Israeli company looks to India to cut engineering costs

As the cost of engineers goes up in Israel, Ness Technologies Inc. of Tel Aviv plans to increase its software development staff through acquisitions in India and Eastern Europe, according to an executive.

The IT services company, which made its initial public offering (IPO) in October, also plans to acquire services companies in the U.S. addressing vertical markets such as life sciences, independent software vendors (ISVs) and defense, according to Raviv Zoller, president and chief executive officer of Ness. The U.S. acquisitions will help the company increase its footprint there, said Zoller. However, Ness is not close to finalizing any of the planned acquisitions, he said.

The U.S. accounted for about 28 per cent of the company’s revenue, and Israel for 56 per cent, in the third quarter of this year.

Ness set up operations in India about 18 months ago. Its “Managed Labs” unit in Bangalore offers product development, maintenance, testing and release automation services to mid-size independent software vendors (ISVs). Another centre in Mumbai develops software for the company’s retail and financial services customers.

The company employs about 1,350 staff in India, and needs to double that over the next year, Zoller said.

“We are currently seeing very strong demand from our clients, and we are in a situation where we are trying to meet that demand in an effective way,” he said. “One of the ways to grow our head count in India would be through an acquisition.”

The company employs about 2,400 in Israel.

“Within the next year or two, India will have a higher head count than Israel, for reasons of economics and the ability to scale in India,” said Zoller. The cost of software engineers in Israel is three times that in India, he said.

Ness also has development centres in the Czech Republic and Slovakia in Eastern Europe, with a total staff of 300, as some European clients prefer Eastern Europe as a development location.

“There is high quality talent available in Eastern Europe, though not in the same numbers as in India,” Zoller said.

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