Why Israel is a hotbed for flash storage innovation

EMC deal for XtremeIO highlights Israel's highly-skilled IT workforce, tech success

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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."

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.

Peters and Rozengarten said EMC wanted superior "architectural" software -- and got it.

"Today's flash is a very unreliable device with poor retention and endurance (especially when scaling to 20 nanometers and bellow)," Rozengarten said. "This requires a sophisticated ECC based on [a digital signal processor] and new flash controller know-how. In this space, Israeli's companies are leading with companies such as Anobit and Densbits."

In fact, Israel has been a hub for many leading companies and technologies including semiconductors, communications, security and storage, Rozengarten said.

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