December 2, 2023

Israel-Hamas War: Potential Effects on the Middle East Tech Industry

Last Updated on November 16, 2023 by newseditor

The war between Israel and Hamas, the militant Palestinian party, has impacted Middle East tech. Though the implications on the IT sector are now minimal, they may become more substantial if the war were to intensify.

The Middle East Tech Industry

There are over 6,000 tech startups in the Middle East. Multinational tech companies provide significant R&D funding to these tech companies in the region. The continuing confrontation between Israel and Hamas is already having an impact on these firms.

Tech companies in the region are starting to see shifts in their financial projections as a result of the unrest’s effects on supply chains, tourism, and advertising income, among other areas.

While the conflict is currently having an impact on tech companies in both Israel and the Palestinian territories, Yugal Joshi, the business leader for technology services research at the research firm Everest Group, points out that if other countries regions get involved, the impact on the tech sector could become much more significant. Joshi agrees that companies are worried about the Israel-Hamas war. He also notes that if the war escalated, they would be even more concerned. The outcomes in such a situation would be uncertain.

Potential Effects on the Tech Sector

The aftermath of the conflict can have a significant impact on the technological sector. US companies investing in the Middle East, particularly in cloud providers, usually go to firms in the UAE, Qatar, Saudi Arabia, etc. For example, when Amazon Web Services (AWS) established the AWS Middle East region last year, it pledged to spend $5 billion in the region over the next 15 years. In a similar vein, Google debuted a new cloud region in May in Qatar.

If the conflict between Israel and Hamas were to extend into these neighboring countries where major tech companies have initiated cloud infrastructure projects, there is a risk that a substantial portion of the ongoing work could be disrupted. This disruption could be due to the direct impacts of the war or potential US influence in the region.

Increased Cybercrimes

Cybercrimes often increase during times of conflict, underscoring the importance for businesses to maintain a high level of vigilance in terms of cybersecurity, as emphasized by Peter Halprin, a partner at the law firm Pasich.

Following the attack by Hamas on Israel on October 7, politically motivated hackers initiated attacks on business websites. The Jerusalem Post, an English-language newspaper based in Jerusalem, experienced downtime as a result of a series of cyberattacks in the aftermath of the Hamas attack.

Office Relocation

Multinational IT businesses with their headquarters in Israel may choose to relocate to India or another nation if the Israel-Hamas conflict worsens, according to industry analysts. Indian firms like TCS and Wipro could also activate their business contingency plans and transfer their operations to India. 

Supply Chain Disruption

Increased conflict could disrupt the supply chain in the region, potentially impacting the IT services business and, consequently, revenues. Pareekh Jain, an outsourcing expert, noted that a significant portion of the IT services sector’s work in Israel is related to specific local projects, primarily for the government.

Takeaways

The Israel-Palenstine war can disrupt all industries in the Middle East, including the tech industry. The war can lead to supply chain disruption, office relocation, and increased cybercrimes.

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