Global Enterprises Increase Spend on Firewall, VPN Solutions

Datamonitor: Market to hit almost $6 billion by 2007

Datamonitor: Market to hit almost $6 billion by 2007

London  February 19, 2004  A new report by independent market analyst Datamonitor predicts global enterprise investment in firewall and virtual private network (VPN) solutions will reach almost $6 billion in 2007, double that of 2003. Increased publicity of threats and security breakers, recent worms and viruses all have highlighted the deficiencies in current security solutions and clarified the need for them, according to the firm.

According to the report "Firewall and VPN solutions," home working and the push for mobility/anywhere-anytime access for workers will see enterprise investment in secure sockets layer (SSL) VPNs in particular, soar to achieve a staggering 74 per cent compound annual growth between 2003 to 2007.

According to Datamonitor, the recent acquisitions in this market, such as Neoteris by Netscreen, which in turn has been acquired by Juniper Networks; and Safe Web by Symantec, show the aggressive positioning of vendors to gain market share in the high-growth SSL VPN market and such strategies will no doubt continue in the future.

The report stated that North America will remain the largest market and continue to provide the most revenues, predicted to reach $2.6 billion, although Latin America, followed by Asia Pacific will be the fastest growing. Datamonitor expects investment in security solutions by the government, utilities and pharmaceutical sectors to show the most rapid rise.

According to the analyst firm, changing work-business models will affect the uptake of SSL VPNs. The ability to have open communication and collaboration between stakeholders within a company and their supply chains and customer base is driving the market forward. The report said that home working and the increased demand for mobile access and the need for businesses to retain key personnel through more flexible working practices will see enterprise investment in SSL VPNS rise from $120 million in 2003 to just over $1 billion in 2007.

Financial services are considered by many vendors to be a major vertical in the firewall and VPN solution market and will remain so in 2007, Datamonitor said. However, government programs, such as the e-Europe initiative from the European Union, is pushing forward e-government policies, like those implemented in the United Kingdom, creating improved citizen access to local government institutions via the Internet. Such initiatives will involve substantial investment in security infrastructure.

In the United States, too, the Homeland Security Funds will provide substantial funds for investment in security solutions for government bodies. Datamonitor predicts global spend by the government sector will grow from $471 million in 2003 to just over $1 billion in 2007.

Utilities have been forerunners in the field of security mobility. The potential terrorist attacks threatening the national infrastructure of a target country are very real, leaving this sector aware of the threat from cyberterrorists. Datamonitor said that the obvious need for utilities to secure their networks would account for expenditure of $900 million by 2007.

In the pharmaceutical and retail distribution sectors, securing proprietary data and maintaining revenue streams are prime reasons for the high rates of growth in security solutions, which Datamonitor estimated would reach $297 million and $772 million in respectively in 2007, more than double that of 2003.

As the firewall and VPN market evolves, Datamonitor said managed services provision for firewall and VPNs is also a growing segment in this sector. Providing an end-to-end managed security environment means that customers need only have one point of contact for any security issue. In the VPN space, the most common form of managed services is that where the service provider owns the equipment and is paid to maintain and manage it on the customer's behalf. Other contracts in the overall security space are for monitoring existing solutions. Datamonitor believes this is a core area for growth, especially in the Internet protocol security (IPSec) VPN space.

Helen Toft, associate analyst in Datamonitor's Enterprise Security team, commented that it is imperative for vendors to constantly update their product portfolios and develop products in areas where high growth is apparent. "The recent acquisitions in this market show the aggressive positioning of vendors to gain market share in the high-growth SSL VPN market, and such strategies will no doubt continue in the future," she said. "The importance of vendors' channel partners must be acknowledged. Vendors must continually monitor the interaction with the channel to ensure the maximum volume of their products can be brought to market. This may involve, for example, regular training and education in the portfolio of solutions on offer as well as innovative pricing solutions to stimulate enterprise demand. Focusing on verticals in the market and tailoring solutions to current trends and problems in a specific industry are necessary, especially in the largely saturated firewall market."