Israel has a booming economy. Westernisation is sweeping the country, and its advances in research and development are taking the global market by storm.
The information security market is no exception. Although comparing a location to Silicon Valley is a cliché, the similarities are rife, and the country's reputation as an international centre for research and development has been further enhanced by investments from Microsoft and IBM, among others.
The country's economy used to rely on agriculture, but has now 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 an educated and creative workforce.
Israel's economy continues to grow strongly, and increasing 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 is like me asking you why there are so many umbrella manufacturers in the UK," says Israel Levy, president and chief executive of ControlGuard. "We need security here like you need umbrellas in the UK."
A need for security
But is it really that simple? "The security sector here in Israel is huge," Levy says. Even as a flying visitor, that much is apparent. Bags are checked on entry to most hotels, shops, bars and buildings, and you cannot go too far without catching sight of army or police. It is strange - although the tight security makes you feel safe, it is 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 have lots of people coming out of the army with ideas for security, and they are good ideas because they have to be."
Nir Zamir, vice-president of marketing for information security firm Yoggie, agrees that Israel's wealth of knowledge about information security is in line with its strong army and military might.
"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 is something good that comes out of the conflict," he says.
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 under way to convert a third property into the company's marketing offices, and it is 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 a plug-in laptop security system. "There has been an avalanche of interest from all over the world," Zamir says. "The thing about Yoggie is that people need it now".
A thirst for innovation
Nick Outteridge is the director of business development for IT security company 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 have suffered has given them the edge."
At the age of 18, most Israeli men and single women are inducted into the Israel Defence Force, women for two years and men for three. Many IT security experts in Israel agree that this is where the thirst for innovation and the need for security is embedded into Israeli citizens.
"There are lots of people who come out of the army qualified in security and develop start-up companies," says Yaacov Sherban, chief executive for web security firm Applicure. "The Israeli government and army have a tremendous need for security and put investments into it - not just IT security, but physical security too."
Eyal Adar, founder and chief executive of information risk management firm White Cyber Knight, says, "We have a culture that knows how to understand the needs of people and security. 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."
Sdema Group, a homeland security provider, emphasises the importance of security systems preventing breaches before they happen, rather than finding a solution after the damage has been done. Sdema Group was founded in 2004 by Shlomo Harnoy and Dror Mor, both of whom have backgrounds in Shabak, Israel's equivalent to MI5.
The political situation in Israel requires forward planning and a state of high alert, says Batsheva Iluz, vice-president of business development for Sdema Group. Iluz says that an organisation can heighten its security and profitability by creating an inclusive and efficient environment for security, rather than buying one security product at a time. "Technology is only part of the solution," she says.
Pre-emptive security systems
"Physical and IT security are co-dependent in Israel. 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 is where IT security stops," Iluz says.
"The security guards at the bar that the suspect tried to enter refused him entrance. The bomb exploded outside and still caused deaths, but not nearly as many as if physical security had not been in place to stop him entering the packed building."
Guy Lifshitz, chief executive of information security firm iTcon, says that Israel's political position and the conflict in the country is why activity in the information security market in Israel has grown enormously.
"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," he says.
Avishai Wool, chief technology officer and co-founder of network security firm AlgoSec, says that education, rather that the army, is the reason for strong research and development and numerous security start-ups in Israel.
"The army is a melting pot, 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," he says.
"Education is taken more seriously here. Students are older, and therefore more focused and driven. And this is why we are seeing so much talent and superior research and development - it is 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 biometric security firm PerSay, says 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 aims to keep talent in Israel. "Otherwise, all of the talent would have gone and done this in the US," Aley-Raz says.
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 consequently liberalising Israel's trade. This made it easier for individuals to make portfolio investments abroad and for foreigners to trade in Israel. Today, Israeli residents can trade freely and make portfolio and direct investments overseas.
Israeli information security companies are traded on the US market, and many position their sales and marketing teams there. "It is just practical," says 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 is important to have a footprint in the domestic land of the US if you want to make it out there. People like to buy within their homeland.
"I like to buy British for example, but I am happy to buy outside of Britain if the technology is better."
Having worked for UK web security firm SurfControl, Outteridge now notices cultural differences working for an Israeli company. "They are very blunt people, they tell it how it is, and that is refreshing. They are very bright people."
With a population of more than seven million, Israel is a very small market. So why don't start-ups head out to the US to build up their businesses? "Moving staff out of Israel would be very hard. There are big cultural differences, and it is not like Israel, where everybody knows everybody," Wool says.
The overseas security market
Lifshitz says that there is often reluctance from foreign customers to deploy Israeli products. "At the moment we are trying to sell our service to other governments, but more developed countries already have the structures in place. And besides, they do not 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 of development 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," says Adar. "There are many collaboration issues between different governments in different countries. It is just the fact that the technology is coming from a different country."
Adar gives the US as an example. "It is difficult to sell to America from outside - most Americans do not even know how to dial out of the country."
The internal landscape
There is a great and arguably deserved pride among many Israeli security companies. The market is strong, it is growing fast and it is innovative.
The I Safe group was established by finance firm Managing Investments Worldwide, with the plan to centralise services in the security market. Most suppliers agree 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 and 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 and alive, and sets a good example," Giron says.
I Safe has one rule, which sets the tone of the organisation: there must be no competing companies in the group. It is this that prevents network security firm CheckPoint from joining.
"We are too big for I Safe," says Eyal Katz, business development manager for the firm. "There should be an equilibrium between members, and CheckPoint would have too much power - it would affect the productivity of the forum."
There was little evidence of a competitive atmosphere at the I Safe conference, held on 5 September in Tel Aviv, as attendees listened to one another's presentations and searched for compatibility rather than a competitive edge.
Yaacov Sherban from web security firm Applicure 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 that customers could build on."
Outside of the I Safe group, however, there is competition within the industry. Lifshitz says that being in Israel makes competition that bit tougher. "Because everyone is an expert, we are always looking for an edge."
Israel claims the highest rate of research and development investment in the world, with 4.8% in 2005, and says it ranks third in entrepreneurship.
"The percentage of Israeli technology companies greatly outweighs and goes beyond the size of the country. 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," Zamir says.
Bill Gates explains why Microsoft has established an office in Ra'anana, "For Microsoft, having a research and development 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 backed by government-funded research and development programmes, Cisco, Motorola and eBay have also invested in Israeli technology.
Although Katz argues that telecommunications has been the largest market to emerge from Israel in the past 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," he says.
Giron says, "The security market is only rising. It is just a pity that we need it so much."
And this is the crux of the matter: Israelis 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 among the most talented available.
But they are still burdened with the perhaps unjustified need to have to apologise for it. And that is what makes this story of growth and success just a little bit tainted.
● This article first appeared in Infosecurity magazine
This was first published in January 2008