Security Spending Shoots Up

The market for VPNs and firewalls is continuing to grow, according to the latest study from Infonetics Research Inc.

Hardware and software revenues in this area were up 11 percent from the last quarter of 2003, to reach $733 million in the first quarter of 2004. This figure is expected to grow to $823 million in the first quarter of next year.

These figures are hardly surprising given the constant security threats businesses face from hackers, worms, and viruses. The trend towards remote working has also helped develop the market for VPNs, which enable staff to access their companies' internal computing resources from remote locations.

The extensive product portfolio offered by Cisco Systems Inc. (Nasdaq: CSCO) has placed it in the driver's seat for VPN and firewall appliances.

Jeff Wilson, principal analyst at Infonetics, says, This is because they have products in lots of different form factors. They have a really broad range of network security products -- firewall appliances, routers with security, switches with security, intrusion and prevention systems.”And it’s not the high-end products that are the hottest area. It is appliances in the middle price-bands between $1,500 and $10,000 that are driving this growth. The fact that many organizations are now deploying VPNs on a significant scale is also spurring growth, according to Wilson.

“A lot of large site-to-site VPNs and broadband VPNs are being rolled out.” But it's not the only factor. Infonetics’ research also emphasizes the importance of the fact that many firewalls are currently being upgraded.

Amongst the SSL VPN players selling application security gateway products, Juniper Networks Inc. (Nasdaq: JNPR) is the market leader, thanks to its acquisition of NetScreen earlier this year (see Juniper/NetScreen Merger OK'd and Juniper & NetScreen: The Smell of SSL).

Wilson says that, with the SSL VPN market maturing, the trick to being successful is getting customer wins. “If you can get customers announced in Federal Government, finance, and healthcare, it makes you look a lot better."

Those sectors are often reliable early adopters of new technologies,according to Wilson. “They spend a ton of money and they are very critical of technology -- if the Federal Government and finance have adopted something, the average company can be sure that it will be good enough for them.”But it’s not just the VPN/firewall market that is experiencing growth. In a separate piece of research released today, Infonetics reported that the market for intrusion detection and prevention systems (IDS/IPS) grew 9 percent from the fourth quarter of 2003 to reach $132 million in the first quarter of this year. This figure is expected to grow 25 percent to reach $165 million by the first quarter of next year and a massive $919 million in 2007.

As in the VPN/firewall market, Infonetics found that Cisco is a major beneficiary of this expansion. The company now has over a quarter of the worldwide revenue from the IDS/IPS market.

— James Rogers, Site Editor, Next-gen Data Center Forum