For Cisco Systems Inc. and Check Point Software Technologies Ltd., their positions in the security appliance market are a mixed bag.
Cisco has once again emerged as the industry leader in a incrementally growing security appliance market — but the market isn’t growing by very much: Worldwide factory revenue was up just 5.7 percent year-over-year tojust above $2 billion, while shipments increased by a modest 1 percent to 499,022, according to IDC’s Worldwide Quarterly Security Appliance Tracker.
For the channel, this stilted appliance growth portends an increasing need to supplement network security portfolios with cloud solutions and related value-add services to boost margins and distinguish themselves in a market wavering on stagnation.
Altogether, Cisco led the security appliance market with 16.2 percent market share throughout Q3 2012, which fell below its 17.3 percent share during the third quarter of the previous year. The San Jose-based network security firm was followed by Check Point, with 12.8 percent of the market. Fortinet Inc. experienced the most significant growth among the top five vendors, with 17.2 percent. Palo Alto Networks Inc. and Sourcefire Inc. had strong quarters, emerging as viable challengers to the top three.
But while the market is still expanding, growth is anemic. Last quarter, factory revenue was at 6.6 percent, while unit growth remained at 5.8 percent, a slight decline compared to the second quarter of 2011.
Long-established market technologies under the security appliance umbrella are experiencing a bit of a metamorphosis. The firewall and virtual private network (VPN) market represents 26.7 percent of security revenues, driven by 7.3 percent year-over-year growth sourced to Cisco and Juniper Networks Inc. However, the IPS and VPN segments were the only markets to show revenue declines compared to the third quarter of 2011, according to the report.
The shifting tides in appliance arenas have seeped into other market solutions. Last month, an IDC report indicated the purpose built backup appliance (PBBA) market remained flat throughout Q3 2012. Figures cited by IDC estimate the market to experience a CAGR of 6.4 percent that reached $567.5 million in overall revenue.
For the channel, the security appliance market is a hard nut to crack. Solution providers have established customer loyalty with related solutions, and displacement, while an option, comes with its own set of deterrents for all but the most willing of customers.
But this may change: Some of the slowdown can be attributed to global macroeconomic conditions.
“Overall, macroeconomic conditions have been questionable at best. While the security market remains more resilient than others, there was a definite slow-down in growth rates in the third quarter,” said John Grady, IDC research manager of security products. “The evolving threat landscape continues to drive spending on security products as organizations battle to keep their infrastructures secure and their data protected.”
As mentioned by Channelnomics, the cloud is emerging a significant disruptor to the appliance space. The reason is attributed to cloud’s cost effectiveness, which is an attractive alternative compared to hardware’s expense and ongoing infrastructure requirements. Cloud represents a more affordable offering and allows solution providers to build an array of tailored solutions and services that can be customized to meet the needs of their customers and easily replaced.
A MarketsandMarkets research report indicates the cloud storage market is primed for a 40 percent uptick, which could translate to other areas of network security.
Those immersed in their security appliance business need not fear. Representing a beacon of light, the Unified Threat Management market is continuing its upward market climb after experiencing a healthy 24.3 percent year-over-year growth, and accounting for 33.3 percent of security appliance revenues during the third quarter of 2012.
Leave a Reply