Israel has always had a great reputation as one of the best hubs of software innovation in the world, and so it is not a surprise that Israeli companies are also some of the early entrants into the cloud computing space. The cloud computing scene in Israel is made up of traditional fields of expertise in the global IT industry, such as security, web applications, HR management, IT management, telecoms applications, business intelligence, and other types of enterprise application domains.

In the past, Israel’s large software companies have been targets for acquisition by leading IT and software vendors. This resulted in many of said companies already making their mark even during the days when cloud technology was still in its infancy. What’s even better is that many of the cloud-related Israeli companies have been acquired at high company valuations. This is further bolstered by many of the acquired companies moving on to provide SaaS solutions in tandem with conventional on-premises offerings.

What Exactly is Cloud Computing?

Cloud computing is only gaining popularity and widespread use during the past couple of years, but the concept itself is not new, as it is basically the evolution of utility or grid computing, which are based on the consumption of resources and services via an on-demand and pay per use basis. The main difference being that utility or grid computing is focused on the technical underpinning for dynamic, scalable, and flexible IT infrastructure, while cloud computing is targeted towards the business side of provisioning and delivery of services on top of the infrastructure.

Emergence of Different Cloud Models in Israel

According to the paper on Israeli Data Protection Law: Constitutional, Statutory and Regulatory Reform, many organizations in the country tend to focus more on internal, private cloud implementations. This is because they are held back by security concerns, resulting in said organizations only deploying private clouds and hiding their operations and users behind a restrictive firewall. Other companies are held back for different reasons, such as the performance and availability assurance, as well as the need to abandon legacy software that are critical parts of their existing operations.

Areas of Activity

The increasing diversification of SaaS applications is present in the evolution of Saas in the Israeli market, as numerous ISVs tend to offer either applications for the global markets or applications that are targeted towards the unique needs of the local market. There is a wide range of applications being offered across different enterprise, consumer, and software domains.

Israeli companies are also very active in the cloud enablement/management area, which basically pertains to solutions targeted towards the implementation and operation of cloud environments, as well as the management and facilitation thereof. This field addresses common cloud issues such as security, performance, and availability management.

The Israeli software industry is generally seen as fertile ground for expertise in the above fields, with many Israeli companies being deemed responsible for the development of some of the most innovative technologies pertaining to security within the last decade or so.

Many of the companies who pioneered in the field eventually became worldwide leaders in their respective domains, these include fields such as firewall and network security, Web application security, authentication, encryption, DLP, Web security, anti-fraud, and others. Israeli companies were also responsible for many new technologies in application performance management, virtualization, business transaction management, and others.

Israeli companies are also active in automated software quality, which is where one of the country’s most successful software companies, Mercury Interactive, has made its mark as a pioneer in the software-testing field. The company has leveraged the vast knowledge and experience that their employees have learned in other companies.

Some Israeli start-ups have also popped up during the last few years and started offering Testing as a Service solutions, and they are gaining traction and reputation as a more straightforward replacement for traditional ASQ tools.

Israeli companies have also excelled in the Business Intelligence sector, with one of the more successful examples being the company Panorama, which has positioned itself as a leader in online analytical processing. Many companies are now showing willingness to move into the BI SaaS field, which IDC believes is poised for rapid growth as more organizations turn to cloud based computing and alternative deployment options.

Lastly, many Israeli SaaS companies both new and old are starting to fill in the void left by many niche needs that have been inadequately served through on-premises software, especially in the healthcare and finance sector.

Adoption of Cloud Computing in Israel

Despite Israel’s reputation as a hub of technology, and the advancements many Israeli companies have achieved in the field, there are still a number of challenges or barriers that affect the adoption of cloud computing in their country. Unsurprisingly, many of these barriers are similar to the ones affecting adoption of the cloud in other countries, such as manageability, security, availability, and performance.

This means there is an ever-increasing demand for new solutions that can address the unique management and security issues associated with cloud environments. Therefore, the country is rife for key market players to move in if they can specialize in the much-needed areas.

Israel’s Data Protection Laws

According to the paper Privacy Implications of Cloud Computing in Israel by Naomi Assia, laws that pertain to data privacy and protection are very important with regard to cloud computing, as its tendency to cross borders and jurisdictions mean that it could encounter conflicts when the physical location of a specific data has laws that contradict the laws that are in effect in the country of origin.

Israel’s data protection law is hard to pin down as it is currently in flux. The right of privacy has recently been elevated to constitutional status, which means the Israeli Supreme Court was moved to extend privacy and data protection beyond the extent of the Privacy Protection Act of 1981. The PPA itself is undergoing changes, as there is a campaign to standardize Israeli law and make it more compliant with European standards.

The push to increase enforcement and compliance levels has moved Israel to start a new data protection authority – the Law and Information Technologies Authority, which will replace the Database Registrar.

A Big Push

As a perfect counterbalance to the challenges that prevent rapid and widescale adoption of cloud technology in Israel, the recent worldwide recession acted as a big encouragement for companies to migrate to the cloud, as the cost savings are very appealing in light of the economic hardships being faced by industries all over the world. Companies are especially hard at work looking for ways to save money, and cloud computing is a low hanging fruit.

Moving to the cloud has allowed many Israeli companies to avoid buying for peak needs, saving significant money by using only the services and resources that they need at the moment, while still having the freedom to scale up when the situation or demand needs it.

Israel’s Infrastructure and Security Tech

When it comes to the successful wide-scale deployment of the cloud in Israel, the country has two important things going for it. First is that it has a solid IT Infrastructure technology, and next is that it has a good grasp of security technology, according to the IDC white paper Israel Software Industry Review.

For instance, the Tel Aviv-based company CloudShare gives IT service providers the ability to produce virtual machines for their customers, basically handling much of the grunt work so that the providers can handle applications, internet appliances, business scenarios, training programs, and sales efforts without the need to install a single line of code on the customer company’s workstations.

As for security, it is understandable that many potential cloud users are being held back out of fear that their security will be compromised. After all, there’s not much use out of all the financial savings if the data is insecure. This is where Israeli companies’ reputation as leading developers of IT security applications come in, as they are able to bank on their skill, experience, and reputation when it comes to making the cloud safe for the users.

In fact, some companies are so confident that they claim to be perfectly immune to hacking attacks. One such company is Gizmox, whose Visual WebGui is a completely open source, cloud based web application dev platform that has been compared to big name offerings like Microsoft’s Silverlight and Adobe’s Flex. The company is also promoted by industry brand names like IBM and Mozilla, which should count for something.

Visual WebGui has also proven its robustness by holding a hacking contest back in 2008, in which the company has offered $10,000 to any person who can successfully compromise the platform. The contest ran for four months without anybody winning, even though the contestants numbered in the thousands.

VWG’s robustness led to it being adopted by Sony, Cisco, the US Army, and the governments of Canada, Thailand, and Germany. Several Israeli ministries are also starting to follow suit, and it may look like Gizmox will be the company that will herald widespread cloud adoption in Israel, simply by proving itself to be free of any security related issues.

Israeli Entertainment in the Cloud

Israeli companies have also started adopting the cloud for non-business use, particularly with regard to entertainment. One example is Libox, which was founded last 2008 by the same person who founded Israel’s Walla! web portal, Erez Pilosof.

Libox allows users to stream and share music, videos, photos, and any other media file on their different devices through the use of private “clouds” between the devices. The primary use is to allow people to listen to music stored on their home computer or iTunes via their mobile phones or portable devices.

Other cloud uses in Israel include data backups, to apps that help farmers manage their crops, proving that the country is ready for the technology and its users are creative enough to find novel and practical new uses at every turn.

Other Israeli Cloud Companies to Watch Out For

There are a number of Israeli startups (or longtime players who are just entering the cloud market) to look out for – see also Cloud Cover, Israel’s Top Eight Cloud Computing Firms, as they are showing growth and promise that ensure that they will soon become big names outside of their country.

Visual Tao is one such company, with their offerings playing on one of the key strengths of cloud technology, such as the ability to act as a substitute for applications that are traditionally stored on desktop or local servers. Visual Tao offers SaaS-based CAD, allowing users to work and collaborate on graphics-heavy CAD files. The service itself is groundbreaking, since CAD applications used to be heavy and expensive, and nobody thought they will be usable through the cloud.

An example of a company that has been around for a long time but only recently ventured into the cloud is Comm Touch, which is an Israeli web security company that has been around since 1991 (a year where many countries don’t even have commercial-level Internet access). Comm Touch developed a cloud-based checksum-based filtering system dubbed as Recurrent Pattern Detection, which analyzes billions of Internet transactions each day in order to catch and isolate malware and spam.

The Future of Cloud in Israel

Many veteran players are joining in on the startups, and starting to make their mark in the cloud sector. Only good things can happen from this, as they could encourage movement and convince even fence sitters to take the plunge. Additionally, they could also serve as catalysts in standardizing many technologies and solve many of the existing security and manageability issues associated with cloud technology. Over time, this will result in cloud services that are simpler, easier, and cheaper for consumers.

However, one key area that the companies can do nothing about is legislation. This is where the Israeli government can (and should) step in. Much of the issues regarding jurisdiction and data protection are already being worked on, and assuming that it doesn’t get bogged down by red tape or beaurucracy, we can start seeing improvements in the industry within a matter of months, and we may yet see cloud technology become more widespread in Israel.