Out to out-India India

A new initiative presents Israel as the world's best quality outsourcing center.

Israel is beginning to look like an attractive outsourcing center for US companies. More and more Israeli companies are interested in climbing this ladder up the globalization tree. Instead of presenting themselves as a duplicate alternative to India's outsourcing services, however, they want to present themselves as a different kind of alternative.

A conference last week at the Jacob K. Javits Convention Center in New York, initiated by the Ministry of Industry, Trade and Labor's Israel Economic Mission, together with the Israel Export and International Cooperation Institute, provided a platform for those Israeli companies wishing to interest potential US customers in their ability to outdo American workers, at least in terms of cost, if not quality.

An initiative called Professional Services from Israel was launched at the conference, spearheaded by Minister for Economic Affairs to North America Zohar Pery.

Pery enlisted the Israel Export Institute's help in spreading the message that outsourcing is not necessarily a bad thing that takes income away from Israelis in favor or their Jordanian counterparts, but also presents an opportunity to Israeli companies wishing to integrate themselves in the global marketplace.

The conference's success can be measured not only in terms of the number of companies represented at the event, but also in the large number of senior executives from North American companies who came to hear what Israel had to offer on the subject.

"Israel is an outsourcing boutique, not an outsourcing supermarket like India," Pery told "Globes". "We aren't competing with India. Our competition is costs in the US. Israel is the natural choice for US companies seeking a high level of service at a competitive price, in an environment that is similar to the US in terms of culture and language. [NOTE: Israel is very influenced by the West and many Israelis speak English -- Ed.]."

According to Compumat Computers founder Mati Herbst, "Israel's chances of breaking into this market are excellent. It has a great deal to offer, and doesn't need to compete with India, but rather, to offer services more suited to its human capital". Many Israeli companies have already adopted the idea that Israel should present an alternative outsourcing route. For example:

  • Radiologist Dr. Ido Netanyahu, brother of Likud chairman Benjamin Netanyahu, diagnoses X-rays for St James Mercy Hospital in New York from his office in Jerusalem.
  • A female radiologist, a recent new immigrant from the US, has taken advantage of the time difference, and continued to work for the same hospital she worked at before coming to Israel.
  • A medical company takes blood samples from Europe for testing in Israel; the results are transmitted via e-mail.

The Israel Economic Mission and the Israel Export Institute are launching a Web site featuring a searchable database of Israeli companies offering their services to international clients. Call centers are just one of the outsourcing services offered.

There is also printing, network access and data storage, internal security, mobile satellite communications, design, technical writing, translation, paralegal services, software programming and testing, healthcare, and more. Some Israeli companies have been operating as outsourcers for years, others have only recently climbed on the bandwagon.

The Israel Economic Mission and the Israel Export Institute's joint effort has already yielded negotiations with a major Chinese company for software testing. According to conference participants, the Chinese company hopes that the Israeli connection will give its product the seal of professional quality assurance.

Pery said that what gives Israel its advantage is its workforce. "The trend worldwide is to locate talent. We are a multilingual nation with a great number of number of native English-speakers."

Others say that Israeli workers "think outside the box," and that Israel's legal system provides a level of intellectual property protection not found in India or other countries. These advantages were offered on the basis of hearsay, as the US becomes disillusioned India as a provider of outsourcing services.

On one hand, Intel Corp. (Nasdaq: INTC) recently announced a plan to create thousands of jobs in India. On the other, two years ago, Dell Computer (Nasdaq:DELL) closed two Indian support centers because of customer complaints about language difficulties. Dozens of US companies now advertise that their customers will never be routed to an Indian call center.

Industry sources say that Israel will never be able to compete with India's low pay scale. An Israeli worker costs one-third to two-thirds that of a North American worker, while Indian workers receives one-sixth to one-eight that of their US counterparts. The gap narrows somewhat when Indian agent costs are factored in, but a price differential still exists.

Pery: "We won't compete with India or Eastern Europe's largest outsourcing service providers. Our strength is in niche markets, where we provide costs lower than in the US."

The Israel Economic Conference was held in conjunction with Jewish Marketplace and Expo, organized by LUBICOM Marketing Consulting, headed by president and CEO Menachem Lubinsky.

Published by Globes [online], Israel business news - www.globes.co.il - on Sunday, December 25, 2005

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