How Security Business Consolidation Impacts The Channels
The surge in complex threat variants and growing voice for holistic security architecture is fueling a consolidation in the web security industry. Circa 2016 marked some of the very strategic acquisitions and mergers (M&A) such as $4.65 billion Symantec-Blue Coat acquisition and $1.3 billion Avast-AVG Technologies deals.
While M&A enables OVMs to realign their business with new strengths and capabilities coming from another OVM, it also impacts their channel play. While channels have reacted positively to the recent acquisitions, they continue to reiterate on the need for clarity from OVMs on channel integration and engagement plans post mergers, given that some of these failed to consolidate in the past.
Win-Win For Partners & OVMs
With new threat variants emerging every day, cybersecurity has become a critical concern across the industry domain. According to the research firm Cybersecurity Ventures, the cybersecurity spending is expected to increase from $75.4 billion in 2015 to $170 billion in 2020. In a bid to have a complete portfolio of solutions and facilitate better presence across the regions, security vendors are either acquiring smaller players specialized in specific domain which they lack in or merging with their direct competitors to get visibility in new growth regions, especially in Asia.
Another report by 451 Research reveals that there is a sharp 42 per cent increase in the security acquisitions in last two years. Ratna Singh, COO of Jainam Technologies says that M&A facilitates growth of OVMs and partners. However, the impact of such M&A on partners’ business is largely depends on their engagement with the OVM.
“When a smaller company is acquired by any big and established vendor, there is a strong approach in terms of channel engagement. Symantec acquiring Blue Coat is an extremely positive sign for us. This acquisition is a win-win for us as we are the premium partner of Symantec and we also work very closely with Blue Coat”, says Singh.
Nityanand Shetty, Managing Director of Essen Vision who is also a Symantec partner says that with Blue Coat’s acquisition, Symantec will now have a complete portfolio of security solutions which ultimately help its partners to take the brand to the customers in a better way.
“We as channel partners expect that the vendor we work with should have a complete portfolio of solutions, so that when we approach customers, we can offer them a complete package for their security needs. The web security was missing in the Symantec’s stack, which is now covered by Blue Coat. According to me it is a very wise move by Symantec”, Shetty says.
While on the one hand vendors are consolidating into the single product by gradually merging the best of both the vendors, the industry also saw Cisco making a come back in the security business with a slew of acquisitions and Intel spinning off its cyber security business. Industry experts say that the trend will further continue and have more new players in the industry as security is a rapidly growing business vertical. The competition will certainly benefit the channel which will have better offerings and scope of business.
“Consolidation allows partners to refocus and stay in shape with respect to the needs of the market. Simplified offerings, less SKU’s to the customer means focused discussions and approach. But it needs adapting to change in business models such as partner policies and skill set”, says Gaurav Sharma, Research Manager-Enterprise & IPDS at IDC.
Lacks Clarity From Vendors
According to partners, as far as M&A does not affect their business ties with their respective customers, such deals do not impact their operations. However, they demand more clarity from vendors on probable changes in the channel policy post acquisitions. “We engage with customers more than the OVMs. As long as these acquisitions do not shake up our customers, I don’t think it really make any difference to us. However, we expect that vendors should give us prior information of such strategic moves that will have long-term impact on our business”, says Shetty.
Similarly, Manish Sanghrajka, CEO of ComPrompt Solutions points out that if partners are already doing business with specific product lines and those solutions are already up and running in their customers’ enterprises, partners find it difficult to convince them to migrate to the new process. In such situation vendor’s guidance and training becomes inevitable for partners to make sure seamless transition.
Post M&A Channel Play Matters
M&A certainly help vendors to strengthen their existing product portfolio and have better visibility in the new region. However, the impact of the business consolidation mostly depends on the channel strategy of vendors post acquisition.
“I see both positive and negative impacts of M&A on the channel business. There are two major factors that impact the channel in a major way. First is the visibility of the vendor in the particular region where the partners operate in and second is vendor’s channel strategy post acquisition”, says Rajpreet Kaur, Senior Research Analyst at Gartner.
It is a fact that certain M&A sometimes result in loss of few partners in a particular region post acquisition. In such scenario, it is important for the vendor to analyse how its channel is reacting to the acquisition.
“Sophos can be the best example of this which has a very clean strategy to make sure that the channel is happy with the acquisition. The company still supports Cyberoam line of products and is heavily focusing on trainings to gradually move partners as well as the customers to the Sophos product line”, Kaur says.
Are OVMs Interference A Threat?
Partners are concerned over the growing interference of vendors in the channel business, especially while locking large business deals. Now a day, vendors directly involve their internal sales and pre-sales team in the big deals. This creates a sense of insecurity among partners, leading large scale system integrators to stop their collaboration with vendors.
“Vendors are controlling a lot of things but at the end of the day they need to understand that it is a solution selling rather than a product selling that requires continuous support. Certain customers are very clear about their security architecture, whereas, some customers give partners liberty to deploy solution for them”, says Sanghrajka.
The industry is set to witness further consolidation of business and leading security vendors will continue to go for M&A in order to improve on the front of security offerings and improve their presence in every length and breadth of the region. Therefore, channel partners will have to make up their mind for the transition. While the pure channel strategy is not going to work in the long run, channel engagement will remain a core strategy of vendors.