Charles Dickens, A Tale of Two Cities (1859)
Last week Equifax, a supplier of credit information, reported that a recent data breach could affect up to 143 million consumers in the U.S. It’s even worse for businesses: according to Cisco’s 2017 Midyear Cybersecurity Report, only 66% of organizations are investigating security alerts, and businesses are mitigating less than 50% of attacks they know are legitimate.
More than 150 years ago author Charles Dickens started off his novel ‘A Tale of Two Cities’ with “It was the best of times, it was the worst of times…”, and that line is still timely when it comes to cybersecurity and the new and improved Micro Focus. The new company officially debuted on September 1 with the ‘spin-merge’ acquisition of Hewlett Packard Enterprise’s software business valued at $8.8 billion, making it the world’s ‘seventh largest pure-play software company’, with annual revenue of $4.4 billion.
Chris Hsu, formerly COO of HPE and EVP and GM of HPE Software, is now CEO of Micro Focus. Under the terms of the deal, HPE shareholders own 50.1% of the new company, which works out to approximately $6.3 billion, which is in addition to the $2.5 billion cash payment that HPE received.
The deal involved the ArcSight security and Mercury Interactive application management assets, as well as the late and unlamented Autonomy Corp. plc, which HP acquired in 2011 for $11.1 billion (more than $16 billion for all three acquisitions), but ended up writing off almost $9 billion of the purchase price. According to Securities and Exchange Commission filings, HPE’s software business revenue in the 12 months through Oct. 31, 2016 were $3.17 billion. ITOM (IT Operations Management) comprised 61% of the revenue; Enterprise Security Products (18%); Information Management and Governance (16%); and Big Data Analytics (5%). Revenue for all products broke down to: 28% license, 9% software-as-a-service (SaaS), 50% maintenance, and 13% professional services.
On Tuesday the company refreshed its expanded security portfolio, with new and enhanced offerings, including:
-ArcSight Data Platform (ADP) 2.2 (GA October) brings native, realtime log parsing, security data enrichment and normalization into the innovative Event Broker for security operations that scales to any data volumes, building the power of ArcSight’s connectors directly into the Event Broker;
–ArcSight Investigate 2.0 (GA October) with built-in security analytics displayed in pre-defined dashboards that are powered by Vertica to provide actionable intelligence for front-line analysts;
-Change Guardian 5.0 (GA September), which now monitors changes to Active Directory in the cloud (Azure Active Directory), and empowers organizations to leverage NetIQ Change Guardian across hybrid IT environments;
–SecureData Cloud for AWS (GA September), for data-centric security hosted by AWS using cloud-native elastic compute, trust and operational capabilities; and,
-enhancing the Fortify portfolio (available now) to enable developers, IT and operations to securely and seamlessly test applications both in DevOps and in production without disrupting the software development lifecycle through automation and analytics.
At 11% CAGR between 2017-2022, the cybersecurity market is not the hottest IT segment, but as it climbs from $137.85 billion this year to $231.94, it’s getting a lot of attention. Gartner is much more conservative in its estimations, putting the 2017 market at $86.4 billion, a 7% increase over 2016, while IDC comes in at $81.7 billion and an 8.7% CAGR through 2020 to nearly $105 billion.
When it comes to the future of IT, the cloud (by 2019, 60% of IT workloads will run in the cloud), there are mixed feelings about security. “Security continues to be the most commonly cited reason for avoiding the use of public cloud,” said Jay Heiser, research vice president at Gartner. “Yet paradoxically, the organizations already using the public cloud consider security to be one of the primary benefits.”
If my math is correct, Micro Focus’ new security software business generated $570 million in 2016. According to Technology Business Research, the five largest security vendors are Symantec, Cisco, IBM, Check Point and Intel (now McAfee), with four of the top five — Cisco, IBM, Symantec, and McAfee — dominating the enterprise security space.
All of this should mean good news to Micro Focus, and according to the company’s security marketing guru, Travis Grandpre, who came on board with the HPE assets, this is “a once in a liftetime opportunity to redefine security.” In a prebrief he told IT Trends & Analysis that there are two issues facing the market: the sophistication of the attacks, which requires greater sharing of data and deeper and broader analytics; and, a shift in technology to the hybrid cloud.
Customers are looking for platforms and tighter integration so they don’t have to deal with the headaches of continuous updates and additions to their security portfolios, he said. This requires a more open and nimble approach, as opposed to the monolithic stacks and leisurely updates that currently dominate, added Grandpre.
“The overall security market is undergoing a period of disruption due to the rapid transition to cloud-based digital business and technology models that are changing how risk and security functions deliver value in an organization,” said Deborah Kish, principal research analyst at Gartner. Two of the top four vectors transforming the security software market support Mico Focus’ direction: by 2020, advanced security analytics will be embedded in at least 75% of security products; and, acquiring and integrating products and technologies will be a critical strategy to increase market share and enter new markets.
Whether or not this is a once-in-a-lifetime opportunity, the move from HPE means the software business can be more focused, and change more rapidly, said Grandpre. The Elastic and AWS deals are only the first of many that are in the works, he stated, and product refreshes are moving to a quarterly cycle, as opposed to the 12 to 18 months they used to take.
“The work that we have been doing over the last year to open up our architecture we will continue to work on that.” Being more nimble, and more focused is also a huge advantage, he added. “We’re checking all the boxes for our biggest customers. That’s something Micro Focus has been known for.”
DISCLAIMER: I have shares in companies mentioned in this story.