That coup is being led by a site called Groupon, which is to shoppers what Facebook is to teenagers. Groupon is a combination coupon/deal/advertising site that helps businesses recruit new customers, while providing signifcant deals for consumers.

Each day, Groupon features deals in various categories (many of them related to food/leisure/services/travel), with the “big deal of the day” offering consumers discounts on whatever is being offered – up to 90% off, in some cases. Consumers who want the deal buy the discount coupon in advance and redeeming it at the business. The catch: Groupon offers a set number of coupons (say, 200) for the product/service. If the minimum number of people buy a coupon, the deal is “on.” If not – everyone who paid gets a refund, and the business goes back to the drawing board.

Groupon was started by in Chicago by now 29 year old entrepreneur Andrew Mason in November 2008 – at the height of the recession (first lesson of Groupon: don’t ever let anyone tell you that you can’t make it, even when times are tough!). Today, Groupon itself provides deals in 150 markets in the U.S., and in four other countries – and that doesn’t even include the dozens of Groupon clones, both in the U.S. and abroad. Groupon started out with $1 million in funding – and several weeks ago, the company rejected an estimated $6 billion buyout offer from Google!

A healthy percentage of those Groupon clones are to be found right here in Israel; I counted at least a dozen at DailyD, which aggregates the deals from each of the Israeli group buying sites). There’s even a site, called Groopbuy, that appeals strictly to English speakers, with most of their deals located in Jerusalem. The biggest Israeli group-buying site is Deal Hayom, which features deals in five Israeli cities – Tel Aviv, Jerusalem, Haifa, Rishon Lezion, and Be’ersheva.

While the internet is worldwide, and certainly national, the trick with group buying sites – including Deal Hayom and Groupon – is to give it a local flavor, says  Dr. Eyal Felstaine, CEO of Deal Hayom, with whom I discussed the whole group-buying phenomenon. Group-buying sites have to give incentives to both consumers and businesses in order to get them on board  – and the way to do that, he says, is by micro-targeting the consumer and matching his or her need to the businesses. And the way to that, he says, is by building a good, old-fashioned mailing list. “That’s my biggest asset, and I am very careful not to misuse it. Everyone who signs up gets an email a day with a deal tailored to their needs.”

When he tries to sell a business on offering a deal, Felstaine says, he tells them that it’s not a discount they’re offering; instead, they’re actually entering into an advertising campaign. “I offer them a guaranteed audience for the product or service they’re targeting,” he says. “Remember that if all the coupons aren’t sold, the deal doesn’t go through, and everyone gets a refund. Thus the businesses are getting exposure to many new potential customers who will hopefully come back again, after the coupon expires.”

That’s one reason why the deal services work on the local level. “The business or service has to be convenient to consumers, otherwise they won’t bother. We can target potential customers by several methods, the most important being address. Residents of Be’ersheva, for example, might use a coupon for a restaurant in Tel Aviv on a one-time basis, but if they get coupons for Be’ersheva, they are much more likely to return to that restaurant in the future,” Felstaine says.

The question of whether or not customers will return once the deal is over – the loyalty question – is one that is asked by many business owners, much less computer journalists. When it comes to supermarket shopping, for example, even loyalty programs where the customer signs up for a credit card issued by the market fall by the wayside unless the store keeps the deals coming; if consumers see the store as too expensive, they just won’t go.

The loyalty question is a real issue for businesses, says Felstaine – and for that reason, he says he does not work with businesses that are not going to benefit from the group-buying model. “A store that sells Levis jeans, for example, is not going to benefit from this – and we wouldn’t even try to sell them on the service. The loyalty is to the jeans, not the store.

“But it’s different for a business like a restaurant or a spa,” Felstaine says. “If you want to go out with your spouse or friends, you are more likely to go to a place you’ve been to before, or that you’ve heard about from friends. You want to know the route, more or less, what to expect, whether there is parking, etc. For a business that caters to leisure needs, group coupon buying is an excellent resource. It’s like advertising for them – and for all I know, many of the people we work with may be using their advertising budgets to pay for expenses associated with their deals,” he adds. “The return on investment per user is 100% – ie the coupons are sold in advance, so the advertiser knows it works.”

For years, internet advertising was considered effective only for big-name, national and international business; if was just to difficult to sell to small business. The best a local business could do was use Google Adwords to target users, and cross their fingers. But it seems that Groupon and company have broken the code (Groupon is said to have about 35 million users; Felstaine says that Deal Hayom sells NIS 12 million a month, and has 110,000 users). People are going to go shopping, deal or no deal; why not take advantage and save some money?

ICQ is just a case in point: Many Israeli companies developed their “killer” device or application with assistance and investments from venture capital investors and funds – investments that paid off big time when the companies they worked with arrived at a successful exit, either getting bought out by a multinational, or going public themselves – turning into worldwide enterprises that, themselves, snapped up promising Israeli startup ventures. With over 100 Israeli companies trading on the NASDAQ – the majority of them in the hi-tech business – Israel is one of the world’s technology powerhouses.

First, some stats: Over little more than a decade, Israel has grown into a hi-tech powerhouse, with the technology boom fueling Israel’s amazing GDP growth of the past few years, says the Ministry of Industry, Trade and Labor. Nearly three quarters of Israel’s $70 billion exports last year were in the high-tech sector, Ministry statistics indicate, and the country has one of the highest per-capita rates of patents filed. In its latest report, the Israel Venture Association (IVA) said that high-tech companies raised $600 million during the third quarter of 2008, an eight-year quarterly high and up 45 percent from a year earlier, and 29 percent more than the second quarter. The World Economic Forum in its 2007-2008 report called Israel one of the leading countries in the world in technological innovation, ranked first for availability of qualified engineers and total expenditure on R&D.

The hi-tech boom, along with the solid fundamentals of Israel’s economy, has helped the country sustain strong growth for decades, with GDP rising most years. Israel’s GDP in 2006 reached $195 billion, according to the International Monetary Fund , and GDP per capita was $31,767 in 2007, the IMF said. After adjusting its forecast to take into account the world financial crisis, the Bank Of Israel still predicts that GDP will grow by 2.7 percent in 2009. Israel has free trade agreements with the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Jordan, and Egypt, and last year became the first non-Latin American country to sign a free trade agreement with Mercosur. According to Bank of Israel statistics, industrial exports grew by some 27% since the start of 2008 and hi-tech exports, climbed at an annualized rate of 18.2% over the past three months.

But with the technology boom in recent years, much of Israel’s growth has been fueled by hi-tech development. As an umbrella group for those seeking to invest in Israeli hi-tech, the IVA lists dozens of VC firms that have portfolios of Israeli companies, some of whom have been working here for over a decade. Almost all the “name-dropping” companies identified with Israeli hi-tech – companies like Checkpoint, Nice Systems, Aladdin, etc. – were nourished by VC companies like Genesis, Gemini, Pitango, and many others.

From modest roots, many Israeli companies have grown to be world leaders in their specialties. One such company is Checkpoint Software, the creator of the modern commercial computer network firewall. Checkpoint was established in 1993 in a small Tel Aviv apartment, by Gil Shwed, Shlomo Kramer, and Marius Nacht – and today the company has some 100,000 customers and over 1,500 channel partners, and is traded is worth over $7 billion, with 1,800 employees worldwide. Nice Systems, which is involved in everything from telephony to web, radio and video communications, has been trading on the NASDAQ since 1996, and has over 24,000 customers in 100 countries, including over 85 of the Fortune 100 companies. Both companies subsisted on investments in their early days, going on to far exceed the expectations of early investors.

In addition to private funding, the government of Israel runs a number of programs that provide help to promising startups. The Office of the Chief Scientist, the Israeli Industry Center for R&D (MATIMOP), and programs like the Israel-US Bi-national Industrial R&D (BIRD) Foundation, among many others, lend a helping hand with logistics, advice, and even funding. The BIRD Foundation, for example, was established by the U.S. and Israeli governments in 1977 to generate mutually beneficial cooperation between the private sectors of the U.S. and Israeli high tech industries, including start-ups and established organizations. BIRD supports approximately 20 projects annually with a total investment of around $11 million per year. To date, BIRD has invested over $245 million in 740 projects, which have produced sales of over $8 billion. Since the establishment of the Foundation 30 years ago, the accumulated repayments have totaled $82 million.

Israel, in other words, is a bright – very bright – spot on the hi-tech world map, with so much innovation going on, many entrepreneurs who take their companies to a successful exit come back for another round, hoping to build yet another startup into a successful world changing company. In an interview with the Israel Investment Newsletter earlier this year, Gemini’s Carmel Sofer said that the rise of the “serial entrepreneur” was an increasing factor on the Israeli hi-tech scene. “We were some of the earliest to spot a key trend we see playing out right now: the return of successful entrepreneurs,” Sofer said. “We’re seeing serial founders of startups rebound off successful exits and with money in pocket, begin building new businesses. We’re seeing more and more of this caliber of professional starting new companies. They’re not necessarily interested in the money. They have a strong commitment to building a company and they’re coming from a variety of different fields.”

One of those “serial entrepreneurs” is Zohar Zispael, one of the most successful and prolific hi-tech entrepreneurs in Israel, or anywhere. With 27 startups under his belt, Zispael’s RAD Group of companies, which he co-founded with brother Yehuda, is considered the top developer of telecommunications startups in the world. In an interview with the Jerusalem Post, Zispael said that he had worked with nearly all the VC companies in Israel, plus a good number from the U.S. “In the early days, before there were VCs, we raised money ourselves. We got some help from the Chief Scientist on some projects as well,” he says. In fact, he says, the assistance the government offers encourages VC investors to do business here. “The Chief Scientist and other programs run excellent programs, which pay off for the country, encouraging not only specific projects, but an atmosphere of development, and a feeling that with enough hard work, a company can succeed. That drive encourages VC investors, who are more willing to put money into startups, and in the end, when there is a successful exit, both the investors and the country benefitting. Even if a company doesn’t make it, the technology they developed with find its way into another project,” Zispael says.

But hasn’t the world financial crisis changed the rules? What are the prospects for Israeli hi-tech in the coming years? Zispael remains optimistic, saying he expects growth to continue. “So far, I haven’t seen a falloff in technology sales, at least by established company, although I do expect a dip next year. But things will definitely not get as bad as they were in 2001,” when the dot com bubble burst. “This bubble is for the banks and real estate, so it will affect hi-tech less,” Zispael says. While VC “angels” may temporarily be intimidated by the market and may hold off on their investing activities in the short term, and some brand new and almost-mature (pre-exit) companies that have a high burn rate may face real problems, he expects most well-run developers to survive the crunch. “If anyone asked me, I would tell them that the time to buy or invest is when everyone else is afraid to, because you can get better terms,” Zispael says. “Those investing in new companies now are looking at exits in perhaps five years,” when things should be looking much better, he says.

And if there’s one thing Zispael has proven, investments in Israeli tech pay off for those willing to take the investment risk. When it comes to the innovation that is a feature of Israel’s hi-tech developers, nothing’s changed, he says; the fundamentals remain the same. “What’s changed is the market, but the ideas are still out there,” he says. And those ideas are as great as ever, according to Gemini’s Sofer. “We’re now witnessing the emergence of the mobile Internet, and this is coming from Israel. The mobile phone is no longer being looked at just for its voice capabilities, it’s being considered as a data device,” he told Israel Investment Newsletter. “Many are trying to take web applications and make them work on the phone. This is just part of the story. Those companies, and many of them are located in Israel, who can start developing mobile applications from the ground up as they look how users will interact with the Mobile Internet are going to be the winners. These companies are working on application development as much as building sustainable businesses.” Regardless of investment climate, that development will continue – and investors like Gemini, who know a good thing when they see it, will continue to bring the future Israeli “stars” to successful exits.

Google, for example, believes in Israel’s hi-tech potential to such an extent that it has opened not one, but two research and development centers in the past four years – one of the few countries outside the U.S. where the company has multiple R&D offices, says Google Israel CEO Meir Brand. “That’s an honor reserved for large countries, like Russia and China,” Brand says, “so it’s an indication of just how advanced Israel’s hi-tech capabilities are that the company would open two R&D centers here,” in Tel Aviv and in Haifa. “We’ve found a huge pool of scientists, engineers and mathematicians full of innovative ideas. Israelis tend to think ‘out of the box,’ a trait highly valued at Google,” he adds. As a company, Brand adds, Google seeks out workers who can think and act independently – a trait Israelis are well known for, and that fits right in with the Google ethos.

Besides converting Google products, such as Gmail and Google Docs, for use in Hebrew – (projects that will also benefit users of other right to left languages, like Arabic, says Brand), the Google Israel staff – about 100 people work in the two centers, Brand says – are at the forefront of delivering some of Google’s latest and greatest products. Among them are Google Trends, which lets you research and compare what people are looking for online, contests and annotations for Youtube, and Google Insights for Search, which lets you compare search volume patterns across specific regions, categories, and time frames. And Google believes in Israel’s hi-tech future, as well, Brand says: Among other projects, the company has developed, in cooperation with the Ministry of Education, layers for Google Earth that will help Israeli students learn history, geography, and other core subjects.

Cisco, another worldwide technology powerhouse, also has a huge presence in Israel – with some 750 employees, mostly engineers, working at the company’s R&D facility in Netanya, says Cisco’s Israel director Bina Rezinovsky, making it the company’s second largest research center outside the U.S. Many of those workers came to Cisco as the result of the company’s purchases of Israeli companies; to date, Cisco has acquired nine Israeli companies, which, says Rezinovsky, have furnished the technology for some of Cisco’s most important products, such as the network management systems designed by Israel’s Sheer Networks. Cisco acquired Sheer in 2005 for some $100 million, part of the over $1 billion Cisco has invested in Israeli companies over the past decade.

“Israelis are imaginative, and they are familiar with technology, two traits that make the human resources of the country very valuable to Cisco,” says Rezinovsky. While they can sometimes be a bit “provincial,” she adds, the “Israeli brain is dynamic and creative, and that’s what we need on our development teams. For Cisco, Israel is a second home, an island of stability in a difficult world economy. We have no plans to stop investing here.” Cisco has had great success in Israel, Rezinovsky says, and gives back to the community as well: Besides job training programs in peripheral areas, the company runs the Mediterranean Youth Technology Club (MYTecC), an education initiative aimed at giving ninth and tenth grade pupils from the Mediterranean region the skills needed for them to become future business and social leaders, and the Digital Cities project, which includes more than 20 different projects aimed at improving relations between Israeli Jews and Arabs in Nazareth and Nazareth Illit.

When it comes to working with Israel, however, the “grandfather” of all multinational investors here is, of course, IBM, which began working in the country in 1949. Invited to help the fledgling country with defense needs, the company stayed, and grew from its initial three employees to about 2,200 today, says IBM Israel CEO Meir Nissensohn. “We also had the privilege of opening the first R&D lab, in 1972, when we established the IBM Science Center, developing projects in the medical, agricultural, and other fields.” Today, IBM has three research labs, with almost 1,000 employees – including the company’s largest research lab outside the U.S., in Haifa. And despite its image as a large, mature corporation with very specific policies, IBM actually prefers the less formal and rigid mentality of Israeli workers when it comes to development. “Israelis are very big on innovation, which is key for any corporation today, including ours. There is a huge amount of innovation on all levels in Israel, and the workforce is well educated and motivated.”

IBM also pioneered the practice of acquiring Israeli companies, and last year it snapped up three more, including XIV, FilesX, and Diligent Technologies. Those acquisitions made IBM the largest foreign investor in Israel in 2008. IBM is a strong player in data storage, says Nissensohn, “and companies like XIV and FilesX, developed using the strong talents of the Israeli hi-tech workforce, provide top of the line solutions for IBM to bring to its customers worldwide. Israel has become a worldwide center for data storage innovations, and we intend to continue our growth in this area.” IBM is also well known for giving back to the community, and has a long history of supporting educational and cultural institutions, and supplying schools with computers, libraries, and scholarships for promising students.

Microsoft, which sells more software worldwide than anyone else, is also heavily invested in Israel. Microsoft Israel has a large research and development center here, and has acquired several Israeli companies, says Microsoft Israel CEO Danny Yamin; today, about 700 people work for MS Israel. “Microsoft sees Israel as an excellent source of innovative workers, and we at MS Israel are proud of our contribution to Microsoft’s worldwide development,” Yamin says. Those traits are essential in the software business, says Yamin, and Israel has more than pulled its weight in developing important Microsoft products. “Their ability to think out of the box and get past formal strictures is a big advantage,” Yamin says.

MS Israel is also heavily involved in the local market, helping large and small businesses, as well as consumers, with software solutions. “Microsoft was one of the first companies to commit to translating its products into other languages, and in fact, any new version of Windows or Office is available in Hebrew the same day it is released worldwide,” Yamin says. “We see ourselves has having an important responsibility to the local market. According to an IVC survey, about 90,000 workers in Israeli hi-tech use Microsoft products. That’s a large group, and they look to us for solutions.” Microsoft Israel’s commitment to the country also expresses itself in the many philanthropic and education projects the company runs; the Maala index for Social Responsibility consistently gives the company its highest ranking for philanthropy and community involvement.

In a sense, the story of Israel’s rise as a hi-tech giant is one of the most inspiring chapters in the country’s history, and one of the greatest signs of the success of the Zionist project. It’s a sure sign of the country’s maturity, and the resources of its people; if multinationals, whose bottom line is the bottom line, are rushing to invest in Israel, we must be doing something right!

Why can’t “they” figure out that we won’t do business with them if they treat us like dirt – or worse, cash cows? Don’t they realize that, ironically, the more they don’t try to “sell” us something we don’t believe we need – and instead help us figure out what we need – the more likely we are to buy from them, not just once, but over and over? With competition cutthroat in the market right now, only the strong will survive – and “strong” in this case means knowing how to care for your customer.

So, given the tough economic climate right now, SAP Israel can consider itself lucky that it has a manager of the caliber of Gilad Gans. Gans, Managing Director of SAP Israel, is responsible for the overall marketing, sales and distribution of SAP products in Israel. Gans oversees the strategic planning and implementation of sales and field activities, professional services and product development, as well as leading investment opportunities in the region. And, he is a chief reason for SAP’s strong showing in an otherwise so-so economy. How strong? “Israel is the second largest market in the world for rampups of SAP’s CRM 2007, after Germany,” Gans says, a significant sales accomplishment that bespeaks a winning strategy – something not lost on SAP executives from countries around the world, who pile into SAP Israel’s Ra’anana office to learn how the local branch has come up with one of the most winning sales strategies of any of the company’s branches anywhere.

SAP, for those who aren’t familiar with it, is the multinational software and information management company, originally based in Germany, that provides a wide range of solutions to customers seeking to make their businesses more efficient, or compete more effectively in the marketplace. Some of SAP’s products include database management, customer relationship management (CRM) software and systems, enterprise resource planning systems, financial planning, and much more. The case of SAP Israel is interesting because it highlights Israel’s unique position and creativity in the world of hi-tech and business – even in the context of what would seem to be a staid, conservative multinational corporation.

When one thinks of a company like SAP, the financial centers of New York, London, or Tokyo come to mind – and while Tel Aviv is certainly advanced enough, none but a handful of Israeli companies would seem to need the services of such a giant.

But one would be wrong to think thus, says Gans. “In Israel, we have about 3,000 customers, 2,500 of which are classified as small businesses with fewer than 50 employees – and many with as few as one employee!” It turns out, says Gans, that his philosophy of working with individual customers to find solutions, not just to sell licenses, has proven a big hit. “Israel is a unique market, because many people have worked in development and engineering. Every Israeli is an ‘engineer,’ having worked at – or established – their own startup at one time or another. Israelis are a very technological people, and in that sense it’s easier to sell solutions here than in many other places,” Gans says.

But what has really made the difference for SAP Israel is Gans’ philosophy of treating even small customers like big ones – by “partnering” with customers to help them find the ideal solution. “Previously, SAP sold licenses for products like other software companies, but now we work with customers as partners, to ensure they are getting what they need to succeed. Personally, I’m more interested in providing a customer with a solution than selling a license – and with the worldwide experience and resources of SAP, I know that we have a solution that will help them accomplish their goals.”

In essence, Gans’ approach is the way high-end sales and marketing staff work with their top customers – except here, it’s SAP’s strategy for working with even small customers. “We are way ahead in sales of other countries with similar sized markets.” In fact, Gans adds, SAP Israel is at the top of the list of company sales organizations selling to small businesses. His next target is the mid-sized business – with between 50 and 2000 employees – which have until now been serviced by local companies. “I think I can prove to them that they are better off with SAP than with their local vendors,” Gans says.

As a result, SAP executives from around the world troop to Israel to get ideas on how to improve their own sales efforts, as well. In fact, Gans says he even gets calls from SAP offices in the Arab world. “We have been working at a steady pace converting SAP products for use in Hebrew systems, and offices in Arab countries often call seeking help on how to make certain features work properly from right to left, like in Hebrew,” he says.

Although Gans expects a somewhat tougher time selling in the near-term, due to the worldwide economic slowdown, he’s not particularly worried. “One thing customers seek during tough times is greater efficiency – saving money wherever possible – and that’s exactly what SAP can do for them,” he says. “In fact, the current situation is an opportunity for us and for our customers. We’re here for the long term, and we want to help them plan for the long term as well. The downturn won’t last forever, and we want to help them – and ourselves – to be here when things clear up.” It’s not about selling licenses – it’s about helping customers find solutions, Gans says. But that, as it turns out, is what prompts them to buy – specifically from SAP.

It’s a lesson I wish the supermarket, the post office, the bank, and all the other places I have to do business with would learn.

It seems that there’s nothing that can’t be blamed on the Jews – whether its missing Christian children during the Middle Ages, in the classic take on the “Blood Libel” – or the massive Internet outage that hit the Arab world over the past week. Well, not just the Arabs; India has had a lot of Internet problems, and Iran may still be 100% without Internet access, after several underwater fiber optic cables were damaged or cut.

The outages, which many in the Arab world and the far-left hate-Israel community are already blaming on you-know-who, began about a week ago, when a pair of undersea communications cables between Egypt and Europe – the data “lifeline” for much of the Arab world, it turns out – broke about 8 kilometers off Alexandria harbor, which was closed most of last week due to the massive storm that hit the region. India, which uses the FLAG Europe Asia and SEA-ME-WE 4 cables as well, was severely hampered, wreaking havoc with much of the world’s backoffice data-processing, and leaving frustrated Americans without the technical assistance that India does so well.

Banks in the Gulf region were hurting, and officials said it could be a week, maybe two, until things got back to normal. Besides being used for fast Internet communications, the cables also carry digital phone calls and TV signals, so even the many in the region who don’t use the Internet at all were affected, as the legions of guest workers in the Gulf and Saudi Arabia couldn’t make phone calls to family or transfer their salaries home to places like the Philippines and Pakistan (which had Internet problems of its own). Several African countries which use the cables, as well as Egypt and Syria, were all out of Internet luck too.

And then there was Iran. On Friday, a third cable (maybe a fourth, according to some accounts) got cut in the Persian Gulf, slowing the already bottlenecked traffic that could still get through – and cutting off Iran altogether. Curiously, the anti-Israel crowd crows, there were only two countries left unscathed by the cable fiasco: Israel and Iraq (I read contradictory reports on Lebanon). Hmm.

Actually, according to the companies that owns the Mediterranean cables, the outage was apparently caused by the anchor of a ship that spliced the cable when it fell overboard (I haven’t heard any explanation yet for the Gulf cable). Although it seems a little too coincidental, it’s not unreasonable for weather related mishaps to occur in the middle of a major winter storm on the high seas – and as far as the Gulf is concerned, I wouldn’t be surprised if this (http://tinyurl.com/yqf3ka) was the explanation. Of course, logic never comes into play for these people; it’s got to be Israel’s fault! Well, I’ve got a theory of my own; instead of saying that Israel and/or the CIA (which, as we all know, controls Iraq nowadays) deliberately cut the cables in order to isolate the Arab world, and especially Iran, to set them up for “something” (which has yet to take place), I think it was the Arabs/Iran themselves that did the cutting to make Israel look bad by having something to blame on us! Or we could just call it a draw, and attribute the breakages to bad winter weather and infrastructure failure, not unheard of with underwater cables.

Why wasn’t Israel affected? Simply because we use a different cable, with Egypt and company refusing to allow Israel to rent bandwidth on the same one it uses. Israel’s cable is called MedNautilus (http://www.mednautilus.com), originally put together by a consortium that involved Israelis, but now wholly owned by Spain’s Telefonica. “Our” cable travels under the Mediterranean from Tel Aviv to Sicily, and looks on the map to be several dozen kilometer north of the broken Egyptian cable.

Considering how important these cables are for business and telecommunication, one would think there would be a backup system of some sort, to avoid the outages and data-pipe shortages that have affecting nearly a billion people over the past week. Unfortunately for the Egyptians, Kuwaitis and Iranians Indians, there was apparently no sufficient backup data communications system to keep their businesses going. And the same holds true for us!

Actually, we have it worse than others in our neighborhood. While some reports said that Saudi Arabia was able to partially restore its service using “terrestrial routes” (overland cables, I guess), we don’t have that option. For high-speed communications, MedNautilus is the only option. There are two other cables available, the EMOS and CIOS systems, which have been around since the early 1990s (MedNautilus was set up in 2001), which, according to one Internet expert I spoke to, “couldn’t hold the bandwidth of even one big Israeli ISP today, much less all of them.” Not to mention that the price of access on MedNautilus has been rising in recent years, making things much more expensive for ISPs and keeping prices relatively high for many customers. And what would happen to Israel’s hi-tech economy if the line to the West was down for a couple of weeks?

The solution to both the redundancy problem and the high prices on MedNautilus would seem to be the construction of another high-speed underwater communications cable, and last month a number of Israeli ISPs got together to discuss doing just that (http://tinyurl.com/ypak5e). Unfortunately, given that the investment in such a project could reach tens of millions of dollars, it’s unlikely to get off the ground, many experts believe, even if all the communications companies work together to lower risks. If the mess in the Arab Internet world last week should teach us anything, it should teach us three things: One, the importance of redundant systems for an an advanced hi-tech economy; two, the importance of a strong navy, to keep troublemakers bent on economic terrorism from cutting the cable; and three, the importance for ship captains to make sure they don’t drop anchor in the wrong place!