Threats give security boost

Widespread fear of hacking, viruses and worms loosens company purse strings

The continuing threat of worms, viruses and hacking has helped to drive up revenue for security vendors and resellers, with the purchase of firewalls and VPNs a priority for customers, analyst Datamonitor has said.

Revenues for specialist security vendors in the last three months of 2003 were 14 per cent higher than in 2002.

In 2003, vendors generated revenue of $5.33bn, compared with $4.67bn in 2002. Fourth-quarter 2003 revenue was 22 per cent up on Q4 2002. The industry average rise was six per cent.

"This indicates that the security market is growing steadily as a higher proportion of IT expenditure," said Ian Williams, managing analyst for Datamonitor's enterprise security programme.

David Ellis, director of e-security at distributor Unipalm, said: "The highly publicised outbreaks gave the market a kick.

"People are considering not only external viruses but worms through instant messaging and peer-to-peer backdoors. The outbreaks have made people think about how to re-layer security."

Antivirus software sales also outperformed the market average, with revenues of the three leading vendors in this field rising an average of 13 per cent in 2003.

Chris Durnan, managing director of security VAR Peapod, said: "It's been a positive three months.

"Content security is a big part of our business and products, such as antivirus or malicious code, are growing. The Netsky virus loosened purse strings."

Durnan added that large firms want more granularity when attaching remote users and providing access to secure applications.

Another area of sustained growth was in the firewall and VPN market, defying predictions that it has reached saturation.

Datamonitor said the ISS/Cobion, Hewlett-Packard/TruLogica and SafeNet/Rainbow deals are significant and expects more acquisitions as vendors look to create portfolios to address emerging security models.

"When the boards of the large IT firms and big network vendors see growth it prompts them to be more proactive," said Williams.

"It's all open now, and anyone can buy anyone. We are seeing the end-game that was expected five years ago, with the integration of IT and security."

The biggest deal of the quarter was NetScreen's acquisition by Juniper, with the former continuing to grow at an impressive rate of 71 per cent in 2003.