In Reinforced Concrete, Deep Under Tirat Carmel, Lies Israel's Data

TheMarker gets a rare glimpse into the little-known facility housing the servers of Israel's biggest companies and government agencies.

Fifteen meters underground near the Haifa suburb of Tirat Carmel resides Israel's Internet, encased in reinforced concrete and kept at a constant 22 degrees Celsius. The MedNautilus undersea cable system connects here, but most importantly the facility is home for the servers operated by the country's Internet suppliers and most major organizations.

It's Israel's largest data center, but it's generally off limits to Israelis. A recent tour of the cavernous facility marks the first time that the press and photographers have been allowed inside. "It's like a lion's cage," says our host, Med-1 CEO Ronnie Sadeh, who leads a tour of two floors of the well-guarded subterranean complex. Security cameras monitor every inch of space and authorization is needed when going from one section of the facility to another.

Surrounded by a trench one kilometer in diameter, the 7,500-square-meter facility is built to withstand earthquakes and missile attacks. It can continue operating under conditions of chemical and biological warfare, with its own self-contained reservoirs of water and multiple power generators with a combined 10 megawatts capacity. Sadeh says that it equivalent to the needs of a mid-sized Israeli city. All in all it is designed to function completely independent of the outside world for 72 hours or more.

Inside, the only sounds are the hum of computer servers. Along the corridors are "cages," rooms reserved for privately owned servers belonging to Med-1 customers, which include all the banks, financial institutions, government ministries and the country's security agencies. But there are no nameplates identifying which cage belongs to which organization. Not that it would make much difference to the staff: Even Sadeh himself doesn't have the keys. "Only the customer's employees can enter unless we rent them 'finger services' where our employee is authorized entry into the cage, for example to reset the server."

Maurice Kasner, vice president for information technology at the Leumit health maintenance organization, is on hand for the tour and invites visitors into his organization's cage.

They say IT people like to be close to their servers. Why don't you keep them at your headquarters?

Kasner: "That's how it was until 2005 when we needed to decide how to increase the size of our data center. We reached the point where our office building couldn't provide enough electricity or weight per square meter. We develop systems and maintain them, but data center isn't our expertise, so we decided to outsource it to someone specializing in this. The facility is secure and I sleep well at night. I don't need to physically touch the servers. The systems manager comes maybe once a month to install a new server."

Some of the hundreds of Med-1 customers use the site for their central data production and storage where all their branch locations and systems link up, while others use it for offsite backup storage.

9/11 gave a boost to business

Med-1 was originally set up as a terminal for the MedNautilus cable that went into use in 2001 but, as Sadeh recounts, construction took place at the height of the dot.com bubble and the facility was built with excess capacity in anticipation of hosting new telecom companies.

"At first companies put their disaster-recovery systems here," says Sadeh. "At the time I served as chief technology officer for Bezeq International, one of Med-1's first customers. The Twin Towers disaster on September 11, 2001 significantly hastened the storage process." Companies that had their data centers in a single location, with no more than onsite backup, saw everything literally go up in smoke. It became clear that servers should be removed to alternative locations.

At Med-1 companies can get something they can't obtain at their own premises, he claims: a service-level agreement (SLA) committing to 99.99% of the time. "This means we're permitted to withhold service for 52 minutes a year," explains Sadeh. "I'm proud to say that in the company's 13 years of existence we've always complied with the SLA and remain committed to it."

Med-1 is 69% owned by Yamcom and 31% by Clal Industries. The company once operated a domestic fiber-optic transmission network and held a stake in MedNautilus, but after Telecom Italia acquired full ownership of the undersea cable in 2005 and Partner Communications bought its domestic transmission operations the following year, the data center became an independent business. Besides the Tirat Carmel site, the company operates two smaller facilities, including one in Petah Tikva, but has a workforce of only about 50 employees overall.

In the first half of 2013 Med-1 generated NIS 25 million in revenues, NIS 10 million in operating income, and NIS 9 million in net income, according to financial reports published by Clal Industries. But the company is also saddled with a NIS 114 million accumulated deficit.

"The deficit results from investing hundreds of millions of shekels to finance the building and construction of the company's facilities," explains Sadeh.

Nonetheless, Med-1 has been undergoing rapid expansion in recent years. "We are at a point where four factors are converging for an increase in organizational demand for information system hosting services: the global trend (towards cloud computing); Israel's particular geopolitical circumstances; the economic situation (exchanging capital for operating costs); and increased awareness in organizations about their dependence on information systems and the need to ensure their uninterrupted operations during routine periods or emergencies," explains Sadeh.

Med-1 is far from exercising a monopoly in Israel. In a survey of the various hosting sites in Israel, the market research firm STKI estimates the total market at $49 million and growing to $65 million in 2015. The myriad competitors in the field include multinational companies like Hewlett Packard and IBM, Internet service providers such as Bezeq International and 012 Smile, as well as specialized IT companies that include Malam Team and Triple C.

The study says many organizations suffer from what it terms "suffocation" by computing facilities. "The running costs of computer rooms - the consumption of resources such as electricity, air conditioning and space – contribute to certain organizations choosing hosting sites and transition towards the use of established cloud infrastructure for part of computer services," according to the survey.

"The momentum of massive construction of company sites or new sites at hosting companies and the increasing supply of solutions are definitely likely to boost the quality of solutions and market competitiveness, leading more organizations into considering a strategic switch to hosting models," says the STKI report.

But the future points towards a storage model different than that offered by Med-1: cloud services. Companies today don't need to buy their own servers but can rather lease servers or services tailored to their needs. For example, instead of maintaining a server for the customer relations system, companies can subscribe to a service such as Salesforce.com.

In the field of cloud computing, Triple C stands out as offering services such as SAP and Oracle that were only available in the past through the purchase of a server.

"Most of our clients are large and traditional organizations," says Sadeh. "They are moving to cloud computing too, but carefully – as opposed to small and mid-sized companies rushing towards the cloud. I believe in this trend, and we'll be here and on time to provide the best solutions in the market. We are in negotiations over this, and within a quarter or two will be able to announce a cooperative venture with an international company in the field of cloud services."

Rami Chelouche
Rami Chelouche