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They may be owned by large multinationals, but the research and development centers in Israel are more like startups, at least in spirit – tackling thorny problems for their parent companies, and inventing new products and services that sometimes go on to change the direction of the multinationals, who find that the new product developed by their Israeli R&D unit has given them access to whole new markets and customers!

Like a startup, an R&D center is expected to be innovative, flexible, and to generate new investments for its owners, which essentially acts as a combined VC fund and angel for the R&D “startup.” As Microsoft says about its Israeli R&D unit, “the Israel R&D Center also serves as an anchor to the Venture Capital industry and the start up community, facilitating technology and business cooperation between the industry and Microsoft’s product groups.” Without innovation, large companies end up stultifying – and many of them rely on their R&D units to come up with the new innovations that will allow them to maintain their edge in the market. And many multinationals see Israel as their best bet when it comes to R&D, because of Israel’s proven track record when it comes to innovation.

That’s how Avraham Credi, Director of the local Motorola Design Center and a Vice President of  Motorola Israel, sees it. “A number of important developments have emerged from the Israeli Design Center, and they are an excellent example of Israeli innovation” – among the chief reasons the company opened their research center here, already in 1964 – the first multinational to open such a center in Israel, since joined by Microsoft, Intel, Google, and other giants.

Among Motorola’s “made in Israel” developments was the Spirit, “the first permanent phone for motor vehicles. The initial development for the device was done in Israel, and it represented a significant improvement – especially in the realm of safety – for drivers who wished to speak while on the road, thanks to the device’s ability to recognize a speaker’s voice. The design was also innovative and the quality was first-rate – and the Spirit quickly became very popular. Later generations of the Spirit – both the phone and two-way communicator models – were also developed in Israel, as well as at Motorola Design Centers in the U.S. and Europe” – but it was the Israeli facility that blazed the trail for Motorola, says Credi.

Another Motorola product developed largely in Israel, says Credi, is the company’s Motobridge solution – a system that allows incompatible voice communications systems to connect automatically, allowing, for example, rescue teams, such as police, fire, medical assistance, etc., to communicate over a single network in times of emergency. “The system came out of the 9/11 terror attack, when the various rescue services found they were unable to communicate with each other in real time. The Motobridge allows users of different communication systems – using different radio frequencies, for example – in an efficient and dynamic manner, in real time,” says Credi, adding that the system helped Florida prevent 2005′s Hurricane Wilma (http://tinyurl.com/dotjc) turn into that state’s version of the Hurricane Katrina tragedy. “Florida had already installed a Motobridge system, and state officials later said that the enhanced ability of rescue personnel to keep each other informed probably saved thousands of lives,” he adds.

Motorola may have been first, but other multinationals – like IBM – quickly followed. In a recent interview with the Post, IBM Israel CEO Meir Nissensohn described his company’s work in Israel.  “We 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,” Nissensohn says.

IBM now has three research labs in Israel, with over 1,000 people working in the units – and the company’s Haifa research lab is IBM’s largest outside the U.S. Among the recent contributions of Israel to IBM worldwide has been the R&D facility’s work on storage – facilitated by IBM’s recent acquisition of  XIV,  FilesX, and  Diligent Technologies – acquisitions that made IBM the largest foreign investor in Israel during 2008, says Nissensohn. “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,” he adds.

It’s not just the “traditional” hi-tech companies that seek to take advantage of Israel’s R&D capabilities; younger multinationals, such as Google, have a strong presence here – with two research and development centers, a singular honor “usually reserved for large countries, like Russia and China,” Meir Brand, Google Israel CEO, told the Post recently. “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.

About 100 people work at both centers, Brand says, working on products such as 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 categories, time frames, and regions. “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,” says Brand.

I could go on and on – but you get the idea. Multinationals like Microsoft, Cisco, and many others see their R&D centers as a great vehicle with which to tap into the “startup spirit” of Israeli tech professionals. In the words of Microsoft Israel CEO Danny Yamin, “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.” And Cisco’s Israel director Bina Rezinovsky recently told the Post that “Israelis are imaginative, and they are familiar with technology, two traits that make the human resources of the country very valuable to Cisco” – and they’re just the traits that make startups so dynamic and innovative. Times may be tough, but they won’t be forever – and when the economy does improve, Israeli tech will be in a position to roar ahead, with the multinationals continuing to tap into their R&D “startups” for their next big thing!

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Category: r & d

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