Managed Security: A Hot Ticket for Carriers
This past week, Verizon Enterprise Solutions closed its acquisition of Cybertrust , one of the best known independent security service providers. (See Verizon Closes Buy.) Carriers aren't the only ones eyeing security as Google (Nasdaq: GOOG) announced plans to acquire security specialist Postini Inc. in a $625 million cash deal. (See Google to Buy Security Specialist.)
In the past year other notable security acquisitions include IBM Global Services snagging Internet Security Systems (ISS) and BT Group plc (NYSE: BT; London: BTA)'s acquisition of Counterpane. (See BT Buys Counterpane and IBM Up-Ends Security Services Market.)
So why this sudden demand for security?
"We were noticing that RFPs kept coming in for managed security services covering a lot of different things," says Kerry Bailey, VP of Security Solutions for the new Verizon Business Cybertrust unit. "We used to have threat, vulnerability, compliance products – now you're seeing all of those come together."
On top of this, Bailey notes that more and more corporations are putting their systems and data outside of the physical enterprise. "That drives the need for security," he says.
The complexity of security also furthers demand. "A lot of companies are deploying security, but are having a hard time doing it due to the complexity. To the carriers, that points to an opportunity," says Infonetics Research Inc. analyst Jeff Wilson.
With the acquisition of Cybertrust, Verizon Business is now the No. 1 global provider of managed security services. This could be a potentially lucrative position for Verizon since the managed security market is expected to double by 2010 to $12.1 billion according to a report by Wilson.
Wilson says that the growth in the security market is both demand-driven and supply-driven. "A lot of these providers are looking ahead to the future and trying to see where their margins are coming from," says Wilson. "Security is always going to be a high margin business and it's economy proof. Threats don't care if the industry is in a downturn."
With all the M&A activity from providers in the security market, there aren't many stand alone managed security companies left, with VeriSign Inc. (Nasdaq: VRSN) being the only notable one.
Wilson suggests, however that even if there if there are slim pickings in the managed market, there could still be room for some technology acquisitions by carriers to further enhance their security capabilities.
— Raymond McConville, Reporter, Light Reading