High-tech Israel taps into ultra-Orthodox talent

At first glance, the modern offices of Israel's Matrix software company look like any other apart from the separate male and female kitchens, and the room set aside for breastfeeding mothers to express milk.

The young women who work as computer programmers look like career women anywhere else, though their skirts are longer and some of them have shaved heads beneath their natural-looking wigs.

These workers are ultra-Orthodox Jews, known as Haredim, who follow strict gender segregation and dietary rules. Matrix formed this development centre just over a year ago and has found success in combining a cheap source of quality labour with a kosher environment that meets the conditions of modesty demanded by rabbis.

Bracha Colchin is a typical programmer. Born in the US, aged 23 and pregnant with her second child, she has a degree in computer science. Her husband studies full-time in a yeshiva, a religious school. "I love working here, the company provides professionalism and an environment that gives me confidence," she says.

The unit was given the name Talpiot, which denotes an elite force in Hebrew, with the aim of attracting the best-qualified young women. It is all part of Matrix's aim to offer serious competition to off-shore centres in India and eastern Europe.

Ziv Mandl, the co-chief executive officer of Matrix, compares wages starting at $60 (EUR49, £33) per hour in the US, $40 in Tel Aviv and $18 at his company, close to those in India and eastern Europe. This is his main comparative advantage for clients in the banking, telecommunications and high-tech industries.

"We are a good example of how 'near-shore' can work by providing the same quality, language and mentality as in the big, global companies, and all in the same time zone as Europe," he says. "Also, in India and other places, there can be a high turnover of staff whereas here we have won our staff's loyalty. They support our initiative, we developed this centre near their homes to give them confidence and we have a low attrition rate."

Israel has a highly developed high-tech industry, which is recovering after the bubble burst in 2000. Output and software exports grew 12 per cent in 2004 to almost $3bn. But Israel has been hit by the trend to outsource to cheaper countries such as India and China. The Gartner research company estimates Israel has lost 3,500 jobs to India alone.

However, Israel also has a hitherto untapped source of relatively cheap labour - the ultra-Orthodox. Some 6 per cent, or 420,000 people, of Israel's Jewish population describe themselves as Haredim, according to recent surveys. By tradition, they marry young, have large families and are exempt from army conscription, causing resentment among many secular Israelis. Ultra-Orthodox men study Judaism full-time, at least until around the age of 30 when some seek paid employment or teach.

Recent economic reforms introduced by Benjamin Netanyahu, finance minister, have cut deep into previously generous welfare and child benefits, forcing more ultra-Orthodox, particularly women, to find jobs. Public-sector reform is also closing off jobs in teaching and sending women into the private sector.

"The Haredi sector is willing, under certain conditions, to take a little more responsibility for earning its living," said the Israeli online Globes site recently. "That is a message that both the business sector and policymakers struggling over plans for growth and combating unemployment should take to heart."

Matrix has been able to exploit the growing need of ultra-Orthodox families to earn a living. Given their modest lifestyle and absence of conspicuous consumption, they can get by on proportionally lower wages.

Modi'in Illit, where Matrix's Talpiot unit is based, is a settlement just inside the West Bank where government subsidies have proved attractive to young Haredi families seeking more space than is available in Jerusalem or the ultra-Orthodox city of Bnei Brak, close to Tel Aviv. Around 40 babies are born each week in Modi'in Illit, which has a population of 20,000, says one worker.

Mr Mandl plans to expand the Talpiot workforce from the current 200 to 1,000 by the end of 2006 through training and offering more short-term courses allowing students to study advanced technologies guaranteeing them a job.

Matrix recently offered a dinner or outing as a reward, but the staff chose to have a rabbi come and address them on Judaism, a perk that certainly appears to help retain loyalty. "I would turn down a job if the environment didn't suit me," says Chavie Josovic, the administrative director. "I'm a typical Talpiot person, my job is to connect ultra-Orthodox religious life to high tech."