Cyber hacking is on the up - but these Israelis are on the case

By Candice Krieger and Natalie Ostroff , March 22, 2012
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Global spending on IT security is expected to reach $38 billion by 2014 as threats increase

Global spending on IT security is expected to reach $38 billion by 2014 as threats increase

As the threat of cyber attacks grow, IT security booms. The sector has seen exponential growth over recent years and according to International Data Corporation (IDC), global spending on IT security could reach $38 billion by 2014.

Good news for Israel. The country is a global leader in the field, home to around 200 companies - many of which are key players. According to the Israel Export Institute, the annual export of IT Security is estimated to be worth around S1.5 billion and predicted to grow at an annual rate of 10-15 per cent as the surge in cyber threats, coupled with greater vulnerabilities due to the more pervasive use of technology, fuel a growth in cyber security spending.

Miky Admon, high-tech director at the Israel Export Institute, says Israel has a good eco-system for developing software. "There are many highly-skilled software engineers and people who have a good understanding of software from doing research in security in the military. They take this knowledge to the commercial sector."

The industry, which comprises around 10 per cent of Israel's software sector, has been growing rapidly since the 1990s. Richard Anton is a partner at Amadeus Capital, where he specialises in software and IT-related investments. He serves as chairman of the British Private Equity and Venture Capital Association (BVCA). He says: "The UK is missing a trick by not investing in more Israeli IT security - their technology is world-beating. The US has embraced it and the UK uses it well in the commercial sector but not so much in the government sector.

"We certainly have a need for it. Cyberwarfare is real. It's not just stuff in stories."

Israel looks set to continue to benefit as countries are compelled to keep pace with the changing information landscape, putting security at the centre of their operations. According to a recent report from the Cabinet Office, cyber crime costs British business about £21 billion a year. Countering attacks has risen rapidly up the UK agenda and the government's allocated £650 million to cyber security as part of its four-year National Cyber Security Programme, announced in 2010.

some KEY israeli PLAYERS

● Imperva

Founded by three Israelis, Imperva provides ways to protect high-value business data and prevent sensitive data from hackers.

Headquartered in California with R&D in Israel, it was established in 2002 by Shlomo Kramer, Amichai Shulman and Mickey Boodei. The company's key innovation has been the development of the data security and compliance solution, SecureSphere, which protects web applications from online attacks, secures business-critical files, and mitigates data vulnerabilities.

Imperva employs 400 staff and has received $53.7 million in venture capital. Investors include Accel Partners, Greylock, Meritech Capital, USVP and Venrock. In 2010 the company generated revenues of $55.4 million, an increase of 41 per cent on the previous year. Last year it was the only major Israeli IPO on Wall Street, raising $90 million. Imperva has more than 1,300 customers in over 50 countries, including four of the top five telecommunications companies, three of the top five commercial US banks and over 150 government agencies and more than 100 Fortune 1000 companies.

Imperva's director of security Rob Rachwald says: "Ignoring Israelis when it comes to software security is like ignoring the French when it comes to wine. Growth in the IT security sector will continue due to the increasing frequency of attacks. Slowly but surely organisations are recognising the need for greater support to protect company data."

● ForeScout Technologies

ForeScout specialises in network access control, reinforcing company security and compliance rules about what goes on within their internal network. It will block anything suspicious or something that an organisation does not want to run on its network. ForeScout also specialises in handling "zero-day threats" - attacks that try to exploit computer application vulnerabilities that are unknown to others or the software developer. Founded in 2000 by three Israelis, ForeScout employs over 100 staff with offices in Israel, the UK, Hong Kong and the US. It has been backed by leading VCs Accel Partners, Amadeus Capital and Pitango Venture Capital, among others and revenues for this year are expected to reach $40-$50 million. Clients are predominantly Fortune 1000 companies and government agencies. It works with computer security company McAfee on certain projects. Co-founder and chairman Professor Hezy Yeshurun, 62, says: "It is natural for Israelis to think of defense and how to defend infrastructure but it is not only that; IT security is an endless algorithmic chess game - you are competing against a human opponent. Someone wants to do something and you want to prevent it. We like these kind of games and we especially like to win these games and be one step ahead of the adversary."

He adds: "Security experts have been saying for years that our exposure to internet threats is far more serious than people realise. We are now seeing this materialise in all sectors, and I'm afraid that these threats are going to increase dramatically. The IT security sector is becoming more and more important."

● Guardium

Guardium is one of the bigger players. Founded in Israel in 2002, it was bought by IBM seven years later for $225 million, one of the most lucrative IT security deals of the past five years. Now based in Massachusetts - some business is outsourced to their Ramat Gan offices - the company has been integrated into IBM's security division.

Guardium was one of the first companies to address the data-security gap by delivering a service that both protects data in real-time and automates the compliance auditing process. Clients include the top five global banks, Microsoft and top government agencies. The company raised a total of $21 million in three rounds of financing. Investors include Cisco, Cedar Fund and Ascent Venture Partners. The deal with IBM was believed to be one of the most rewarding for the VCs, expected to make over ten times their investments. IBM revenues reached $106.9 billion in 2011, up seven per cent on 2010, with software segment revenues comprising $24.9 billion, an increase of 11 percent.

A spokesman for IBM said: "IBM sees the opportunity to provide security software and services to clients worldwide as a $94 billion opportunity. It sees security as a growth area and allows us the ability to leverage IBM's renowned research, services, hardware and software to help our clients protect their computing environment."

● Cyber-Ark

Founded in 1999 by a team of security technologists in Israel, it specialises in protecting and managing privileged users, applications and sensitive information to improve compliance, productivity and protect organisations against internal and external threats.

Cyber-Ark works with over 1,000 customers, including more than 35 percent of the Fortune 50. Clients include BT, Deutsche Bank and Hershey's. It prides itself on its award-winning "privileged identity management", one of the fastest growing segments within the $4 billion identity and access-management market.

Headquartered in the US, Cyber-Ark is backed by some of the world's most successful venture capitalists, including Jerusalem Venture Partners, Goldman Sachs, Seed Capital Partners and JP Morgan/Chase Partners. Co-founder Udi Mokady, a veteran of a Military Intelligence unit, is the company's president and chief executive, while Chen Bitan heads the Israeli office.

● Skybox Security

Skybox Security helps companies and government agencies monitor and reduce the security risks that could lead to an attack.

Founded in Israel in 2002, the now-California-based company specialises in proactive security management, providing security professionals with tools that can be used automatically on a daily basis to find risks.

A relatively new player, Skybox grew by nearly 100 per cent in 2011 versus 2010. International expansion plans are on the agenda for this year.

Skybox has around 60 employees, half of which are at the R&D facility in Israel. Clients include leading banks, companies and several government and defense organisations. It is backed by Susquehanna Growth Equity, Benchmark Capital, Carmel Ventures, Valley Ventures, Mitsubishi Corporation, and Rembrandt Ventures.

Chief executive Gidi Cohen said: "Many large security companies operate in, or originated in Israel, which creates a very experienced talent pool for technology innovation. In addition, the information security sector is a natural fit for a country with strong entrepreneurial culture, high awareness of the importance of security, investment support, and strong ties to security and technology companies in Silicon Valley."

Last updated: 2:38pm, March 23 2012