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TITLE: INFORMATION SECURITY SUBJECT COUNTRY(IES): ISRAEL POST OF ORIGIN: TEL AVIV SERIES: INDUSTRY SECTOR ANALYSIS (ISA) ITA INDUSTRY CODE: CSF DATE OF REPORT (YYMMDD): 980701 DELETION DATE (YYMMDD): 010701 AUTHOR: LIANA FOKSHENEANU APPROVING OFFICER: EDGAR FULTON OFFICER'S TITLE: COMMERCIAL COUNSELOR NUMBER OF PAGES: 10 INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1998. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES SUMMARY Products included in this analysis are classified under the following HS headings: 85.24.5110 Total market size for software in 1998 is estimated at USD 1.57 billion, showing a growth rate of 21% compared to the 1997 market of USD 1.3 billion. This analysis will cover the software security sub-sector, which is estimated at USD 8 billion in 1997 and expected to show the same growth rate as the software sector. Israel is a global leader in software security solutions. The security market experienced rapid growth through the last five years. In spite of the present slow of the economy,Israeli high-technology behaves as an economy on its own, and it is not expected to experience the same down. Accordingly, it can be assumed that the growth rate of the software security sector will keep at the same rate for the next two years. Computer penetration in Israel is one of the highest in the world - over 45%, and Internet use has grown by 300% during the last two years. As Israeli organizations, both corporate and government, have moved to open computer systems, full use of Information Technology capabilities, and online services, the need for information security has increased. Over 60 Israeli companies have developed security technologies and 30% of their products are exported. In spite of the strong local industry, imports of information security are still approximately 50% of the total market. The United States has the lead position for imports in this sub-sector - 85% of total imports. A. MARKET HIGHLIGHTS & BEST PROSPECTS Statistical Data (U.S. Million Dollars) 1996 1997 1998 Annual Real (Est) Growth Over Next 2 years (Est) Import market 610 620 740 Local production 958 1,060 1,280 Exports 310 380 450 Total market 1,258 1,300 1,570 18% Imports from U.S. - Future inflation rate assumed: 7% - Last year's import market share (U.S. and major competitors: USA: 85% ; Europe: 10%; others: 5% Total market size for 1998 is estimated at USD 1.57 billion. Best prospects "Firewalls" HS # 85.24.5110 Information Security has emerged as a best prospect within the larger scope of the computer industry (software and hardware) during the last five years. The migration of computer based industries towards open systems and the explosive growth of Internet use have raised the concerns of the Information Technology community to the dangers of intruders and sensitive data exposure. The computer environment used to be a centralized environment. With the de-centralization of computer operating platforms, networking systems, and open client-server systems, all designed to enable broad access to system resources and corporate databases, proprietary information is left open to security threats. Unauthorized access to corporate data has become a major concern. Data attacks are not only an external threat. Internal malicious attacks on the system are also a known danger: authorized users, service providers, and consultants are considered an inside threat. As there is a wide range of potential security breaches, the technologies and products vary accordingly. There are seven different applications for security solutions: 1. Anti-virus solutions, which scan and detect a variety of viruses that might be introduced into the system. Demand for these products grew with the increase of Internet use. 2. Access control - a.k.a. "Firewalls" - which determine access to certain application within a network. 3. Identification/Authentification - secure data in transit by identification of sender and recipient. 4. Authorization - product determines the level of access to local resources. 5. Privacy - securing transmitted messages and ensuring their being received only by the appropriate parties. 6. Integrity - products ascertain that messages and transactions are transmitted and received in their entirety and without any tempering. 7. Administration - this solution aims at the entire organization, as it monitors, controls and centralizes security policy for the whole system. It is foreseen that during the next two-three years there will be an unprecedented growth in the Electronic Commerce sector. This factor will add a new dimension to the already ever-growing concerns about Internet, Intra-net, and overall computer security threats. The next generation of security solutions will have to answer these specific needs. B. COMPETITIVE ANALYSIS Israel is a very competitive market for all Information Technology products. It is especially true for software security, as local production is very well developed. Israeli companies producing security software are considered global leaders in this field. There are over 60 local companies active in manufacturing of data security, most of them sprang to life out of the large start-ups pool existing in Israel. The security software industry development is partly due to the military influence on the high-tech industry. The Israeli defense needs required training computer professionals, which have later become part of the civilian human resources available. This trained personnel provided a large percent of the start-up founders. Technologies that were developed for military needs were later commercialized for civilian requirement. Defense influence is only one of the factors giving the Israeli companies a competitive advantage. The best competitive advantage lies in the human resources available. Israel has the highest rate of scientists and engineers: 145 per every 10,000 employees, followed by the United States with a rate of 78, and Japan - 75. The wealth of skilled personnel available, and the innovative work they produce, provide a rich technological environment. Over 35% of the local production is exported. U.S. manufacturers hold the leading position in the import market (85%). U.S. companies have a dominant presence in the Information Technologies market in Israel due to the U.S. orientation of Israeli firms in this field. Israel's high-technology looks to the U.S. for new technologies available, for joint-ventures, and for exports. Nevertheless, local competition is fierce, and U.S. companies interested in exporting to Israel should look for specific niches which will be best prospects for the next three years: electronic commerce security, banking security, Internet security. C. END-USER ANALYSIS End-users for data security include all organizational users of computer systems: government entities, academic and research bodies, private companies, banks. The level and type of security required by each group of users varies. Government entities require protection against outside intruders, especially since the Israeli government has just made available virtual services to the general public. At the same time they require protection against internal threats, i.e. misuse of the data by its own employees and sub-contractors. The Justice system has also opened its databases for lawyers' distance use, requiring a different level of security. The academic and research bodies have to protect their information frOm intruders through the Internet as well as from Intranet users. Banks require the highest level of protection from inside and outside damage. Israeli banks started offering online services only in 1997. With the beginning of commerce over the Internet, security has become a major concern. Electronic Commerce, which has become the newest buzz-word on the Israeli market, is expected to show a growth rate of over 20% for the next year. Demand for data security will be a direct result of this development. The corporate user's awareness of the information security importance is the highest. This is not a theoretical worry for firms managers. Information security breaches cost the corporate community a great deal of money. As Internet becomes available on each employee's PC, and the sensitive data available on the company's Intra-net is also growing, Chief Information Officers require installation of security on the system to protect their privacy. D. MARKET ACCESS The Israeli market is very receptive to U.S. Information Technology products in general, and to data security products in particular. Local manufacturers are considered global leaders in this sector, and put up fierce competition. The import market, though, is dominated by U.S. products, which are considered state-of-the-art technologies. Israeli users are known to be on the lookout for the cutting edge technological solutions. As a result, 85% of the importS in this industry sub-sector consist of American products, and there are still opportunities for new products to be imported. Opportunities are available also through joint-ventures with Israeli technological companies. Israeli firms look to the U.S. for technological cooperation both in development and manufacture, as well as in marketing and investment. Joint-ventures are widely used, as the similarity in the working methods and the lack of language barriers make cooperation an almost natural solution for both parties involved. Financing Israel has an open exchange system and a well developed and modern system which provides the full range of banking and credit services. Eighty-five percent of total banking assets in Israel are held by Bank Leumi, Bank Hapoalim, Israel Discount Bank and the Mizrahi Bank. These leaders, as well as the First International Bank of Israel, maintain correspondent relationships with U.S. banks, and also have their own subsidiaries in major U.S. cities. The most common method of payment in this sector is by Letter of Credit (L/C). Collection without a letter of credit is not unusual, however. Cash Against Documents (CAD) is the most common mechanism preferred by Israeli importers. Since there is no guarantee of payment, as there is in a L/C transaction, some exporters prefer to collect an advance payment, or an irrevocable bank guarantee on a certain portion of the deal. This practice is appropriate and recommended when there is no past relationship and experience with the buyer. The most common payment terms in this sector are 30, 60, and 90 days depending on the product. The local banking system provides sources of short and long-term credit and access to venture capital. Due to the relatively high interest rates for local currency loans (28-35 percent) importers may wish to seek financing from the U.S. Ex-Im Bank which has most of the leading Israeli banks as correspondents. For information on Ex-Im Bank programs in Israel, contact the Ex-Im Loan Officer for Israel, 811 Vermont Avenue N.W., Washington, DC 20571, and its Credit Information Section at (202) 566-4690. The information can also be obtained at the Israel Desk, Department of Commerce, Room 2039, 14th and Constitution Avenue N.W., Washington, DC 20230, Tel: (202) 482-1857, Fax: (202) 482-0878. Israeli manufacturers enjoy special credit lines offered by the Israeli government, ranging from preferred loans and grants at the capital investment stage to special loans financing purchases from abroad of raw materials, components and semi-finished goods for the manufacturing process. U.S. exporters should be aware of these special government funds when negotiating credit terms with Israeli manufacturers. The Overseas Private Investment Corporation (OPIC) finances overseas ventures wholly owned by U.S. companies and joint ventures between local companies and U.S. sponsor firms. The U.S. investor is expected to assume a meaningful share of the risk, generally through the purchase of at least 25 percent of the equity. Counter-trade is not widespread in the U.S.-Israel trade, and is not favored by the Free Trade Area Agreement. Key Contacts: Federation of Israel Chambers of Commerce P.O.Box 20027 84 Hahashmonaim Street Tel Aviv 61200 Contact: Mr. Gad Modai Director, International Relations Tel: 972-3-5631010 Fax: 972-3-5619025 Israel-America Chamber of Commerce P.O.Box 33174 35 Shaul Hamelech Boulevard Tel Aviv 61333 Contact: Ms. Nina Admoni Executive Director Tel: 972-3-6952341 Fax: 972-3-6951272 Manufacturers' Association of Israel P.O.Box 50022 Industry House 29 Hamered Street Tel Aviv 61500 Contact: Mr. Moshe Nahum Director, Department of Foreign Trade and Director, World Trade Center, Israel Tel: 972-3-5128814-5 Fax: 972-3-662026 The Israel Association of Software Houses Industry House, P.O.B. 50022 Tel Aviv 61500 Contact: Mr. Zvi Goldstein General secretary Tel: 972-3-519-8836 Fax: 972-3-516-1003 The Office of the Chief Scientist Ministry of Industry and Trade 4 Mevo Hamatmid St. P.O.B. 2197 Jerusalem 91021 Contact: Dr. Orna Berry Chief Scientist Tel: 972-2-622-0587 Fax: 972-2-624-8159 The Internet Society of Israel P.O.B. 53113 Tel Aviv 61530 Contact: Mr. George Meir, Chairman Tel: 972-3-647-3023 Fax: 972-3-647-3683 BIRD Foundation 3 Tevuot Haaretz St. P.O.B. 61390 Tel Aviv 61390 Contact: Mr. Dov Hirschberg, Executive Director Tel: 972-3-647-0710 Fax: 972-3-649-8341 U.S. Israel Technology Commission Migdalor Bldg., 1 Ben Yehuda St. Tel Aviv Contact: Mr. Yoram Yahav, Director Tel: 972-3-517-0963 Fax: 972-3-510-6724 Leading companies: Aladdin Knowledge Systems Ltd. 15 Beit Oved St. Tel Aviv Contact: Mr. Yanki Margalit Manager Tel: 972-3-537-5795 Fax: 972-3-537-5796 Areshet Systems Ltd. 6 Hamaskit St. Herzlia 46733 Contact: Mr. Shmuel Buganim General Manager Tel: 972-9-952-5480 Fax: 972-9-952-5488 Check Point Systems (Israel) Ltd. 8 Haargaman St. Netanya 46766 Contact: Mr. Israel Elran General Manager Tel: 972-9-885-3332 Fax: 972-3-885-3155 Digital Equipment (DEC) Ltd. Digital House, Accadi Junct. Herzlia 46120 Contact: Mr. Immanuel Perez General Manager Tel: 972-9-959-3222 Fax: 972-9-954-4255 Enigma Information Systems Ltd. 10 Kishon St. Bnei Brak 51203 Contact: Mr. Jonathan Yaron General Manager Tel: 972-3-579-7061 Fax: 972-3-579-7061 Memco Software Ltd. 24 Raoul Wallenberg St. Tel Aviv 69719 Contact: Mr. Eliahu Zinger President Tel: 972-3-645-0000 Fax: 972-3-645-0001 Mittwoch 5 Druyanov St. Tel Aviv 63143 Contact: Mr. Dedi Mittwoch General Manager Tel: 972-3-526-5555 Fax: 972-3-528-2115 New Dimension Software P.O.B. 58168 Atidim, Neve Sharet Tel Aviv 61581 Contact: Mr. Dan Barnea Chief Executive Officer Tel: 972-3-645-1111 Fax: 972-3-645-1100 Radguard Ltd. 24 Raoul Wallenberg St. Tel Aviv 69719 Contact: Mr. Eli Hershkovitz Managing Director Tel: 972-3-645-5444 Fax: 972-3-648-0859 Tadiran Information Systems Ltd. 11Ben Gurion St. Givat Shmuel 54017 Contact: Mr. Ossi Launer General manager Tel: 972-3-531-3558 Fax: 972-3-531-3567 |
