Oct 2, 2021
The Nimbus tender may be the best explanation into how Israel works that you’ll ever receive. Here’s why.
Only in Israel can a pop singer turn data center tycoon at the drop of a tender
Once upon a time, in an office block far far away, somebody high up in Israel’s procurement hierarchy decided that it was time to put a tender out to market (the story gets slightly more interesting, I promise).
Reading the news coverage, Israel had decided that it was time to begin shifting its government’s tech infrastructure off-site.
In the business word, migrating business systems to the cloud is a banal and common occurrence.
Managing infrastructure on-site is these days considered clunky and cost-ineffective and the major infrastructure providers — AWS, Google, Oracle, and Microsoft, among others — can generally do a better job. Your tech guys can get back to thinking about business problems. Or playing Solitaire.
When governments and secret services want to move their stuff off-premises, however, the usual process of scrutinizing the security of the prospective cloud vendor gets an elephant-sized dose of anabolic steroids.
All the more so in Israel’s case.
The Nimbus tender was interesting for two reasons:
- Israel evidently saw this as a worthwhile enough priority that it made no effort to keep things on the DL. The tender — and the reaction to it — made the news.
- Israel — as in the State — made clear that it wanted companies with experience operating clouds to do the job. Hence, in an unusual move, Israeli firms were excluded from bidding on the project.
But also for one final reason that didn’t attract so much attention:
- Israel had very little in the way of existing cloud infrastructure — or at least cloud infrastructure robust enough to support a project of this nature where security was paramount. This created an interesting opportunity for local monoliths to move in on the international action.
Turning An Opportunity Into Gold The Israeli Way
So what was your average Israeli IT operator (or real estate developer) to do when their country had announced an outsized tender but forbidden them from directly bidding on it?
Not make a huff and puff about it or mount a constitutional legal challenge (although those options are not off the table).
Explore other ways to take advantage of the capital flow.
There was one more interesting detail that presented an opportunity for local operators.
The wonders of encryption have made it possible for even intelligence agencies to entrust their sensitive data to somebody else which is how foreign entities are being allowed to develop the cloud in the first place.
AWS, for instance, has provisioned a cloud specifically adapted to meet the needs of the US intelligence community.
But physical access remains a concern whenever you’re handing over data to somebody else — and much moreso for governments than private consumers.
AWS is an American entity and so is the CIA. But the lucky confluence of great cloud expertise and passport didn’t exist in Israel.
Why does this matter?
In part, physical access control. Both governments and people running solo marketing websites probably want to make sure that their data is stored reasonably securely. But the consequences of a breach are vastly different.
A nation state’s unexpected bid to decrypt Rosehill Marketing Communications’ web infrastructure may only yield them a few lousy client invoices (I suspect Japan may be plotting something…). But replicate the effort on servers operated by the Ministry of Finance and something a lot juicier could spill out the other end.
So geography matters. Even though modern cloud architecture can be complicated and involve replication, redundancy, and nodes that minimize latency, data ultimately physically sits — even temporarily — on a server located in a room located in some country.
In this respect, the abstraction of cloud computing and virtualization meets a decisive end. And governments, it turns out, want to keep stuff on land that they control.
So it’s risky if that country is a jurisdiction you don’t have sovereignty over. A homeland security hazard no less. And it seems almost insanely risky to host government data within the physical parameters of another jurisdiction. Or as Oracle Israel’s CEO put it: dangerous.
But that’s still not a reason to avoid making lemonade from this bag of lemons. It’s the Israeli national ethos.
As the famous saying in IT goes, the cloud is simply someone else’s computer.
Or as another variation I’d be happy to coin goes: A cloud is just a data center that somebody else manages for a fee. If you can’t supply the computers you can try to install the hardware. Or at least lease out a patch of land — or carved out bedrock — to host it on.
And the problem:
Traditionally, Israel hasn’t been considered a worthwhile place to host these things. If you’ve ever attempted to even host a website in Israel — I have — you probably knew this five years ago.
The solution:
Israeli developers and tech magnates are getting involved in the sudden rush to provision the (physical) infrastructure that’s needed to execute the contract.
Compass Datacenters, a subsidiary of the massive Azrieli Group, is helping build data centers on behalf of AWS. By all reports, at a furious pace (this sounds like the pace of the tender; but it’s also the pace of Israel in general).
Google is pumping one hundred million dollars per data center into two subterranean facilities via a partnership structure.
But wait .. there’s more.
In a development that may only be loosely connected to Israelis’ newfound crazy for building all manner of facilities for housing data, Omer Adam — best known for regaling Israelis with Mizrahi pop hits, including the odious Irish trad mimic “Rak Rotzeh Lirkod” (an unforgivable affront to my ears) — has joined a partnership with a somewhat cryptic entity called the Lian Group to pour $120 million into an underground facility in the peripheral neighborhood of Afula.
The move makes eminent sense and I imagine will turn out to be a great investment for the superstar.
If Israel’s government successfully gets its infrastructure offsite, Israeli businesses will be tempted to do likewise also (isn’t that already the case? Not necessarily. In a market that’s overwhelmingly focused on exports, Israel’s domestic tech isn’t necessarily up of the highest order.).
If the case for storing data within Israel has been proven — and the government provides about as robust a case study as any on the fence could hope for — then it’s only a matter of time before demand zooms up.
Israelis will finally feel confident enough in entrusting their data to third parties, including international technology companies.
But they may initially (or over the long term) want to mimic their government’s stipulation that the data physically reside within Israel.
Oh.
And Adam controls Europe Israel Group P.A.I (yes, the pop star).
It may just have pumped part of a 400 million NIS deal into a major infrastructural project.
But it doesn’t appear to operate a website.
What Ordinary Israelis And Olim Can Learn From The Nimbus Tender
What lessons can be ordinary mortals derive from a government computing technology worth over one billion dollars?
- Israelis are terrific at identifying opportunity.
- Israelis are difficult people to offend. Their government can prevent them from competing on a tender in their own country. But if there’s still an indirect way to profit from the opportunity they will find it.
- The majority of Israeli companies are focused on the export market. But those who want to land deals in Israel think big. Millions and billions big. Unfortunately, the wealth generated from those deals sometimes has a habit of not trickling down the food chain.
- In Israel, a pop star can also quietly be a data center tycoon without many people noticing or remarking upon how strange a development that is.
- This country probably runs entirely on protezia, big deals, and — to a lesser extent — foreign investments.
