ISRAELI START-UP MAY THWART INTERNET HACKERS

January 12, 2001

COMMERCIAL NEWS

Tel Aviv, Israel — Steven Scheer reports that an Israeli high-tech firm says it has developed a system that cuts off the main route used by most Internet hackers when they try to break into a company’s computer network.

The new technology by start-up Whale Communications is aimed primarily at e-commerce companies that offer goods or services to consumers who sometimes are wary about providing credit card information over the Internet.

Most e-commerce sites use sophisticated encryption to encode sensitive information and make it unreadable to outsiders. Whale’s system, called “E-Gap”, goes another route.

What it does is ensure that hackers cannot jump from the Internet into a company’s “back office” — the internal web server or computer where it stores sensitive information such as a buyer’s credit card details.

The system consists of two servers, or computer systems. One is connected to the Internet and the other to the back office. A black box in the middle contains a memory device toggling between them.

“This eliminates the main way hackers get inside. The main goal is to avoid hacking into internal systems,” said Whale chief executive Elad Baron.

“We created an air-gap between the two networks. The back office and Internet are completely disconnected at all times,” he said. “There is a safe zone. If the data is OK, then it’s passed on to the back office to execute the transaction.”

Web surfers accessing information will not notice a thing while information moves between the two networks.

While encryption, firewalls — software that checks for viruses and unauthorized people who seek access to a computer — and other protection methods can prevent hacking, they have not been foolproof.

Several Israeli government Web sites, Microsoft (MSFT.O), Yahoo (YHOO.O), the University of Washington Medical Center’s network and many others have been targeted, and some forced to shut down temporarily down by hackers in recent months.

Baron said E-Gap could have prevented many of the break-ins.

“The first thing a hacker often does before attempting a break-in is to scan the network, similar to a burglar ‘casing’ a potential target,” Baron said. “E-Gap prevents a hacker from achieving even this first basic step, since the physical and network disconnection eliminates the possibility of such a scam.”

COMPLEMENTS FIREWALLS

But he said E-Gap was meant to complement, rather than replace, many of the security measures e-commerce companies have put in place.

Whale, which aims to go public on Nasdaq this year, is currently targeting big companies and application service providers (ASPs), and contemplating plans to offer a scaled-down version to smaller businesses.

The company also has plans to extend to areas of authentication, authorization and database security.

“E-business requires an architecture to be open to allow people to connect to the internal web servers,” said Steve Hunt, vice president of research and head of the security research team at the Giga Information Group, a U.S. information technology consulting firm. “Whale is effective to meet e-business.”

Hunt believes Whale’s current technology will stand for at least five years. “This is tantamount to a rearchitecture of the Internet gateway. It’s the difference between being able to meet the requirements of e-business or not,” he said.

Whale started two years ago in a Tel Aviv suburb and has since registered as a company in New Jersey but maintains its research and development in Israel.

It closed on its first financing round of $23 million in July, led by Goldman Sachs and the BRM Group, which also gave an initial cash injection to Check Point Software Technologies (CHKP.TA).

SECURITY A KEY FOCUS

In recent years, Israel has become a hotbed for Internet and network security companies. A number focus on viruses, while Check Point, which developed a firewall to prevent hackers from accessing private information, has become synonymous with Internet security.

“It’s something in the way we live, in that security is something you are always aware of,” Baron said.

Baron said Whale has already sold E-Gap to 20 customers, with the company currently targeting larger businesses, financial institutions and large industrial offices.

Israeli mobile phone provider Partner Communications (PTNR.O) was the first to give the system a shot to protect the company’s billing systems, where customers can see charges online.

Bills are “something no one (unauthorized) should see from a privacy point of view,” said David Margalit, a manager in Partner’s technology department.

He said the company was trying to protect itself from two types of hackers.

“There are people trying to destroy you for their own happiness and there are people trying to get information for fraud — to get information without paying for it.”

Margalit said Partner has used E-Gap along with a host of other security measures for a year.

“Nobody has broken it so far,” he said, noting that he expects hackers eventually to develop a way to bypass E-Gap. “It will last for a few years until someone breaks it,” he said, adding that this year the company will have to look for more solutions.

Baron, though, insisted Whale’s technology would not become outdated.

“It is an infrastructure; you can build more on it,” he said. “If you have a good platform, it won’t be obsolete.”

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