Software Surges Ahead

Based on high-quality computer engineers and entrepreneurial ingenuity, Israel's software industry shows signs of a continuing impressive growth rate.

Devising innovative software systems and entire packages and products that meet global market needs, Israel's software houses saw overseas sales climb from $300 million in 1995 to $400 million in 1996. This exceptional success can be attributed to the quality of Israel's manpower. Some 8,500 computer specialists working for over 300 companies, many of them still start-ups, have the incisive ability to investigate market needs and develop software products in a rapid, flexible and creative way.

Indeed virtually all Israel's software houses were start-ups not so long ago. In 1984 the country's software exports amounted to just $5 million. Average annual growth in exports of over 25% have seen Israel's exports soar, while combined overseas and local sales reached $1 billion last year. In addition, most Israeli-made electronics goods include embedded software, which accounts for much of their competitive advantage.

Furthermore, design centers for semiconductors have been established in Israel by such major companies as Intel, Motorola, Digital and National Semiconductor. The country has world-class products, and over the past decade the character of exported systems has changed from custom software to packaged software, both in traditional areas such as data base, CAD/CAM and education, and more recently in software products for the Internet, multimedia and computer security.

Traditionally strong in software defense products such as real-time applications, avionics software, communications systems and command/control applications, local software companies have also developed expertise in civilian sectors.

The prestigious worldwide corporations counted among the clients of Israeli software firms include Phillips, Toshiba, AT&T, Southwestern Bell, Samsung, Air France, Deutsche Aerospace, Siemens, Club Mediterranean, Dunlop, Berlitz and the central banks of Japan and France.

Israel's international reputation for innovative software entrepreneurship has also resulted in major worldwide investment in local R&D, both in veteran software houses and promising start-ups. Investors have bought into Israeli companies either directly, or through the many venture capital funds operating in Israel. In addition many Israeli software enterprises have issued public offerings on US stock markets, as well as on the Tel Aviv Stock Exchange.

Channels for international cooperation include marketing agreements for Israeli software products with distributors abroad, outsourcing, contract programming, subcontracting and joint projects, and joint ventures with hardware/software companies overseas, often through funds like BIRD, the Israel-US Binational Industrial Research and Development Fund. For example, through BIRD, Applicom Systems together with a Californian partner, have developed TeamConference, a powerful collaborative engineering tool that enables participants in both local and remote locations to view and interact with conferenced applications in real time. Other instances of international cooperation include Aurec Ltd., one of Israel's largest software exporters, which has been commissioned by Southwestern Bell, which owns half Aurec's equity, to develop software billing systems for both conventional and cellular phones.

Checkpoint Software Technologies, a subsidiary of BRM Technologies, has developed "Firewall" product for Internet security. The software module, which acts as a "gatekeeper" to keep out inappropriate intruders, is being distributed in the US by Sunsoft.

VocalTec, the Herzliya based enterprise which pioneered Internet phone products, is now developing a variety of multimedia and collaborative computing technologies, while Point Of Sale is a leader in the development of innovative retail and restaurant software solutions, from the point-of-sale through the store back office to the head office.

Educational software is one of the newest and fastest growing niche areas. More than 20 Israeli companies specialize in producing software and applications for this growing field. Innovations in educational software start with packages aimed at kindergartens that develop visual and reflective thinking, a sense of color, optical orientation and basic mathematical concepts. Other advances include elementary and secondary computer-aided language and mathematics training. For the college graduate, there is technological training software, computer integrated training systems, turnkey training, teacher training and industrial training applications.

This combination of high-quality computer engineers with entrepreneurial ingenuity and international investment means that Israel's software industry will continue to grow at impressive rates for years to come as innovative packages developed by dozens of start-ups find markets overseas for their innovative products.