Exhibit 10.23

                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This First Amendment to Employment Agreement (this "Amendment") is made and
entered  into as of this 17th day of May,  2001,  by and between  DATA SYSTEMS &
SOFTWARE INC., a Delaware  corporation (the "Company"),  and GEORGE  MORGENSTERN
(the "Executive").

     WHEREAS,  the  Company  and the  Executive  are  parties  to an  Employment
Agreement  dated as of  January  1, 1997 (the  "Agreement"),  which  expires  on
December 31, 2001; and

     WHEREAS, the Company desires to assure itself of the Executive's  continued
services  until December 31, 2002 before he considers an election to be retained
by the Company on a part-time  basis in an advisory and  consultative  capacity,
and the Executive is willing to continue to provide such services to the Company
on a full time basis until such date.

     NOW,  THEREFORE,  in consideration  of the mutual promises  hereinafter set
forth,  the parties  hereto,  intending  to be legally  bound,  hereby  agree as
follows:

     1. Paragraphs 1(a),  1(b),  2(a)(2)(i) and 4(a) of the Agreement are hereby
amended  by  deleting  the  references   therein  to  "December  31,  2001"  and
substituting "December 31, 2002" in its place.

     2.  Paragraph  1(c)(ii) of the Agreement is hereby  amended by deleting the
reference therein to "December 31, 2005" and substituting "December 31, 2006" in
its place.

     3. Except as modified by this  Amendment,  all other terms of the Agreement
shall continue in full force and effect without modification.

     4. This  Amendment  may be  executed in  counterparts,  each of which shall
constitute  an original and which  together  shall  constitute  one and the same
agreement


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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the day and year first above written.


DATA SYSTEMS & SOFTWARE INC.


By:      /s/ YACOV KAUFMAN
     ---------------------------------------
      Yacov Kaufman, Vice President and
      Chief Financial Officer


By:      /s/ ROBERT L. KUHN
    ----------------------------------------
      Robert L. Kuhn, On Behalf
      of the Board of Directors


         /s/ GEORGE MORGENSTERN
- ---------------------------------------------
            GEORGE MORGENSTERN


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