The Information Technology Landscape in Israel
Analysis: National IT Strengths and Weaknesses
Israel's high-tech
success has been quite a phenomenon. As a very small country with such a
small population, Israel has managed to outdo other nations much larger and more
populated in what is perhaps one of the leading growth areas of technology. The
following section outlines Israel's strengths and weaknesses in developing its
high-tech industry.
Strengths:
Strong Economy
"Despite the ongoing political and economic upheaval in the Middle East, Israel's innovative high-tech sector has lost little of its dynamism." (18)
Israel has survived a number of economic downturns in its recent history including a tourism crisis as a result of political turmoil and worldwide economic recessions. Though the country has witnessed a slowdown in some sectors, the economy is still growing and will continue to prosper because of its strong multinational corporations and defense industry exports.
Israel's population of less than 6 million people consists of highly educated and very skilled professionals. This abundance of skilled labor has allowed the country to compensate for its lack of other types of resources. Israel has the highest per capita population of engineers engaged in research and development in the world and they have contributed significantly to the development of the high-tech industry.
The compulsory military institutions has created a very centralized and team-oriented nation, while Israeli world renowned programs and educational institutions have produced some of the most talented Information technology developers and workers.
Source: Embassy of Israel
Military service is mandatory for youths over 18 years old. This service not only provides young adults with proper technological training, but assists in the development of their work habits, ethics and management styles. The military also fosters a sense of team building and team work, which encourages them to form close networks and communities. These close relationships not only prepare them for the corporate team-orientated environment, but allows them to build lasting relationships that can transpire into start-up companies.
"Israel's strength in the high-tech arena dates back to the early seventies, when the country's leaders decided to focus on developing the technology industry, recognizing that they lacked much in the way of natural resources or low-cost labor, and so the only area in which the country had a relative advantage over other nations was in its highly educated workforce." (18)
Apart from the compulsory military service that has lead to the creation of a number of local IT firms, the government is actively involved in funding the IT industry with subsidies, tax incentives and incubator programs. The advanced stated education infrastructure has also contributed greatly to the current and future success of the IT Industry.
Changes in regulatory policy will continue to be a strength for Israel, the introduction of competition in the Telecommunications industry has not only improved service greatly but has also encourage more investment in the nation. Improvements in Legal Policy, including the revision of copyright, trademark and patent laws will also encourage investment as well protect Israeli innovation.
External Financial Support
External support from investors both domestic and foreign has also been an integral part of the success of the IT industry. Venture capital firms and private foundations have invested billions into the continuous development of this industry. Bi-National partnerships has encouraged investors from many developed nations in the world, including the United States and Japan, to participate in the IT revolution in Israel.
Approach to IT
"The Israeli high-tech sector's focus on fundamental technological is what has made it less vulnerable to the current Nasdaq downturn than were the many service-oriented dot-coms" (48). Although most Israeli high-tech firms were founded as start-ups, they continue to thrive as a result of their focus on telecommunications, software development and the Internet.
Russian Immigrants
Of the 70,000 immigrants who joined the Israeli population in the early 1990's, 50% had university degrees, while many of them were highly educated scientists, engineers and technicians. They not only brought with then innovation, but specific technologies that contributed significantly to the development of Israeli high-tech industry.
Culture of Risk taking
Another of Israel's strength is the culture itself, which places a premium on risk-taking and entrepreneurship. This attitude has enabled Israelis to leave their jobs in established corporations to take part in start-up companies - the foundation of Israeli high-tech.
Size of Country
Due to the small size of the country, close-knit communities are formed from various neighborhoods. These relationships often form the basis for successful start-up companies. Also, the corporations within the high-tech industry are geographically close together. The country as a whole operates similarly to that of a tech park.
The Internet
Although Israel is geographically far from many of its business partners, the Internet provides the country with a means to communicate quickly, access free information and connect to its overseas counterparts. Now, with over 40 Internet Service Providers, the internet penetration rate grows steadily.
Weaknesses:
Distance from Markets:
Although demand for various technologies might be high per capita, due to the country's size, it is not enough to support an entire industry. This forces the country to look abroad. Because of Israel's geographic location, it is far from many markets and creates a competitive challenge. Although the Internet has created the free flow of information and increased communication between countries dramatically, the physical distance between Israel and its consumers is a definite weakness for the country. It is important for Israel to continuously assess this problem, while forming strategic partnerships with foreign firms and taking other such actions to alleviate this problem.
Geography of country:
Israel falls in the midst of a developing region, many of its neighbors lack both financial capital and overall infrastructure to participate in the IT industry. This makes exporting developments in both goods and services difficult. If the region was more developed, local trade would greatly increase the market potential of the industry.
Slow e-commerce adoption:
Although business to business and business to consumer activity is increasing in Israel, adoption is still behind the other sectors of the high-tech industry. E-commerce adoption has been rather slow due to Israeli hesitancy to provide credit card information over the web and because of the culture preference to touch items before purchase.
