Israel's cybersecurity industry is now a powerful force – its biggest challenge may be its own success

The cost to the global economy of cyber-crime was estimated at $500bn in 2018 Credit: FeelPic

It is so secretive that the Israeli Defence Force (IDF) didn’t publicly acknowledge its existence until only a few years ago.

Its youthful recruits, mostly aged 18-21 and recruited directly out of school for their computer and hacking skills, are not even permitted to tell their parents they are members.

But Unit 8200 – the shadowy Israeli army unit responsible for signals intelligence and code decryption – is fast becoming a powerful engine for the country’s tech-fuelled economy.

This week it emerged that cutting edge Israeli spyware produced by NSO, a private company reportedly co-founded by former Unit 8200 soldiers, was used to hack the phones of human rights lawyers representing Saudi dissidents.

Similar spyware, which can be surreptitiously injected onto a smartphone using no more than a missed WhatsApp call, was also allegedly used by Saudi agents to eavesdrop on conversations with Jamal Kashoggi, the journalist murdered in the kingdom’s consulate in Istanbul.

For good reason, cyber-security companies like this often prefer to operate in the shadows, but there is no disguising the stunning recent global commercial success of the industry in Israel.

So many young graduates from Unit 8200, which reportedly also wrote the Stuxnet computer virus used to disable centrifuges at an Iranian nuclear facility, have gone on to start cyber-security companies that it has effectively served as an incubator and start-up accelerator as well as a key plank of the country’s security establishment.

Last year, Israeli cyber companies raised a record $1.2bn (£930m) – five times the $240m they raised in 2014 and about 20pc of the amount raised globally, placing Israel in the top tier of global cyber-powers.

WhatsApp was targeted by sophisticated spyware designed by a shadowy Israeli private security company NSO Group.

Israel’s more than 420 cybersecurity companies, many clustered around Tel Aviv and Beersheba, generated $3.8bn in exports in 2017  – not bad for a country of 8.5m people.

The number of deals involving Israeli cyber companies is also surging from 50 in 2014 to 117 last year.

Israel’s expertise is now so prevalent and well-recognised globally that it is rapidly becoming the go-to place – not just for intelligence agencies and nation states seeking the kind of top-notch spyware developed by NSO but for industry too.

With the cost to the global economy of cyber-crime estimated at $500bn in 2018, demand for sophisticated cybersecurity products is surging.

Israeli expertise is being called upon by everyone from carmakers to banks and manufacturers of household appliances.

All of this is translating into high-paying jobs and foreign investment.

Cymotive, a Volkswagen-backed developer of software that protects self-driving cars and connected vehicles, was created in 2016.  Skoda, Daimler and GM have research operations in Israel, for example.

But the industry’s real clout is not just economic but political too.

It lies in forcing regimes around the world who want access to Israeli technology to forge closer and better relations with the country.

Naturally, Israeli cyberweapons have plenty of willing customers in the Middle East, including in countries such as Saudi Arabia, so the export licenses issued by Israel’s government for use of the nation’s technology overseas have become a powerful diplomatic tool.

Although the fruits of Israel’s cyber expertise are being harvested now, Israel’s success has been decades in the making.

Naturally, the Israeli armed forces have played a big role but Unit 8200 represents only one part of the story.

Back in the early 2000s – and well before most countries – Israel recognised the growing need to bolster its cyber-defences and directed its Shin Bet security agency to defend critical infrastructure IT systems.

In 2013, Israel established a dedicated campus for cyber-security in the desert city of Beersheba, co-locating some of the country’s top experts and companies beside a big nearby spy base, roughly equivalent to Britain’s GCHQ ‘doughnut’ in Cheltenham.

Private investment has flooded in and Beersheba now hosts the offices of a string of big companies including IBM, EMC, Cisco, PayPal, Deutsche Telekom and Lockheed Martin.

In 2016, Israel restructured its cyber defences under the Israel National Cyber Directorate, which reports directly to the office of the country’s Prime Minister.

The country’s education system has played a vital role also.

Israel is the only country in the world that teaches cybersecurity classes in regular schools and was the first to offer a PhD in the field.

No fewer than six university research centers are dedicated to cybersecurity, which now plays a vital role in the success of Israel’s wider technology industry, which generates 45pc of the nation’s exports.

In fact, Israel’s tech industry has grown so fast that its biggest challenge may be its own success.

The number of tech workers, who earn over twice the average wage, grew to 280,000 in 2017 from 240,000 in 2013 but over 15,000 positions remain vacant and Israeli companies are struggling to find new recruits, amid rising wage inflation.

It’s a nice problem to have.