Consolidating for security
By Tim Clark
Staff Writer, CNET NEWS.COM
February 20, 1998, 12:25 p.m. PT
news analysis Cisco Systems' (CSCO) acquisition
this week of security firm WheelGroup signals the
rapid convergence of the networking and network
security industries, analysts and industry executives
say.
The deal also may accelerate the already-evident
consolidation of Internet security vendors by
forcing them to bulk up, perhaps bidding against
networking companies moving into security.
And because of WheelGroup's widespread
partnering, the deal could force companies looking
for "intrusion detection" software, WheelGroup's
forte, and a technology that detects hacker attacks
on corporate networks, to reevaluate their plans.
"We believe that security will be a natural
expectation of the network infrastructure," said
Tony Jennings, WheelGroup's CEO, echoing
Cisco's own rationale for the $124 million
acquisition. "Customers will expect that basic
functionality [to be] in the infrastructure and for it to
be transparent."
That could spell trouble for Internet security firms
with standalone products, potentially speeding up
the merger and acquisitions spree among security
companies that is already underway.
Analysts say Cisco's acquisition also puts pressure
on networking rivals 3Com (COMS), Bay
Networks (BAY) , Ascend (ASND), and
Cabletron (CS).
It also may force the hands of Internet Security
Systems, a WheelGroup competitor that filed last
month for an initial public offering, and Check Point
(CHKPF), the leading firewall firm.
"We are going to move to a different order of
magnitude for acquisitions," predicts Ted Julian, an
industry analyst at Forrester Research, who floats
the idea that IBM might even buy a company like
Check Point, despite Check Point's $1 billion
market valuation. Check Point would not confirm
IBM discussions on an acquisition.
"Today there is not a security market--it's only a
subset of the networking market called security,"
added Fred McClimans, CEO of research firm
Current Analysis, saying security is no longer just
add-on hardware or software for a corporate
network. "Security becomes just another
component in the routing, switching, operating
system, and virtual private network (VPN)
architectures."
Networking hardware and its complex software are
natural places to put security because they control
access to corporate networks--a security-aware
router, for example, can keep the bad guys off a
corporate network altogether.
Already Cisco offers a firewall, both hardware and
software versions, and is licensing VPN technology
from RedCreek. Ascend, too, has a hardware
firewall, though it doesn't show up on the firewall
market-share charts. Bay and 3Com have deals to
build Check Point firewall software into their
networking hardware.
Cisco, as the market leader with a long history of
buying and integrating new technologies for its
routers, is now pressuring networking rivals to
respond to its WheelGroup deal. Cisco is upfront
about its long-term strategy for WheelGroup's
intrusion detection technology.
"Short term, we think there's still a lot of room for
standalone products for about 24 months," said
Michael Safly, the Cisco business development
manager who put together the WheelGroup deal.
"The effort to include intrusion detection in the
infrastructure, to make it fundamental, isn't trivial."
But clearly that's where Cisco is headed with
intrusion detection, and by extrapolation, with other
security technologies.
In the Internet security space, the WheelGroup deal
immediately affects ISS and its IPO. It must explain
to Wall Street investors why its standalone
software--which commands 35 percent market
share today, according to Aberdeen Group
figures--can survive in the long term as Cisco and
other giants move in.
Indeed, ISS has issued a careful statement on the
Cisco-WheelGroup deal, despite being in its
Security and Exchange Commission mandated
"quiet period" before its stock offering.
"Unless you have a dominant position, you cannot
survive in this [security] market," ISS stated.
"Based on Cisco's historical approach to
networking, this will be another point product in the
Cisco catalog."
Check Point echoed that line: "Cisco has made
several acquisitions in an attempt to catch up,"
spokeswoman Emily Cohen said. "They are
attempting to create another patchwork answer to
things by slapping different products from different
entities together. But there's no management of
anything."
Despite that slam, Check Point's own strategy
recognizes the coming together of networking and
network security. The company now has three
product lines: its flagship FireWall-1, a VPN
product called SecuRemote, and a "bandwidth
management" offering called FloodGate-1, which
prioritizes who gets to use limited bandwidth on a
corporate network.
In an announcement due Monday, Check Point
intends by year's end to combine FireWall-1 and
FloodGate-1 into a single product, a clear sign of
the coming convergence. Still missing from Check
Point's arsenal: a network management product.
Industry observers remain puzzled why Check
Point hasn't itself pulled the trigger on an
acquisition. Cohen acknowledges discussions with
a wide variety of potential partners but says the
right deal hasn't come around yet.
Other security firms have moved faster. Last year
Trusted Information Systems (TISX), another
firewall vendor, bought Haystack Labs, an intrusion
detection software firm.
Also, firewall vendor Raptor Systems has been
snapped up by security vendor Axent (AXNT) .
And encryption software pioneer Pretty Good
Privacy was purchased late last year by Network
Associates (NETA).
Network Associates itself is the biggest sign that
the network and security worlds are converging--it
was created last year in the merger of antivirus firm
McAfee and Network General.
Network Associates last month introduced
CyberCop, its intrusion detection software--based
largely on WheelGroup's technology. Cisco and
WheelGroup say the acquisition won't hurt their
relations with Network Associates, which even
hints this week's deal might deepen its already-cozy
ties to Cisco.
"We've been pretty positive about the merger," said
Chip Messec, director of product management in
Network Associates' security division. "They have
validated intrusion detection as a viable way to
protect networking and that's a mantra we've been
chanting for the last year now."
Messec characterized Cisco's emphasis as
"protecting the pipes in the network," while
Network Associates "manages the pipes" as well as
the applications that go through them.
"There will be complementary products, and there
may be some overlap," he acknowledged.
Still to be heard from on the convergence issue are
other major providers of network management
software: IBM's Tivoli division, Hewlett-Packard
(HPW), and Computer Associates.
Reporter Ben Heskett contributed to this story.
related news stories
Cisco acquires WheelGroup February 19, 1998
Cisco to use VPN from RedCreek January 21,
1998
Network Associates plots strategy January 8,
1998
PGP acquired by merged firm December 1, 1997
Security companies join forces December 1, 1997 |
