Elementor, says the pool of candidates in and near Tel Aviv tends to remain unchanged, and thus it is necessary to venture outside the area to find a different type of population.
“Israel is very small. … Ninety-something percent of the potential workforce is located within 30 kilometers north or south of Tel Aviv. It’s often an employees’ market because it is a limited pool that doesn’t really grow or get more diversified,” he says.
“There is always a company that will offer more money for a position. You get whatever talent you can out of it, which is why you have to learn how to tap the potential outside this pool.”
This is especially true for Tier 1 positions, which do not require as much technical expertise and which Tel Aviv area residents tend to see as temporary or starter jobs.
“I try to compare: If I build in Tel Aviv, and I base my recruitment on students, I could fill that whole group quickly because of the type of work and the location, but they will always be on the lookout for the next job and next opportunity,” Sherill says.
In the periphery, “people see it as a professional opportunity that they don’t want to miss,” and thus they tend to stay longer and be more dedicated to the company.
“There are quite a few reasons why we went to that kind of solution in the periphery. It starts with our need to expand our support services. … We’ve had a growth period in the last year; we need to revamp it [customer service],” Sherill says.
“We thought first about building it as an outsource function in our headquarters in Ramat Gan, but it became clear that Tier 1 functions are a bit different from the rest of the support functions because of the high rate of [employee] turnover. … Then the idea of going down to the south in the periphery was brought up,” he continued.
“These guys will be much more stable and that aligns very well with our more holistic approach, that we like diversity. … We found an amazing group of people who were waiting for such an opportunity that was more than transient work; we all feel like we got something from it."
Sherill says the talent can be found in the periphery, which is less well off than the main cities in Israel, and that building centers in these more remote locations allows companies to attract people who would not be willing to commute to the tech hub.
“One of the reasons we went there is to tap new markets for those limited by the geography of travel, like in Beersheba or Sderot, who would not come to Tel Aviv,” he says.
Elad Yeori, CEO of SouthUp, who co-founded the not-for-profit startup incubator in the Western Negev in 2017, agrees.
“If you have employees who are coming from Ashdod to Tel Aviv, it will take them less time to come to work in the startups here. The startups at SouthUp are serving populations in Ashdod and in Be'er Sheba,” he told The Media Line in 2019.
Eyal Waldman, president and CEO of Mellanox Industries, which has an outpost in Yokneam Illit, in the Lower Galilee, said that same year that there are direct financial benefits for companies in moving outside large urban centers, particularly in Israel.
“The government gives you incentives, like tax [breaks],” he says.
Waldman also agrees that there is a broad range of talent in the more rural areas.
“You can find good employees in the periphery … because there are universities out there."
Another perk for startups is increased funding from the Economy Ministry’s Israel Innovation Authority (IIA), previously known as the Office of the Chief Scientist.
Those outside the periphery can fund half their early budget through monetary incentives from the IIA. However, those in the periphery are able to get three-fourths of their budget from the IIA.
Still, there are also downsides to setting up shop there.
“The periphery has its own difficulties because it doesn’t have too much of a population,” Yeori says.
“It’s difficult to find employees for specific positions and sometimes, when there are tensions with Gaza, it’s an issue” in the Western Negev.
Just how much the coronavirus pandemic will shape the expansion of high-tech centers in the periphery, in the long run, remains to be seen. With the advent of stay-at-home orders, companies greatly expanded working from home.
“I think what we found out throughout this pandemic is that people don’t have to be there in the office with you in order to work with you,” Sherill says.
“Working remotely is not something they considered before the pandemic. The thought of having a team based outside of headquarters is still new to us as a legitimate thing.”