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Published in the October 2007 issue An industry born of necessityIsrael has developed an enviable reputation for IT security development. Eleanor Dallaway finds out why
Everyone has their own pre-conceptions of Israel. Whether it’s seen as a war ground, the core of Judaism, a beautiful holiday destination or a land of political and religious conflict, everybody has an opinion. Israel may be all of these things, but it also has a booming economy. Westernisation is sweeping the country, and advances in research and development are taking the global market by storm. The infosecurity market is no exception. While comparing any location to Silicon Valley is an over-used cliché, similarities are rife: the country’s reputation as an international centre for research and development has been further enhanced by investments by Microsoft and IBM among others. I went to Israel to find out why. The economy used to rely on agricultural goods, but has moved towards knowledge-intensive industries, with the aim of ensuring that the country is at the forefront of high-tech innovation, built on a sound infrastructure and consisting of an educated and creative workforce. Israel’s economy continues to grow strongly, and increase in demand from the international market for its technological expertise plays a big part in this. In 2005, almost half of the total industrial exports were technology based. Today, Israeli entrepreneurs lead the way in many fields of software applications and homeland security. So why are so many information security companies founded and developed in Israel? “That’s like me asking you why there are so many umbrella manufacturers in the UK,” says Israel Levy, president and chief executive of ControlGuard (see page 24 for all company information). “We need security here in Israel like you need umbrellas back in the UK.” But is it really that simple? “The security sector here in Israel is huge,” says Levy. Even as a flying-visitor, that much is apparent. Bags are checked on entrance to most hotels, shops, bars and buildings, and you can’t go too far without catching sight of army or police. It’s strange – while the tight security makes you feel safe, it’s also a constant reminder that you are in Israel; a country that believes itself to be at war. On entering the ControlGuard building in Herzlia near Tel Aviv, visitors are confronted by the first layer of security, a guard at the car park entrance who eyes visitors suspiciously and asks our guide (a ControlGuard staff member) who we are. The mood is soon lightened when he jokingly asks to check the car boot. Israelis know to take security seriously, but they also tend to have a sense of humour. “Look at the ministry of defence, and our army,” says Levy. “We’ve got lots of people coming out of the army with ideas for security, and they’re good and attentive ideas because they have to be.” Military might Nir Zamir, vice-president of marketing for Yoggie, agrees that “Israel’s tremendous wealth of knowledge” about information security is in line with the “strong army and military might of Israel”. He adds: “The industry is growing as the face of the battleground does. We apologise that our technological advantage comes from our army, but at least it’s something good that comes out of the conflict.”
Sitting in the Yoggie offices, bungalows surrounded by lush green countryside, any sign of conflict seems a million miles away. The land stretches as far as you can see, and has potential for huge expansion. Plans are already underway to convert a third property into the company’s marketing offices, and it’s hard not to think of it as the foundations of a ‘Yoggie empire’ if the company’s growth continues to accelerate. Yoggie recently released its new product, the Yoggie Pico, which Zamir describes as an “interesting and sexy gadget”. No bigger than a flash drive, the Pico is packed to the brim with security software. “There has been an avalanche of interest from all over the world,” says Zamir, “the thing about Yoggie is that people need it now”. Nick Outteridge is the director of business development for PureSight, and is the Israeli company’s only British member of staff. “Israel needs superior security. Having survived the Holocaust, it sharpens minds. What they’ve suffered has given them the edge”. In Israel, at the age of 18 most men and single women are inducted into the Israel Defence Force (IDF), women for two years and men for three. Many IT security experts in Israel agree that this is where the thirst for innovation and need for security is embedded into Israeli citizens. “There are lots of people that come out of the army qualified in security, and develop start-up companies,” says Yaacov Sherban, chief executive for Applicure. “The Israeli government and army have a tremendous need for security and put investments into it – not just IT security, physical security too.” “We have a culture that knows how to understand the needs of people and security,” says Eyal Adar, founder and chief executive of White Cyber Knight. “The entire architecture of Israel is drawn from risk assessment, a unique ‘know-how’ when it comes to understanding risks. We just engineer security solutions to match each risk.” Advance guard Sdema Group emphasised the importance of security solutions preventing breaches before they happen, rather than finding a solution after the damage has been done. Sdema was founded in 2004 by Shlomo Harnoy and Dror Mor, both who have backgrounds in the Israel Security Agency (Shin Bet, also known as Shabak), which is Israel’s equivalent to MI5. The political situation in Israel requires forward planning and a state of high alert, explains Batsheva Iluz, vice-president of business development for Sdema. Iluz argues that an organisation can heighten their security and profitability by creating an inclusive and efficient environment for security, rather than buying one security solution product at a time. “Technology is only part of the solution,” she explains. “Physical and IT security are co-dependent in Israel,” says Iluz. She gives an example: “A while ago, there was a suicide bombing in Tel Aviv. Intelligence had picked up this threat before, and had used cameras and technology to track him. They knew where he was, but that’s where IT security stops. The security guards at the bar that the suspect tried to enter refused him entrance to the bar. The bomb exploded outside the bar and still caused deaths, but not nearly as many as if physical security hadn’t been in place to stop him entering the packed building.” Guy Lifshitz, chief executive of iTcon, argues that Israel’s political position and the conflict in the country is why “activity in the infosecurity market in Israel has grown enormously”. He adds: “Our government is a high target for all of the world. We therefore have to be innovative and superior in protecting our government from e-threats.” A superior education Avishai Wool, chief technology officer and co-founder of AlgoSec, says that education rather that the army is the reason for strong research and development and numerous security start-ups. “The army is a melting pot,” he explains, “an effective filter of people. The high-tech units separate the young, intelligent and driven children, they take on responsibility at a very young age and go to university later because of their service in the army.” “Education is taken more seriously here,” Wool continues. “Students are older and therefore more focused and driven. And this is why we’re seeing so much talent and superior R&D – it’s not just about the military. The industry is booming out here, and all of the innovation coming out of Israel has led to major US companies positioning their development teams out here.” In the late 1990s and early 2000s, the Israeli government offered funding to many start-up companies, and Almog Aley-Raz, chief executive of PerSay, believes that to some extent this was the drive for innovation in the IT security sector. Government promotion had a significant impact on the Israeli information security industry, and encouraging start-ups with financial help aimed to keep talent in Israel. “Otherwise, all of the talent would have gone and done this in the US,” says Aley-Raz. PerSay’s offices are the complete contradiction of Yoggie’s base. Situated on the seventh floor of a modern, high-rise building in Ra’anana, PerSay’s offices are contemporary and professional. “We’re so good at infosecurity because we have the nerve to do this. That’s what it’s like in Israel,” says Aley-Raz. Their offices are no exception: security getting into the building was, again, extremely thorough. Making it big overseas At the end of the 1980s, the government and the Bank of Israel began to implement a policy of full foreign currency convertibility, decreasing the country’s currency control regulations and therefore liberalising Israel’s trade. This made it easier for individuals to make portfolio investments abroad and allow foreigners to trade in Israel without difficulty. Today, Israeli residents can trade freely and make portfolio and direct investments overseas. Israeli infosecurity companies are no stranger to the US market, many positioning their sales and marketing teams there. “Well, it’s just practical isn’t it?” comments PureSight’s Nick Outteridge. “Because of time differences, to sell to America, you have to be in America. Everyone wants to make it big in the biggest market in the world. It’s important to have a footprint in the domestic land of the USA if you want to make it out there. People like to buy within their homeland.” “I like to buy British for example, but I’m happy to buy outside of Britain if the technology is better,” he adds. Having spent many years working for his former employer, SurfControl, Outteridge now notices cultural differences working for an Israeli company. “They’re very blunt people, they tell it how it is, and that’s refreshing. They are very bright people.” With a population of just over seven million, Israel is a very small market. So why don’t start-ups head out to the US to build up their businesses, with its 300 million people? “Moving staff out of Israel would be very hard. There are big cultural differences and it’s not like Israel, where everybody knows everybody,” says Avishai Wool of AlgoSec. The big fish in a small pond/small fish in a big pond scenario springs to mind. Guy Lifshitz admits that there is often reluctance from foreign customers to deploy Israeli products. “At the moment we’re trying to sell our service to other governments, but more developed countries already have the structures in place. And besides, they don’t like to bring foreign talent in.” And it seems to work both ways, with Israeli security companies admitting they like to use designers and manufacturers within Israel, giving both ease and quality as reasons for doing so. Is the foreign reluctance to use Israeli security products fuelled by Israel’s political conflicts? “Not at all,” argues Eyal Adar. “There are many collaboration issues between different governments in different countries. It’s just the fact that the technology is coming from a different country, it doesn’t matter who.” Take the US for example: “It’s difficult to sell to America from outside,” says Adar, “most Americans don’t even know how to dial out of the country.” Strength in numbers There is a great and arguably deserved pride among many of the Israeli security companies that Infosecurity visited surrounding the security industry. The market is strong, it’s growing fast, and it’s innovative – what’s not to be proud of? The I Safe group cluster was established by MIW (www.miw.co.il) with the plan to centralise comprehensive solutions and services in the security market. Most vendors agreed that the marketing opportunities that I Safe creates are the biggest benefit. For example, at London’s Infosecurity Europe exhibition last April, I Safe ran an ‘Israel’ stand, decreasing the cost for each company while maximising exposure. Daniel Giron, director of the department of telecom, computer and software industries for the ministry of industry, trade and labour, has granted I Safe a loan for the third year running. “The idea of the I Safe group is very positive – the co-operation between the companies is harmonised, the group is energetic, alive and sets a good example,” says Giron. I Safe have one rule, which sets the tone of the organisation: that there must be no competing companies in the group. It’s a similar mentality that prevents CheckPoint from joining: “We’re too big for I Safe,” says Eyal Katz, business development management for the Israeli information security giant. “There should be an equilibrium between members, and CheckPoint would have too much power – it would affect the productivity of the forum.” And there was little evidence of a competitive atmosphere at the I Safe conference, held on 5 September in Tel Aviv, as attendees listened to each other’s presentations and searched for compatibility rather than a competitive edge. Applicure’s Yaacov Sherban even talked about the possibility of Israeli technology companies joining forces to make an integrated project. “There is a lot of synergy between Israeli security companies, and everyone is filling a different gap. In the long run, an idea would be to work with the Israeli government to provide a single [Israeli] platform, which customers could build on.” Outside of the I Safe group however, Israel Levy of ControlGuard admits that there is competition within the industry. Lifshitz of iTcon says that being in Israel makes competition that bit tougher. “Because everyone is an expert, we’re always looking for an edge. iTcon is different, we’re not greedy like most Israeli companies, and we’re not looking for the immediate penny,” says Lifshitz. “The percentage of Israeli technology companies greatly outweighs and goes beyond the size of the country,” says Nir Zamir, vice-president for marketing at Yoggie. “So naturally there will be some competition. However, we all got here on the same road, so there is a sense of unity and we always try to see how we can be better served together.” Developed research At 4.8% in 2005, Israel claims the highest rate of research and development investment in the world, and reckons it ranks third in entrepreneurship. Large technology companies have opened R&D centres in Israel. Bill Gates explains why Microsoft has established an office in Ra’anana: “For Microsoft, having an R&D centre in Israel has been a great experience…the quality of the people here is fantastic.” With reasons such as motivated staff and an innovative atmosphere enhanced by government-funded research and development programmes, Cisco, Motorola and eBay have also invested in Israeli technology. Although Eyal Katz of CheckPoint argues that telecommunications has been the largest market to emerge from Israel in the last 12 years in purely economic terms, the success of the information security industry is undeniable. “The thing about Israel is that the cultural influence shines through – Israelis see a huge task and just want to overcome it,” says Katz. “The security market is only rising”, says Daniel Giron of the industry ministry, but adds: “It’s just a pity that we need it so much.” And this is the crux of the matter: the Israeli people know that their technology, especially in the information security sector, is among the best in the world. They know that their researchers and developers are amongst the most talented. But they are still burdened with the perhaps unjustified need to have to apologise for it. And that’s what makes this story of growth and success just a little bit tainted. Eleanor Dallaway travelled to Israel as a guest of the I Safe
Group, which consists of 14 information security companies, and
was the first consortium formed with the aid of the Israel Export
and International Cooperation Institute and the ministry of industry,
trade and labour to help maximise marketing resources COMPANY DIRECTORY AlgoSec, firewall analysis
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