Merging Managed Security

VeriSign's Guardent acquisition may prompt further consolidation of MSSP industry.

Verisign Inc.s acquisition of Guardent Inc. last week not only brought together the two strongest managed security services providers, but it may also spark a new wave of consolidation and innovation in the MSSP sector as the remaining players scramble to hold customers.

In the wake of the $140 million VeriSign deal, companies such as Counterpane Internet Security Inc., RedSiren Inc., NetSec Inc. and TruSecure Corp. are looking for ways to remain competitive, even as they consider whether the time is right for a merger of their own.

"I think there will definitely be more consolidation as time goes by. Its a good indication of the interest in and value of this space," said Glen Hazard, CEO and chairman of NetSec, based in Herndon, Va. "There arent that many sizable players left in this space, but the companies that are left have held their value because their investors have invested for the long haul and didnt panic."

Hazard said he is not actively looking for a buyer for NetSec and, in fact, may be in the market for acquisitions in the coming year. The company is also planning to add several new capabilities to its services portfolio in February and will launch a new product later in the year.

Even so, analysts said the market climate is ripe for consolidation and that the remaining independent players would do well to start shopping.

"Its time for everyone to start picking partners," said analyst Pete Lindstrom, of Spire Security LLC, in Malvern, Pa. "Its always nice to have friends with deep pockets. This is sort of like that point in your late 20s when everyone is pairing off and getting married."

In addition to Guardent, a few other MSSPs have found buyers for themselves. The biggest of these transactions, in dollars and in its effect on the industry, was Symantec Corp.s acquisition of Riptech Inc. in 2002. Symantec paid $145 million for Riptech at a time when much of the security sector and the technology industry in general was in a swoon. The acquisition grabbed the attention of other MSSPs and served notice that the model was a viable one.

For VeriSigns part, company officials said it plans to continue investing in Guardents proprietary technology platform. The Mountain View, Calif., company also plans to expand its service offerings in the near future. Much of that plan is based on combining the data that VeriSign collects with technology from Guardent.

"Our developers and our engineers are just salivating at what they think they can do with this data," said Maria Cirino, CEO of Guardent, based in Waltham, Mass.

VeriSigns managed services offerings rely on data gleaned from the companys presence in the Internet Domain Name System and the unique view of the global networks health and performance that it provides.

First up on the newly constituted companys agenda is infusing Guardents popular managed vulnerability protection service with intelligence and data from VeriSign. The Guardent offering enables customers to outsource the task of scanning their networks for new vulnerabilities. Guardent probes customer networks on a regular basis looking for new weaknesses and does more in-depth penetration tests occasionally.

VeriSign executives said the vulnerability protection service was one of the more attractive elements of Guardents portfolio.

"That service has been on our road map, and this accelerates that," said Judy Lin, executive vice president of security services at VeriSign. "Were going to enhance that with our unique intelligence and will add some of our payment fraud data in there as well. The visibility we have on the Internet in terms of security and payment events allows us to bring some unique perspective to the table. Were really looking for operational efficiencies along with service enhancements. This is combining strength with strength."

Guardents Cirino is likewise confident of VeriSigns ability to capitalize on the advantages that the acquisition gives the company.

"Managed security is a very exciting business, and if youre not great at it, you wont survive," said Cirino, who will become the general manager of VeriSigns security services unit. "Its a business of skills, and the companies that didnt reach critical mass during the boom havent been successful."