Microsoft Launches Its Israel R&D Center

By Danny Cohen, Guest Author

[SM: I have a great deal of interest in seeing technology and entrepreneurship thrive in other locations besides Silicon Valley. Danny’s article here provides a crisp update on the Israeli scene.]

A couple of days ago Microsoft announced the opening of a new R&D center outside of Tel-Aviv. For the Israeli high-tech industry this is old news. This development center has been operating for a few months already, lead by Moshe Lichtman who returned to Israel after spending many years in Redmond (He joined Microsoft in 1991). The focus of this R&D Center will be around Telecom, Security and Internet applications. All areas that are highly relevant to the expertise of Israeli developers.

Typical for current times, the Microsoft announcement came in parallel to Google’s move into the Israeli market. Same story, same timing. Google is setting-up 2 R&D groups, one in Tel-Aviv and one in Haifa. It is rumored that the R&D team in Haifa will focus on advanced search algorithms. I am not sure what products will emerge from the Tel-Aviv R&D center.

The Google/Microsoft move will have a few implication on the Israeli high-tech market.

1. In the short term, competition will increase for R&D talent. Similar to Silicon Valley, these companies attract top engineers, raising the overall salaries in the marketplace.
2. However, In parallel, Google & Microsoft have the ability to attract Israeli talent from the abroad. The constant “exchange” of Israeli talent from/to the US and Israel has always been a driver in the creating of the Israeli high-tech scene. Intel’s Fab 8 in Jerusalem was built upon’s Dov Frohman‘s return from Santa Clara to Israel. I already mentioned Moshe Lichtman’s return. I also know a few people that moved from Google’s Mountain View campus to the new Israeli office.
3. Finally, in the long term, we will start seeing better, more experienced entrepreneurs. As a VC, it is much easier to invest in someone that has a great idea, some startup experience, but also spent 1-2 years working for Google/Microsoft. I guess we will see much more of those in the upcoming years.

In summary, Israel needs more multinational design centers. With Microsoft, eBay and Google in the market, we are missing Yahoo. I hope we will see Yahoo do something in 2007-2008.