Archive for July 2010

What Israeli spin cannot hide about the Palestinian economy

July 18, 2010

  On 14th July, the EU announced increased financial support for the Palestinians.

The European Commission has agreed an additional financial package worth € 71 million for the Occupied Palestinian Territory, topping up the € 224 million already allocated by the EU in the 2010 European Neighbourhood and Partnership Instrument, as well as a reinforcement of humanitarian aid for Palestinian refugees.

For Catherine Ashton, the EU top foreign policy official, Israel has not done enough to help the poverty of the Palestinians. And many claim that the situation in the West Bank is not much better. Citing charities like Save The Children Fund, bloggers say that West Bank prosperity is  a myth.

Boring stats reveal that in absolute terms Gazans received only 12 tons per month of food aid – far less than Zimbabwe, Ethiopia or any of the other hot spots. Put that into “loaves of bread per head”, and suddenly Palestinians have received 10 times more than their “competitors”.

Sounds wrong? Well have a look at these photos. On the same day that Ashton was moaning about poverty in Gaza, a brand new shopping mall was opened in the area. Some kind of computer imagery ploy? Not if you check out the website of the mall.

And no, these are not isolated situations, taken out of context. Here is how one Syrian blogger compared many Arab countries to what he has witnessed in Gaza.

And as for the West Bank, it is not just the luxury car business that is booming. The end of Plaetinian led violence has seen a return to the choices of normal consumer spending.

The biggest demand is for their four-wheel-drive models, but prestigious European cars are also selling well. The Al-Bustami company, for example, deals exclusively in German cars such as BMW, Mercedes and Golf.

What is it that Ashton refuses to acknowledge? Why are Western taxpayers bank rolling this hypocrisy?

Back in February 2010, acclaimed Palestinian journalist, Khaled Abu Toameh, asked the same question.

Donor countries have yet to respond to revelations by former Palestinian intelligence official Fahmi Shabaneh that top Palestinian Authority officials are continuing to pocket millions of dollars, earmarked for financial aid to the Palestinians in the West Bank and Gaza Strip.

“Don’t the Americans, Europeans and Arabs care about their money that is being stolen? If they continue to turn a blind eye to the corruption of the Palestinian Authority, Hamas will eventually take over the West Bank the same way they took the Gaza Strip.”

Nearly a month after Shabaneh, who headed the anti-corruption unit in the General Intelligence Service, revealed in an exclusive interview with The Jerusalem Post that some of Palestinian Authority President Mahmoud Abbas’s close aides and loyalists had siphoned off hundreds of millions of dollars to private bank accounts, decision-makers in the US and EU continue to bury their heads in the sand.

Hamas or PA; Gaza or West Bank;  Ashton and her caring political friends are determined to plough on with their spin, but for the benefit of who?

More concerns about Israeli high tech

July 17, 2010

Sver Ploscker is one of Israel’s leading economic journalists. So, when his latest column echoed my thoughts on Israeli high tech, I was very pleased but saddened in one breath.

Yes, sure, my ego was gently stroked. However, he was also indicating that not all is looking so rosy for the future of the power house of the Israeli economy.

Ploscker based his thoughts around an interview with Haim Shani, the director-general of the finance ministry. Now Shani is no ordinary bureaucrat. When he was convinced to join the civil service, he had to give up on his successful post as CEO of Nice Systems, one of Israel’s largest software houses.

 As Shani reports, high tech accounts for around 40% of Israel’s exports and 15% of its wealth. So, if something was to go wrong there, the country could be in trouble.

What seems to concern analysts is the “start” of the process. “Innovation”, that key buzz word, is no longer so paramount. Shani notes that less scientific degrees are being awarded. There is less local money available at seed stage. In fact he noted how more money is poured into real estate, locally and overseas, rather than into industry.

The discussionwas not totally pessimistic. However, the conclusion is clear. There is a clear need to evaluate quickly how to apply Israel’s many strengths and capabilities with changing global commercial trends.

Israeli high tech dream – time to wake up?

July 15, 2010

“Obviously we will set up a Facebook (marketing) operation in Israel.” Thus says their VP Advertising exec, David Fischer, in an interview with the Hebrew paper “The Marker”. And the company will join other megas like Siemens, Microsoft and Intel with significant operations in the Holyland.

Great news indeed, but is it merely covering up a more disturbing trend. Is the Israeli high tech boom, which has been running for nearly 20 years, reaching the end of its path?

The success of the recent decade, despite wars and recessions, has been staggering. GDP has risen over 3% per annum on average. Using OECD, Israel invests over 4.0% of its income in new industry. The country continues to rank amongst world leaders in patent generation. Jerusalem has become a centre for the solar technology. Etc, etc, etc.

And yet, something is not quite right. There are numerous reports that overall funding of new investments has not picked up since the credit crisis. A new index for biomed shares has proved to be a disappointment – although admittedly it was launched in a difficult period for stocks globally.

Michael Eisenberg is a leading local commentator. In the first of a 2-part article, he observes that “the world of technology is rapidly changing around us and we are not doing enough to address the challenges.”  Eisenberg’s specific complaint refers to human resources – too many start ups chasing too few people, many of whom are trained in the wrong disciplines such as dot-net.

Eisenberg used the example of Conduit. It is no secret that this Rehovot based company has sales that have gone viral, rapidly . And yet, despite great benefits for employees, Eisenberg writes how they are finding it difficult to recruit the correct talent.

Eisenberg’s key theme of the wrong resources in wrong areas was rammed home to me yesterday. I attended an innovation seminar, organised by various public bodies in Jerusalem. For example, Bioline was there, again stressing the message that the capital city has much to offer towards the growth of the country.

The lead talk was given by a senior figure from the Office of the Chief Scientist. One of his slides proudly showed how despite the recession, his team has increased investment in new projects. And as he continued his explanation, revealing the breakdown between sectors such as telecoms, life sciences and others, somebody whispered quietly “where is the figure for cleantech projects”?

Where indeed? This new industry was not on the chart. That says something, and sends out a message unease.

The high tech and communications industrial revolution has been rapid. Globalisation is the buzz theme. Has Israel become too confident and not realised that the world’s innovative streak is now rushing ahead, without her up front?

More Israeli firms join Orange in failing customers

July 13, 2010

I dislike my mobile server, Orange. I recently wrote how their sales force botched a basic 101 course in customer care.

If that episode was not stupid enough, a few days ago Orange completely failed a “retake exam”. You see, I gave them a second chance and inquired about special deals, if you are located overseas.

I could not get a straight answer. They forgot to mention VAT or daily service charges, depending on the proposed deal. And when I asked who could help set up the phone as you go abroad, it turns out that the “help desk” ar the airport closes around 7.00pm, one of the busiest flight times of the day!

Let me be clear: For the moment, I am very unhappy with Orange. And for all their smily adverts and thousands of wonderful workers, nobody seems interested. Why should they care as the profit levels keep on shooting up?

This week, the Ministry of Communications has proposed allowing a fourth mobile supplier on to the market. The established teams have cried that there is no room. Surly, this was not out of self-interest!?!

Where the Israeli mobile industry leads, the specs sector is right behind. My wife wanted one pair of new glasses. This week, she went into several shops, mainly branches of large chains. We are talking about little bits of plastic, nicely cut, and coated with aluring colours.

Everything was exorbitantly priced. She could receive a 1+1 deal, but if she took one item only, it would be the same price as …2! She was offered multifocals, when she does not need them! She was offered……well everything she did not need, and was made to feel a fool for not accepting the chance to go into overdraft. Thankfully, she did not agree to any sales’ terms, and we got to eat a meal that night.

As she put it, all the assistants were simply shooting themselves in the foot, as her next stop is to consider laser surgery! She has an appointment on Thursday.

The internet and professional literature is awash with techniques on customer care. The Israeli retail sector is booming. Maybe the Israeli consumer should encourage a recession, and that way they will begin to be treated properly.

Economic value of Israeli high tech

July 12, 2010

I previously wrote about how Israeli high tech deservedly receives coverage in international media. Business Monitor International has just published its latest survey of technology from the Holy Land.

It makes for impressive reading for a country with only 7.5 million people and surrounded by geopolitical concerns. And the future outlook remains optimistic:

The Israeli IT market has a number of positive fundamentals, which should keep it in positive territory during BMI’s five-year forecast period. Household computer penetration of around 75% offers potential for further growth. High internet penetration and growing broadband penetration are drivers for the retail segment, while the financial services sector accounts for about 15% of Israeli IT spending.

I have copied the article in full below:

2010-07-11 22:24:05 – Recently published research from Business Monitor International, “Israel Information Technology Report Q3 2010”, is now available at Fast Market Research

BMI projects that the Israeli IT market will have a value of US$4.9bn in 2010. The Israeli IT market should gain enough momentum from key sectors to expand at a compound annual growth rate (CAGR) of 6% over BMI’s 2010-2014 forecast period, thanks to stable demand from defence and government sectors as well as opportunities in verticals like financial services and small and medium-sized enterprises (SMEs).

Spending is expected to resume single-digit growth in 2010 after a contraction in 2009. In early 2010, there were reports of a pick-up in the flow of projects. Vendors reported that demand had revived in the key financial services vertical, where new projects included an US$11mn IT outsourcing tender by the First International Bank of Israel. Healthcare, the public sector and utilities were also generating projects.

The Israeli IT market has a number of positive fundamentals, which should keep it in positive territory during BMI’s five-year forecast period. Household computer penetration of around 75% offers potential for further growth. High internet penetration and growing broadband penetration are drivers for the retail segment, while the financial services sector accounts for about 15% of Israeli IT spending.

Industry Developments

In 2009, Israel’s high-tech sector suffered as demand for high-tech exports dropped by at least 10-15%, with as many as 10,000 sector jobs feared to be at risk. This represented a major concern for the Israeli government given that high-tech accounted for around 10% of Israel’s economy, with annual sales estimated at around US$25bn. Major IT firms were retrenching in Israel, including SAP, Cisco and HP. IT is viewed as an important policy tool for the Israeli government’s 2008-2010 socio-economic policy framework. In 2009, the National Economic Council recently submitted a policy agenda to the government, which specified two main policy tracks of reducing poverty and achieving balanced growth. The first track was expected to emerge as the main priority.

As part of its modernisation agenda, the government is pressing ahead with various other strands of its egovernment project. Among other initiatives, there has also been spending on computers in healthcare and the nationwide paperless court initiative. The e-government programme is leading to increased demand for computers, with the Israeli government reaching supply agreements with vendors like Dell and HP.

Competitive Landscape

The Israeli IT services market is competitive, with leading multinational competitors IBM and HP – following its merger with EDS – both estimated to have Israeli IT services market shares of around 10%. HP Israel’s software division hosts HP’s biggest research and development (R&D) centre worldwide, and the company also has significant production facilities in Israel.

Leading IT services vendors, including Israeli companies Ness Technologies and Matrix as well as US company IBM, experienced mixed fortunes in the Israeli market in 2009. Ness Israel reported a 17% decline in full-year 2009 revenues compared with 2008, although around one-third of this was due to foreign currency effects. Meanwhile, market leader Matrix reported wins in a number of key sectors including healthcare, financial services, defence and government.

In 2010, Microsoft Israel, which as an annual turnover of around US$1bn, hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its sales. Microsoft anticipated that support from leading PC makers would underpin success for the new system, despite some caution from businesses. Israel is also an important R&D centre for Microsoft, and in 2010 the company’s Israel R&D centre launched a new unified access gateway (UAG) product.

Computer Sales

The Israeli computer hardware market, including desktops, notebooks, servers and accessories, is projected at US$2.2bn in 2010, up from US$2.1bn in 2009. The market is expected to grow at a CAGR of 5% over the forecast period to reach US$2.6bn in 2014. Spending is expected to resume single-digit growth in 2010, after a contraction in 2009 due to the economic slowdown and unemployment hitting consumer demand for electronics goods. Household consumption moved into negative territory in 2009, and although there was a slight recovery in H209, trading conditions remained tough.

Software

Israeli software spending is projected at US$1.0bn in 2010, up from US$973mn in 2009. The packaged software segment is expected to grow at a CAGR of around 7% over the forecast period. Businesses are expected to remain cautious, deferring investments or looking for ‘good enough’ solutions to immediate problems. However, there should still be several growth areas going forward.

Spending on software is shifting towards the SME segment, which forms the mainstay of the Israeli business sector. Spending on enterprise solutions has grown since 2007, with reviving or emerging areas of opportunity including security, customer relationship management (CRM) solutions and business intelligence. In terms of verticals, the financial sector has been a mainstay of demand, with other key opportunities including defence and healthcare.

IT Services

The IT services segment is estimated at US$1.6bn in 2010, and this is expected to grow at a CAGR of 7% over the forecast period to reach US$2.1bn in 2014. In early 2010, there were reports of a pick-up in the flow of projects, but growth is expected to reach a higher trajectory in the second half of our five-year forecast period.

Government and defence are two key sectors likely to be a continued source of opportunities, because the factors driving spending in each case are not particularly sensitive to economic vicissitudes. Another key area of opportunity is healthcare IT. Despite failing to capitalise in the past, Israel is starting to emerge as a desirable location for packaged applications and localisation services.

E-Readiness

Israel’s relatively high PC penetration and the growing availability of broadband access mean that internet penetration is likely to continue its upward trajectory. The government has announced that it intends to make a big effort to narrow the digital gaps that manifest themselves across various demographic lines.

Israel’s strong broadband growth has long relied on a handful of developments across the market. These include the competition between Bezeq and the cable companies, with five major internet service providers (ISPs) vying for market share from both the corporate and residential markets, which enjoy high PC penetration rates, advanced telecoms infrastructure and minimal regulatory intervention. Another development likely to stimulate growth is the introduction of local loop unbundling (LLU), which will give alternative operators access to Bezeq’s network and will stimulate much greater competition. LLU was due to be implemented by end-2009.

For more information or to purchase this report, go to:
www.fastmr.com/prod/71664_israel_information_technology_report_q ..

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI’s country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010

Israeli tech companies draw global praise

July 11, 2010

It’s the time of year, when Red Herring announces its picks for the new up-and-coming tech giants. Yet again, the number of Israeli firms are disproportionate to other countries.

Examples abound. In the North America category, the winner is Contendo, which provides internet acceleration software. Barely in existence for two years and with its HQ in sunny California, the founders and development are very much centered in the Holy Land.

In the European category, 8 of the top 100 firms selected are Israeli. I was particularly impressed by TaKaDu, when I saw it demonstrated last year. The software offers local authorities a simple and effective method to monitor water loss, thus saving millions in costs and wastage of a valuable resource. 

Red Herring is not the only media watching Israeli companies. This weekend, I was reading the latest edition of Fast Company, which ran a special focus on WeCU. Based in Caesarea, this small outfit has developed a software-hardware-behaviour science combine, which detects intent. Applicable when handling airport security or workplace sensitivities, this proven approach does not require any physical or spoken contact with the “target”.

I know that the tech was evaluated by one of the arms of the American military, which unofficially indicated that WeCU are ahead of their competitors in the field. The company is currently completing another round of field trials.

CNBC has recently focused on creative companies. Three of the 25 named are from Israel. Of these, a biz dev colleague told me that he was exceptionally impressed by the skills of BriefCam, and he has taken them in to the UK market.

I have covered here homeland security, cleantech, internet, video surveillance, and more. On Friday, I had a long conversation with a Danish lecturer on renewal and change. He asked what Israeli culture possesses that allows for so much innovation. The answer is not straight forward. Whatever the analysis, the international community will continue to focus on Israel, when discussing new technologies.

What’s a goal worth?

July 8, 2010

It is with some irony that I learnt that the word “goal” comes from Old French, something for their current failing national football team to reflect on.

In business, the word “goal” is used in its original form – a limit or boundary to seek out.

No – it is not just the World Cup bug that made me link the two concepts. This week, I was trying to explain to a young company the importance of setting targets and planning towards them. Otherwise, you tend to drift, lose focus, procrastinate. In fact, you often end up being totally busy, doing nothing commercially worthwhile.

 “How to set business goals” is a well-worn phrase on google. Amazingly, most managers do not set them, and even fewer are reported to differentiate between short and long term targets.

I was speaking to a company that has been asked to make cutbacks by HQ. They have gone over budget and now sales are down. Salaried positions will have to be sacrificed to ensure that profit margins are protected. All very politically and financially correct.

Correct, until somebody then asked how they were going to increase sales. There were no resources available to invest in this seemingly irrelevant activity. 5 minutes of extra checking revealed that competitors are enjoying a boom. Big ouch!

A simple analysis revealed that HQ had been insisting that the unit toe the line as imposed from the top. As everybody ran around to please the “senders of e-mail”, all sides of the party forgot why they were in business; to sell in order to make a profit. Years of continued success have been converted in to….an empty hole with no end in sight.

In both my case studies, a large outfit and a small set up, the planning boards are coming out very quickly. The first team are looking closely at where they want their new firm to be by the end of year one. The second group is taking a near and far term approach, once HQ can realise that there is more to life than a piece of paper with numbers.