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Why Israel is a hotbed for flash storage innovation

Lucas Mearian | May 18, 2012
Israel is where the USB flash drive was invented and where innovative companies such as Anobit and XtremIO are drawing American companies to their shores in droves

The Israeli difference

Because of Israel's diminutive size and its location, technological innovation is more a matter of "life and death," Berry said. "Many of the technologies, if we don't invent them, we also [could not] buy them. It's a political issue. Consequently, we often need to be self-sufficient in certain technologies. On the other hand, being first to market often gives us an opportunity to have a place in the market."

Israel's military-industrial complex is also tightly intertwined with academia, helping to develop and promote programs that foster technology innovation and corporate incubation. "I would say that almost more than any other government, maybe with the exception of Finland and Singapore, Israel has been extremely focused on turning know-how into economical or defense value as a policy," Berry said.

Mark Peters, an analyst with market research firm ESG, agreed. What Israel has to offer is a large population of students steeped in mathematics and science. The country has no natural resources to speak of and doesn't export any significant retail items, Peters said.

"When was the last time you saw a tag that said 'Made in Israel?'" Peters said. "For Israel, education is all about sophisticated science and math. As a country, they're not focused on low-margin products. They're always at the advanced level."

Israel's top schools, such as Tel Aviv University and Technion-Israel Institute of Technology, are bastions of high-tech education.

Additionally, Peters noted that an unusually high number of well-educated Russians have immigrated to Israel since the fall of the Soviet Union in the 1990s. Peters also pointed to high military R&D spending, and a strong venture capitalist community for the nation's tech success.

Big companies on the prowl

Every large technology company - from IBM to Hewlett-Packard - is considering acquiring a full range of solid-state products, from drives to arrays, Peters said. If they don't, they'll be left behind.

"They've got to be shopping around everything," he said. "Management, ultimately, for solid-state technology has got to be up and down the entire stack," he said.

For example, last year flash drive maker SanDisk purchased Pliant Technologies for its enterprise-class flash drives. It then turned around and purchased flash management software vendor FlashSoft this past February.

EMC's acquisition roadmap to date has included nine Israeli-based companies, including Kashya, nLayers and Proactivity. But XtremIO is its largest acquisition by far, with EMC reportedly spending $430 million on a company that has yet to ship its first product.

While the XtremIO buyout raised the eyebrows of some industry pundits who doubted the wisdom of the deal, according to Peters and Kobi Rozengarten, a managing partner at Jerusalem Venture Partners (JVP). JVP is one of several major investors in XtremIO, which garnered $25 million in venture funding since its founding in 2009.


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