The Information Technology Landscape in Israel
Software Development
"Close
examination of Israeli's software industry reveals a remarkable picture of
innovation, growth and diversification." (31)
The Industry:
Software comprises a major part of Israel's industrial production and exports. Stand-alone software, both for both consumer and business applications has become an important sector in Israel and is growing rapidly in the country. Dominant sectors include vertical software and systems management applications. "Israeli software houses are especially strong in systems management and control 2.2% of the global market." (47) There are approximately 300 software houses operating in Israel.
Growth of the Industry:
As of 1998, the software market was valued at $1.8 billion and grew to $5.4 billion in 2000, including domestic sales and exports. In 1990, software exports from Israel amounted to $90 million while overseas sales soared to $2.6 billion by 2000. Domestic sales have been growing by 10% annually and overall sales for the industry are expected to top $4.2 billion in 2001. (31) (See Table 2 and 3 for Industry and Export Sales).
Table 1: Software Market by Sector
Source: (31)
Table 2: Software Industry - Sales
Source: (31)
Table 3: Software Industry - Exports
Source: (31)
Table 4: Software Export by Sector
Source: (31)
Success Factors:
Human Resources
"Ongoing sales growth reflects the ability of Israeli software houses to devise technologies, software systems, entire packages and products that meet market needs. Local software developers continually conceive new technologies and products, which either complement new developments in hardware design or fill a vacuum in the market. These products encompass virtually every sphere of human endeavor, including commerce and industry, education and government, banking, finance and leisure. This exceptional success can be attributed to the Israeli software industry's greatest asset - the caliber of its human resources." (31) In Israel there are currently approximately 35,000 computer specialists, 14,500 of whom are employed in the country's more than 400 software houses. (31)
Technological Independence
In order to be truly self sufficient, Israel developed an understanding and "mastery of data processing and software." (31) This was achieved by combining globally developed technologies with the "initiative and capabilities of scientists and engineers" in Israel. (31) As a result, the software industry has doubled in size over the past four years and Israel has become a world leader in software development tools. The defense industry has become a major consumer of software, specifically with real time applications, avionics software, communication systems, and command and control applications. (31)
Exports
As a result of Israel's small population of about six million, the demand for computer software, while high per capita, is still relatively low and has forced the industry to look abroad. An extensive list of software packages have been created specifically for the export market. "There is virtually no computer application for which an Israeli package does not exist." (31)
Software Design and Development
"Israel has become a major international center for software design and development. The world's largest computer companies, including Microsoft, IBM, Compaq, Hewlett Packard, National Semiconductor, Motorola and others, take advantage of the country's ability to conceive new technologies and products, or design packages to order using ingenuity, speed and flexibility when confronted with difficulties." Microsoft set up its first R&D center outside of the United States in Haifa, while Intel retains its largest R&D center in Israel. (31)
Venture Capitalists
Throughout the last few years, about 100 private venture capital companies have been established in Israel with the objective of "financing start-up companies in various high-tech areas, the majority have their base in software products." (31) In 1999, of the $1 billion in investments made, $481 million (44%) went into software houses. (31)
“With the exception of the US, no other country in the world has managed to build a technology sector based on startup companies rather than older, established businesses. Israeli engineers have shown a remarkable readiness to risk leaving secure jobs in big companies to form business of their own.” (32)
