Nadav Zafir, one of Israel's cyber entrepreneurs. Photos by Howard Solomon

Published: February 2nd, 2017

TEL AVIV, Israel – Policy makers often flock to the latest trend when looking where to position their country’s industrial policy for the future. In digital, first it was e-commerce, then cloud computing and big data.

Cyber security has become the latest. For example, in announcing a federal cyber public consultation last August, Public Safety Minister Ralph Goodale said not only do Canadians need to make ourselves and our businesses more secure online, we also need to take advantage of “selling our valuable cyber skills and products into a booming market throughout the rest of the world.”

And booming it is. No expert believes that despite all the money CISOs spend on technology to block hacking, ransomware and distributed denial of service attacks, or how many police raids, attempts to penetrate the enterprise are unlikely to dissipate any time soon.

Ottawa estimates the current global market for cyber security products and services is expected to grow to over $170 billion by 2020, and the job market for cyber pros is expected to rise by 6 million in the next four years.

Wedging Canada as a cyber products leader – despite having dozens of cyber companies including BlackBerry and top computing universities — won’t be easy. Two countries have a head start: The United States, the heart of the IT industry, with the advantage of its huge market and capital resources, and Israel, where IT World Canada has been reporting this week, where the government in 2012 decided to make the country one of the top five cyber nations in the world able to protect its infrastructure, companies, and people. As a by-product, it created a commercial cyber security industry.

It is doing it through a combination of things that Ottawa may not be able to match – leveraging a populace that understands cyber is now one of the main tools to help protect the nation from unfriendly neighbors and terrorists, leveraging the young people who have to serve mandatory military service – particularly those who serve in intelligence and cyber security roles (in fact the Army’s cyber unit has first pick of all high school students) and generous tax breaks to foreign companies including Intel, IBM, Microsoft to open research centres here, some of which are dedicated to cyber.

In a speech this week to the annual Cyber Tech conference Prime Minister Benjamin Netanyahu delighted in telling the audience there are lots of incentives for foreign companies to set up cyber research centres here and partner with Israeli firms.

To help make the southern city of Beersheva and its Ben-Gurion University a cyber centre the government spent $5 billion transferring all of its military cyber facilities there and helped expand the campus, including an IT research park.

The government boasts of the cyber ecosystem at Ben Gurion and other places in the country where academics, the public and private sectors work together to advance cyber security knowledge and solutions.

This is not to say Canada doesn’t have advantages. Three are proximity to the U.S. customers, proximity to U.S. capital, and quality Canadian universities whose computer science grads are often scooped up by Silicon Valley. BlackBerry isn’t what it once was, but departing engineers have skills being turned into startups. One of Canada’s triumphs is New Brunswick’s Q1 Labs, bought by IBM for its Qradar system information and event (SIEM) management suite. The application’s development team is still there.

In an unscientific count, there are some 30 cyber security-related companies in Canada (depending on your definition).

On the other hand Israel says it has 400.

To be fair, Ottawa has not yet said it wants Canada to be a top five cyber security country. But talking to Israeli government and IT industry people here one can’t help think about how Israel did it, and how if Canada wants to be up there it will have to find a different way.

For example, we have a federal state, so Ottawa can’t mandate public schools start cyber learning at a young age in schools, as Israel did. Nor can it create a system for evaluating intellectual and leadership capabilities of public school students destined for military service to offer them plum positions, as Israel does. Or count on the young people who leave after their military service to essentially be highly educated in advanced technology, ready to be hired by cyber companies. Similarly, Ottawa doesn’t have a full handle on all the industrial levers that Israel does because we’re a federal state. Every country offers tax breaks to corporations, but how much are Ottawa and the provinces willing to offer cyber security firms to set up branches here beyond what they already shell out?

Among those IT World Canada met was Nadav Zafir, who stayed after his military tour of duty and rose to head the Israel Defence Forces’ Unit 8200 cyber security and intelligence unit. Now he runs Team 8, what he calls a ‘cyber foundry’ — or incubator – for security companies with a unique approach. Investors such as Cisco Systems, Microsoft, Accenture, Nokia, AT&T, help define security problems. A local team is formed to devise a solution, which can be commercialized.

Given the resources the Israeli government has leveraged, he sees the opportunity that opening up govenrment procurement to startups can bring.

“The companies that are going to be successful in the future are companies that are going to be able to get resources from different sources,” he said. “I think government involvement is very important, so I think the government of a country can do a lot to augment its own capabilities, and if it opens itself up to startups, which governments seldom do, and allows them to be a player within the procurement process, then the answer is yes, because that could be a differentiated factor for companies in Canada.

“In terms of talent in Canada, it’s probably based more on universities,” he added, which he assumes many are good, “and if you can create hubs as the U.S. has done around MIT and Harvard, that would be the way to go.”

Israel’s cyber strategy includes not only partnering with the private sector but also reaching out around the globe to have as many formal and informal arrangements with governments as well to tout Israel’s expertise and exchange knowledge. This works in many ways – senior Israeli cyber security officials meet with their Canadian counterparts, for example, to talk about national security. Canadian and Israeli security officials in the electric generation sector visit the other’s countries. One ex-pat Canadian who works for the CyberSpark Industry Initiative a non-profit joint venture with Ben-Gurion University and the National Cyber Bureau (which reports to the Prime Minister) for managing, says Ottawa’s science museum is interested in the public school cyber awareness program the organization has created.

In fact, the Canadian Advanced Technology Alliance (CATA), which represents startups and solution providers, just concluded an agreement with Israel Advanced Technology Industries for their members to collaborate in areas of joint interest, including cyber security. That will include creating a web portal that will combine research from both associations and a way to allow companies in both countries to post requests for solutions to problems.

“We have a very good relationship with the government of Canada,” CyberSpark CEO Roni Zehavi said. “We had a very interesting meeting with the premier of Ontario [Kathleen Wynne] and I can quote to you what I said to her, because the premier talked about building an ecosystem for finance and cyber security: I think when it comes to ecosystems there is no competition. At the end of the day, facing the cyber security challenge it’s an ‘ecosystem of ecosystems’” that’s needed.

Roni Zehavi, CyberSpark

“There is a lot a value and assets in our ecosystem, there is a lot of value and assets in Ontario’s, and in New Brunswick and in Vancouver and many other places. And we need to find a way and a platform to work together, to take the best of each of those places.

Meanwhile Zehavi is trying to lure Canadian companies to the Ben-Gurion research park to open an R&D or innovation centre, having talked, for example with TD Bank, Royal Bank, the University of Waterloo, the University of New Brunswick and McGill University.

Zehavi has a few lures: “One of the services we provide is called Landing Pad – we approach companies and say, ‘Before you make a decision to establish an entity in Israel we can do this for you: Recruit the people [locally], deal with the administration and the logistics and bureaucracy. You don’t need to establish an entity yet. Take this service for one year and let them work under you. They will carry your business card. You will define their milestones and their charter. And if after one year you’re happy you can extend that, and you have a core team. If you’re unhappy, nothing has happened. So you can enjoy swimming in the pool and stay dry. This is one of the things we discuss with Canadian entities.”

How would he feel if such lures were aimed at Israeli companies? “There is the reverse,” he replied. “And we have no problem. And I’ll tell you why. Every startup in Israel, upon foundation, realize that Israel is never the market… the market is in the Americas, the Far East, in Europe. But the talent you have here, the innovation you have here, the expertise you have here do not exist anywhere else. This is something we have, this is what we offer. So, yes, we would love for Canadian entities to build their innovation centre in Israel … and we would love Israeli companies once being boosted from the first stage to establish operations in Canada.”

CATA recognizes the challenge Canadian startups – including those in cyber security – face from Israel. “We’re lagging behind Israel in the public policy approaches to the way they support their industry,” CATA president John Reid said in an interview Thursday.

CATA has called for the creation of a national strategy to promote the development of innovation clusters for cyber security and take lead role in helping position the sector as a hub for job creation, innovation, and economic growth both within Canada and globally

“We believe the tools and resources offered by government have to be brought into the 21st Century,” he said. Despite Goodale’s wish to push Canadian cyber products and services to the world, Reid said, if Ottawa doesn’t deliver reduced red tape and revise incentives the minister’s intention won’t be achieved.