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Security acquisitions and product integration still leave channel opportunities

Security acquisitions are becoming more common, but vendors and experts say the channel will still have plenty of integration opportunities.

Increasingly, security technology companies are becoming acquisition targets, as large vendors make the move towards platforms that include integrated security solutions. The changing marketplace will force value-added resellers (VARs) and systems integrators (SIs) to adapt, but the security acquisitions will still leave them with plenty of sales and services opportunities, according to vendors and experts.

No matter how many security features vendors try to integrate into one platform, there will always be room to do more, said Peter Evans, vice president of marketing for IBM Internet Security Systems.

"We won't have every piece of the puzzle solved for the customer," he said.

Jay Kirby, vice president of sales for Troubadour, a Houston-based SI, agreed.

"There's plenty of mystery in security, even if you had one product that did everything," he said. "Every network is so unique and has its own challenges."

In the past month alone, four of the biggest names in the technology sector have announced or completed security

One of the common worries that partners have is, 'Oh my God, what's going to happen to our margins?'
Susan Don
security leader for worldwide channelsCisco Systems
acquisitions. IBM is buying application security vendor Watchfire, while Hewlett-Packard is purchasing Watchfire's main competitor, SPI Dynamics. Cisco Systems closed its deal with email security vendor IronPort, and just this week Google said it is acquiring email and compliance vendor Postini.

"The consolidation has really been accelerating," said Andrew Braunberg, principal analyst for Current Analysis in Sterling, Va. "You're getting larger and larger customers that are getting picked up."

Acquisitions between security vendors are one reason for the trend, but the main driving force is vendors in other markets who want to integrate security into their own products, Braunberg said. He warned that VARs and SIs need to be more selective in who they partner with, because a lot of smaller security vendors may not be around for long.

"That's a tough market," he said. "If Google wants somebody, they're going to get them. If Microsoft wants somebody, they're going to get them. These partners have to be aware."

Susan Don, Cisco's security leader for worldwide channels, said Cisco is lending its resources to help grow IronPort's channel program and allay partners' concerns.

"One of the common worries that partners have is, 'Oh my God, what's going to happen to our margins?'" Don said.

Before the acquisition, IronPort ran most of the sales cycle -- which provided good margins for the channel, but not many opportunities for partners to grow their businesses through services, Don said. Cisco is now offering formal training for partners to handle more of the sales cycle themselves and offer custom services that Don said will more than make up for any decreasing margins.

Troubadour, a channel partner of both Cisco and IronPort, has had a "very easy transition" since the acquisition, Kirby said. He was concerned that IronPort would have a problem scaling, because he expected an increase in sales, but Cisco's partner sales and technical training had Troubadour prepared to meet the demand, he said.

IBM declined to speak about the Watchfire acquisition because the deal has not yet closed, but Evans did talk about last year's ISS purchase. The deal gave ISS the opportunity to reach more customers through IBM's products, he said.

Although integration has traditionally been the channel's job, integration by vendors can create different opportunities for

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partners, Evans said. Businesses and organizations are spending increasingly more money on IT staff to manage all of their different security features. VARs and SIs can help these clients sort out when each product's license expires and what the best way is to consolidate them -- a complicated process that businesses and organizations will happily pay someone to do for them, Evans said.

"There is a lot to figure out," he said.

Security acquisitions are a necessity, Evans added, because about 10 vendors control 30% of the market and another 850 to 900 control the other 70%.

"That's an unsustainable model for any industry," he said. "You've got to have some sort of shake-out."

Victoria Fodale, industry analyst for In-Stat in Scottsdale, Ariz., agreed the security acquisitions trend will continue. Strict Securities and Exchange Commission regulations have made it more difficult for companies to go public, so for many smaller vendors, their only options for survival are to offer a truly unique product or get acquired, she said.

Fodale also thinks there will still be integration opportunities for the channel.

VARs and SIs "still need to do what they do," she said. "I don't think that immediately goes away."

But they should be thinking about new services to offer, because "you want to direct your business to where the new challenges are," she said. Two areas where channel partners can really help their customers are reporting and data collection, and identity management, she said.

"You don't want to be doing commodity work," she said. "We don't have the luxury of standing still in this industry."

Let us know what you think about this story; email: Colin Steele, features writer

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