Size matters: Nielsen winds down Israeli R&D operations to focus on India

Calcalist reports that Nielsen is laying off 60 employees at its Herzliya-located R&D center in a push to consolidate offshore development activities in India. The R&D center, which was established following Nielsen’s acquisition of BuzzMetrics in 2007, contributed to the development efforts of Nielsen Online, the set of online measurement services that enable clients to “understand, measure and respond to online consumers”.

Nielsen’s near-departure from Israel is a troubling development if is taken as a sign of things to come. This is particularly true in light of recent discussion about the role of NIS appreciation in driving companies away. But it is also important to remember that the Israeli R&D efforts of multinational technology companies, including Microsoft, Google and Intel, are widely recognized as key contributors of cutting edge technological innovation. Bill Gates, founder of Microsoft, went so far as to say that Israel “is part of Silicon Valley”.

India, while also crucial to the development efforts of global technology companies, has made a name for itself in the market for commoditized offshore IT services – Wipro Technologies is one of several billion dollar businesses to have emerged from India by catering to, and helping create, this market. India’s engineers are rapidly moving up the value chain, but they have a way to go before they are in direct competition with Israel – according to the McKinsey Global Institute, just 25 percent of India’s pool of graduate engineering talent is considered suitable for employment in multinational companies.

To draw a crude analogy, consider the wristwatch industry. Swiss watchmakers, including Omega, were particularly challenged in the 1980s with the onslaught of competition from Japan’s powerful electronics giants. But Swiss watchmakers continued to reinvent themselves and focus on the highest value-added activities – namely the design, manufacturing and marketing of the world’s finest timepieces. Today, though impacted by the global economic downturn, it is still an important industry for the nation.

High-tech is to Israel what watchmaking is to Switzerland: a core competency. In this era of global markets and global competition, there will be challenges, and India will over time become an increasingly worthy challenger. But by continuing to train the best engineers, Israel’s tech sector will continue to thrive – this is not a zero sum game. Nations, like companies, should compete by doing something (or several things) better than anyone else in the world, not on price.

Nielsen’s layoffs come at a time when the global economy is recovering and parts of the technology sector are thriving. While the life of the Nielsen’s R&D center is limited, the core technology – which Nielsen added to its portfolio upon the acquisition of BuzzMertrics – lives on. And the company’s Israel-based engineering talent will now be able to pursue new opportunities.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.