Security vendors face pricing time bomb
Cash-strapped customers may opt for shareware or freeware if the price is not right, says Doug Woodburn
Security vendors have been warned that a failure to adjust their prices in the wake of the Comprehensive Spending Review could prompt end users to move to a shareware or freeware alternative.
Price has become a hot-button issue in the security channel following price hikes from both Websense and Barracuda and counter-moves from Clearswift and Bloxx.
Meanwhile, a huge number of end users – many of whom are cash-strapped public sector organisations – are approaching the annual renewal date for their web or email filtering subscriptions.
Nigel Hawthorn, vice president of EMEA marketing at Blue Coat, said channel partners will play a crucial role in which vendors win and which ones lose over the next six weeks.
“The market is more difficult than it was,” he said. “It is renewal season. End users are looking for savings and are not necessarily going to renew what they had last year.
“We have a special trade-in programme running between now and 31 January for anyone upgrading from the likes of McAfee, Websense or Bloxx. As so many renewals happen on 31 December, it is a great time for channels to look at multiple vendors and work out what their customers want and the right balance between functionality, price and channel margin.”
Price may be just one of the three factors outlined by Hawthorn, but Phil Dick, sales director at Websense and Bloxx partner NTS, argued it has become by far the most important for end users.
Dick advised vendors to accept that public sector clients can no longer afford to pay as much for their security and argued that their current prices are not sustainable.
“We are talking to people that have literally had their budgets slashed by 40 per cent, so vendors have to accept there is less money out there to play with,” he said.
“Organisations need to protect their networks and need web and email filtering, but they will find more creative and cost-effective ways of doing it. “There are cheaper alternatives. One is to do nothing. Beyond that, there are freeware or shareware solutions, which some organisations are looking at deploying.”
That is a message that has been received loud and clear by web filtering challenger Bloxx.
After cutting its RRPs by five per cent in October, it is now offering a free hardware refresh for existing customers who renew maintenance for another three years.
The strategy is designed to put clear water between itself and US-based Websense, which raised list prices by 15 per cent in August “to support adjustments in international currency rates”.
Pat Dunne, vice president of sales at Bloxx, argued some of the US-based vendors were guilty of arrogance, and argued that their resellers would be the ones to take the hit.
“What I hear in the reseller community is that end users still want to pay the same price, so it is the reseller in the middle that gets squeezed,” he said.
“For many years the UK pound has been very strong against the dollar, meaning sales in the UK generated significantly more dollars for US companies.
During this time these US companies did not reduce their prices in line to allow British customers the benefit of the strong pound. Now the pound is weak, they want UK companies to pay more. It doesn’t stack up.”
Andy Philpott, vice president of sales for UK and Ireland at Websense, urged channel partners to consider the total cost of ownership of the solutions they sell. He also stressed that Websense provides a premium product in terms of
the resource it invests in research. “When looking at a security solution, you need to consider whether it is market leading, whether it comprehensively covers web threats by protecting web, email and data, and whether this also provides the best total cost of ownership,” he said.
He also took a veiled swipe at Bloxx. “An issue with choosing a vendor that delivers a point product is that there are additional overheads such as multiple management interfaces and more importantly, point solutions cannot rival the power of integrated security.”
Dick said that more of NTS’ business was shifting from Websense to Bloxx, but emphasised that pricing strategies were about more than just price lists.
“Bloxx has been quite cute in its price reduction – it has sent a psychological message to the market that it is cheaper,” he said.
“But RRPs often bear little resemblance to the number at the bottom of the purchase order. Websense is just as capable of being realistic about the price organisations are willing to pay, but Bloxx has chalked up a psychological victory here.”