Global Economics

Tech Startup Bridges Mideast Divide


With his cutting-edge offering G.ho.st—and its West Bank operation—Zvi Schreiber hopes to soften the edges between Israel and Palestine

Zvi Schreiber is a British-born serial entrepreneur who established the headquarters of his latest tech startup, a software company called Global Hosted Operating System (G.ho.st), in Israel last year. G.ho.st has developed a "virtual PC" that saves all of a person's files online so data and programs can be gathered from any computer. As Schreiber sees it, the Microsoft (MSFT) Windows and Apple (AAPL) Macintosh operating systems that cram applications and documents all inside one physical computer will soon be obsolete.

"Our G.ho.st virtual computer will enable users to get their computing environment from any browser—and we'll eventually compete head-on with Microsoft," Schreiber predicts.

Taking on Microsoft is tough enough. But Schreiber is embracing another challenge: He's helping create a high-tech economy in the Palestinian territories, one of the most poverty-stricken, crisis-riddled spots in the world. He has located the development center for G.ho.st in the West Bank.

A Tough Commute

It's a bold move at a time when the Palestinians are facing an unprecedented economic crisis due to years of Israeli restrictions and border shutdowns imposed for security reasons. Some $7.4 billion in aid was pledged by international donors at a Dec. 17 conference in Paris to shore up the government of President Mahmoud Abbas. But what is really needed, according to a recent World Bank report, is economic integration of Israel and the Palestine territories—a task that's far easier said than done.

Consider the challenges Schreiber confronts. Though he has hired three dozen Palestinian engineers and programmers in Ramallah, Schreiber has yet to set foot in the development center, located a mere 12 kilometers (7.5 miles) north of his home in Jerusalem. As an Israeli citizen, he is barred for security reasons from entering Palestinian-controlled parts of the West Bank. And Israel's security fence prevents most Palestinians from entering Israel.

Still, the hassle of managing long-distance is worth it, Schreiber reckons. "We'll only make progress on the peace front if there is a dramatic improvement in the Palestinian economy," says the 38-year-old computer engineer.

Hoping for High-Tech Cooperation

In October, Schreiber was able to meet with his Palestinian development team for the first time—in a restaurant on the road to Jericho accessible to both sides. But that's not the only contact he's had with his Palestinian employees. "For the most part we stay in touch daily through video conferencing, Skype, e-mail, and phone," says Tareq Maayah, a 40-year-old U.S.-trained Palestinian electrical engineer who heads up G.ho.st's Ramallah operations.

Schreiber isn't alone in trying to tap the Palestinian economy for high-tech talent. Despite many obstacles, Israel's Industry and Trade Ministry and the Peres Center for Peace—an independent nonprofit organization founded by Israeli President Shimon Peres to foster regional cooperation—are holding discussions with Palestinian entrepreneurs about expanding high-tech cooperation.

"Unlike the case of other forms of economic cooperation, blockades and other restrictions do not present a barrier to software development," says Yossi Vardi, a local Internet guru and one of the country's most successful high-tech entrepreneurs. He believes G.ho.st can serve as a model for future cooperation between Israelis and Palestinians, as each side has a lot to gain.

Help for a Tight Labor Market

Indeed, with its thousands of computer engineers and programmers, the West Bank could be an excellent resource for Israel's high-tech industry. Its biggest advantage lies in lower costs: With wages in Israel's high-tech sector up 15% this year, Israeli computer engineers can expect to command a salary of $60,000 or more. In contrast, "the cost to the employer of a Palestinian engineer is only 30% to 40% of the level in Israel," says G.ho.st's Maayah.

With an increasingly tight labor market in Israel's booming high-tech sector, thousands of startups and older companies find themselves competing for qualified manpower—leading some Israeli companies to outsource to India and China. Schreiber figures it makes more sense to look for talent closer to home. G.ho.st has more than doubled its Ramallah-based workforce in the past year and expects to hire an additional 30 people in 2008. It's also hiring on the other side of the line: In mid-December the company hired its first five Israeli employees for a newly opened office in Modiin, an Israeli town located halfway between Tel Aviv and Jerusalem.

Schreiber, of course, wants to do well at the same time he does good. The $2.5 million invested in G.ho.st so far comes from an undisclosed venture fund and several private investors, including Schreiber himself. He sold his first company, Tradeum, a business-to-business e-commerce trading platform, in 2000 for $500 million to Philadelphia-based supply-chain management company Verticalnet (VERT). A second venture he founded, an enterprise information-management startup called Unicorn Solutions, was sold to IBM (IBM) in 2006 for an undisclosed sum. Schreiber is planning to raise an additional $5 million in the coming year to help G.ho.st expand.

Similar Products, Different Philosophies

The company is set to officially launch its product in April and hopes to start making money by the end of next year. G.ho.st plans to offer premium services, such as extra storage capacity, to customers. The initial target markets for the service are students and users in the developing world who in many cases don't have their own computers.

"Their service is extremely user-friendly, but there is no lack of competition in the space," says Gilad Nass, senior analyst of communications and media at IDC Israel. He cites other startups such as Wixi, Goowy, and YouOS (from a company called WebShaka) as having similar products. But whatever happens to its technology, G.ho.st likely will be remembered for its pioneering work in bridging the gap between Israelis and Palestinians.


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