Continued from page 1

Slowing things down, many engineering graduates in India are deemed by employers not ready for the workplace, leading software services giants like Infosys to launch intensive training programs for new hires. An emphasis on rote learning and general fear of failure, some executives say, also dampen the creative spirit needed for groundbreaking innovation.

But Chinese companies are now also developing technology and expanding into services and systems _ areas where Israeli companies excel. And the huge domestic market gives companies cash flow to finance research and economies of scale.

Both Asian giants benefit from an incubator that helped to galvanize Israel’s own technology industry decades ago: Research facilities set up by dozens of multinationals to take advantage of abundant engineering talent coming at a far lower cost than Israel’s does now.

For now, Israelis continue to be a magnet for the venture capital that has helped the tech industry grow. Israeli venture funds aren’t attracting the kind of money they did a decade ago following an industry trend, but they do hope to raise $500 million this year _ more than double the figure in 2009.

Although venture capital money can be attracted by opportunities _ meaning countries are not necessarily competing for a given pool _ it is instructive to look at recent trends.

According to Dow Jones VentureSource, which tracks the global venture market, venture capitalists from around the world invested nearly $904 million in Israeli startups in the first nine months of 2010. Chinese companies drew a little more than $2 billion in that same period and Indian companies drew $710 million, the VentureSource figures show.

Israeli funds “have a challenge in recruiting follow-on funding because of the shift in global attention to the east,” said Holtzman, referring to repeat, later stage investments.

Meanwhile, many Israeli tech companies are outsourcing programming to India. Giza maintains an Asia office in Singapore. Ness Technologies, an Israeli computer services outfit, has offices across India.

“Those are big markets that we need to start targeting and already are,” said Michael Eisenberg, a partner in the Israel office of U.S.-based Benchmark Capital. “India and China have to be a focus. There are 2.5 billion people there.”

A technology conference held in Tel Aviv this month underscored, perhaps, the beginnings of a move to consumer orientation.

Among the companies on hand were outfits that provide Internet TV storefronts, produce gaming platforms and Facebook applications.

Conduit, for example, is a service that enables web publishers to create applications using their own brand and content, and to distribute them to engage users beyond their own websites.

Another promising startup called Outbrain alerts readers of blogs and media sites to recommended links targeted to their specific interests, much the way Netflix or Amazon make movie and book recommendations to their customers. The idea is to help readers cut through information overload and find information that is relevant to them.

Clean technology is another key area: Better Place, the brainchild of Israeli entrepreneur Shai Agassi, hopes to revolutionize the global automobile industry by laying down the world’s first electric car grids next year.