Cyber Power

October 23, 2015

Cyber warfare is no longer ‘the future of warfare’. It is very much the present, with countries large and small investing heavily in developing their cyber capabilities, to enable them to defend their military and civilian systems from hostile cyber-attacks — and to conduct such hostilities against others.

 

Nor is this cyber world limited to governments. On the contrary, most of it is happening in the corporate sphere. Hardly a week passes without news of a major corporation suffering a cyber attack of some sort. The general public hears about those cases in which data about clients is stolen — “identity theft” — because these require the victims to be notified. But there are many other attacks which the firms suffering them have no obligation — and certainly no incentive — to publicize.

 

On top of these are the huge number of cyber-incidents in which the attack is blocked, so that no damage was done and there is apparently nothing to report. But that is not the same as saying “nothing happened”. A home-owner who receives a report that a burglar tried to enter his house, but triggered an electronic alarm and fled the scene, is unlikely to say that nothing happened.

 

Brains and work and…

 

The business of cyber warfare, both offense and defense, is therefore growing very rapidly. The technologies involved move with ease from military and national security uses to commercial and corporate uses — and the people with the expertise to develop these technologies similarly transfer between these areas. However, with all due respect to the brains and hard work needed to create and perfect cyber products, there is another crucial ingredient needed, without which very little can get done.

 

This is money — called “funding”, because to talk about “money” is considered gross — and it comes from two main sources. One is governments via their national budgets, specifically through defence spending. The other is via investors, typically through the usual channels of venture capital — angel investors, early-stage funds and so on through successive rounds, until the company is ready to “go public” and make an initial public offering (IPO), usually on the NASDAQ market in the US.

 

Nothing said so far is Israel-specific, but it will be obvious to anyone with even a passing knowledge of the Israeli hi-tech sector, its deep roots in the military/ security forces and its phenomenal record of tapping into venture capital — mostly American — that this is a sector ‘tailor-made’ for Israeli involvement.

 

Indeed, Israel has long been recognized as a major player in the cyber sector. It is fair to say that Israel came to prominence in the area of computer and internet security over 20 years ago, when Checkpoint and some other Israeli companies  — most of them since sold to or merged with larger firms — emerged as global leaders in the field. Israeli companies have continued to be at the ‘cutting edge’ of cyber-technology ever since, thanks to significant government investment and to ongoing commercial success.

 

Smart money is on Israel

 

Thousands of bright youngsters are drafted into elite units engaged in cyber warfare and, on completing their service and/or after spending some years employed in the defence sector, many of them move to the civilian sector. Here they apply their skills to the development of new products aimed at both the civilian and military markets.

 

The results are extraordinary, in business terms. Israel’s National Cyber Bureau — whose creation and rapid growth is itself impressive evidence of the nation’s commitment to this field — was quoted  in the Economist magazine as saying that Israel’s exports in the cyber field amounted to some $6bn in 2014 — an amazing 10% of the global total — and already surpass the (estimated) amount of Israel’s conventional defence exports.

 

Significant as those numbers are, the potential is clearly much greater, driven by the buregoning demand for cyber security. In early October, two Israeli cyber-security start-ups raised a combined $84 million in financing from foreign investors, in one case from Japan and in the other from the US.  The smart money is on Israel.

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