Cheaper alternatives are an obstacle

By Ryan Naraine  |  Posted 2008-03-07 Print this article Print

The report, written by analysts Nick Selby and Paul Roberts, argued that Core's claim of 500 customers paying $25,000 per seat should put the company near profitability or at least cash-flow positive at this point. However, because the company was not profitable, The 451 Group suggested that the market was too small, specialized and crowded to justify the investments, but Core Security was quick to respond, arguing that it is rapidly growing its customer base and pushing towards profitability.

"We have about 625 customers today and that's growing quarter over quarter," said marketing director Mike Yaffe. "There's no shortage of opportunity to raise capital, depending on the strategy we want to put in place."

The company has seen players in the Web application and vulnerability management space-SPI Dynamics, Watchfire and ISS Security-feature in big-money acquisitions by the likes of Hewlett-Packard and IBM, and there's a sense that Hatton's priority is to prepare Core Security for an exit.

It won't be easy, if Core Security sticks to its penetration-testing roots. The market is littered with cheaper alternatives-among them Immunity Canvas, SAINT, and the free, open-source Metasploit Framework-and a burgeoning vulnerability scanning market made up of companies like eEye Digital Security, NetClarity, NGS Software, StillSecure and Qualys.

For example, Immunity has branched out beyond pen testing, adding specialized training and consulting services, while companies like eEye have added endpoint security management and even anti-malware capabilities to its vulnerability scanning services.

Hatton is banking on the sophistication of Core Impact and the company's well-respected research team to help provide enough differentiation from competitors. He said enterprise buyers are skeptical about the limitations of free or inexpensive offerings, arguing that Core Security has invested heavily in research and development to create a high-end security management product.

"I think, in places where security is a big issue, cost of this solution is negligible based on actionable insight they get out of it," Hatton said. "We have a strong customer base that's vocal about wanting to do more with our product. They want to see more development in areas beyond pen-testing.  That's where we're focusing our efforts."


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