Notes from the Consultant's Jungle

Undoubtedly you’ve heard by now that Intel has a bid on the table to buy McAfee (for $7.7B). ¬†We’ve written before about the collaboration that’s been going on between the two companies for almost two years now, which we suspect is a leveraging of features at both ends of the stack to improve security of data processing devices. ¬†Indeed the two companies share a vision of combined secure hardware and software to protect the full spectrum of Internet connected devices.

So what does this mean for us chickens? ¬†Well, there’s quite a variety of opinion in the industry so far. ¬†The official company line(s) are of course that this will lead to technology that improves security for network connected devices of all types (something we certainly can benefit from), and of course that there is a great opportunity for more sales of security software if every new CPU is seen as an opportunity for that. ¬†However, there is a good bit of open endedness around this. ¬†We’ll at least give you our opinions.

For one thing, while the idea of a hardware-integrated security foundation has appeal, this is a concept that will take many years to spread through the enterprise IT footprint.  There are lots and lots of platforms in the enterprise now that cannot take advantage of this, and refresh cycles will have to run their course for more contemporary silicon to establish broadly in the enterprise.

To cut to the chase, if you agree that the security product market is in a state of transformation, then there is much food for thought with this merger.  For the past few years, McAfee held a solid second place in the security software market behind Symantec and in front of Trend Micro.  With McAfee a part of Intel, Trend Micro is the only remaining pure-play security vendor in the front of the pack.  That could spell opportunity for Trend Micro, at least so far as the merger may prove a near-term distraction to McAfee.

As a McAfee user myself, it worries me that my supplier of something as critical as PC security software is potentially swizzling its business model. ¬†I’m probably not alone in that I’m comfortable with the other choices I have for security software, and that may be a valuable indicator of some of the risk exposure of this merger.

The fact that this is just one example of a security product company being purchased by hardware or services companies (similar moves have recently happened with HP, IBM, RSA, Fortify, and others), we think is evidence of changes ahead in how security features exist or are accessed by the various layers of the stack. ¬†We’ve seen the traditional OSI stack shrink considerably over the past decade, and we think this is also a part of that evolutionary progression of data processing architectures. ¬†Where it goes next will be interesting to watch.