“Aladdin could become another Symantec”
IT security guru Steve Hunt explains how Israeli security companies can achieve breakthroughs, and talks about the opportunities of the local software giants.
Shlumik Shelah 14 Jun 06 17:02
“Wherever in the world I have clients, Israel is considered the leader in security,” says Steve Hunt, one of the world’s most influential analysts in IT security, explaining what brought him to Israel. “From the corridors of Washington to South America and Scandinavia, everyone always asks me, ‘What’s happening in Israel?’”
Hunt, a former VP for IT security research at Forrester Research (Nasdaq:FORR), left a year ago to found A4 International, where he is trying a slightly different model from the one used at Forrester. He still provides advice and analyses of the security market, especially IT security. At A4 International, he plays a broader role in the decisions of companies that hire his services. A4 International focuses on consultancy and business development relating to convergence of all security fields (information, physical, and homeland security).
Hunt is a technology analyst. Before joining Forrester, he worked for several years at Giga, acquired by Forrester in late 2001. He says that each year he talks with thousands of managers using different security technologies, which is the source of his vast knowledge about security accumulated over years as an analyst. One way in which he helped clients was to match security products suppliers with frustrated customers, which made him popular among security products makers, including quite a few Israeli companies in the sector. Either because of this, or for other reasons, Hunt visits Israel several times a year.
In early June, Hunt participated in the InfoSec 2006 conference organized by Secoz Ltd. Despite his appreciation for Israeli technology, he has quite a bit of criticism of business developments in Israel. “I think that anyone developing technology should check whether the product will be ready for market when the market is ready for the technology, and whether there will be too much competition. These are seemingly simple recommendations, but they’re apparently often forgotten. When I look at the Israeli technology space, I see too many Israeli technology companies doing the same thing. Too many are competing against each other, and not enough are targeting new niches. I’m mainly referring to my field of expertise (the security market), but when I talk with analysts from other sectors, they tell me the same thing.
“On one hand, Israel is known to everyone as a country with a record of high achievement in technology innovation. On the other hand, Israel suffers from competing against itself. When a technology company is a little successful, six other companies immediately pop up to compete against it.”
“Check Point missed growth opportunities”
One Israeli company that Hunt considers a market leader is Aladdin Knowledge Systems Ltd. (Nasdaq: ALDN; TASE: ALDN), run by chairman and CEO Yanki Margalit. Hunt does rule out the possibility that Aladdin could become an acquisition target by a software giant, but he sees the company achieving greatness in another direction.
“To an observer, Aladdin has been a company without a clear strategy from the beginning. The company could grow through acquisition to become a major power in the security sector. If it chooses not to do this, and so far it has not, then I see it as a target for a takeover. The problem with anyone trying to acquire it is to swallow the company’s three product lines - anti-virus (eSafe), authentication (eToken), and copyright protection (HASP). This complicates an acquisition of the company.
“I’d rather see Aladdin acquiring another growing company and turning its brand into a major power. After acquiring Veritas Software, Symantec Corp. (Nasdaq:SYMC) changed from a leading name in security into a major software infrastructure company. I think that there’s room in the security sector for another great name in IT security that will replace Symantec. Aladdin could do it. Symantec was the largest company in the IT security sector, but it now focuses more on infrastructures.
“There’s room in the market for a new large security player in the area of information security or security in general. Aladdin also has a good chance of combining its products with the physical security sector where it will use its eToken solution. Aladdin could become a major brand if it wanted. They could be on the level of Symantec if they wanted; they have the tools for it.”
Hunt is more critical of another Israeli company - Check Point Software Technologies Ltd. (Nasdaq: CHKP). He says Gil Shwed’s security giant has not always picked the right road. “Check Point is a company that for years had many possibilities to exploit opportunities in the market. And I am sure that it’s hard for a company like that to decide over time which opportunities to exploit. As a result, Check Point has missed some growth opportunities, which is not to detract from its success. It executed its decisions. Check Point is a company with technological skills; they constantly create new solutions in the lab. They decide which solutions to bring to market, which partners will help them, and which trends to focus on. This is confusing for a company with one product, certainly for a company with hundreds of products.”
“Symantec should renew itself to cope with Microsoft”
“Globes”: What is the hottest field in the security market today?
Hunt: “In general, event driven management is the hottest field in the security market. Billions of dollars are being poured into it. It includes things such as video surveillance, alarms, and surveillance and locating equipment. These are immense fields of investment and revenue, and they all have one thing in common: all the systems were designed to help us find out what’s happening, how important it is, and what to do about it.”
Hunt mentions a number of Israeli companies in this sector, including NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) (a developer of video surveillance systems), and Orsus Solutions Ltd., run by chairman and CEO Arye Finegold, a co-founder of Mercury Interactive Corp. (Pink Sheets:MERQ). Orsus is developing a situation management response coordination solution.
Hunt says, “Every time I see their solution, I’m pleased. Another sector with room for innovation is video analysis. Today’s technology in this area is inadequate, but Israel has promising companies in this sector, such as start-up Math.”
It seems that Israeli companies are unable to penetrate large homeland security projects.
“Israel is successful in the military sphere, and is known for this in the world. This is a major part of any homeland security solution. Israel appears to be well equipped at the moment to contribute to the world in the area of military technology, and to make the world a better place, but there are products in the simple homeland security sector, such as Haifa-based SDT - Scent Detection Technologies Ltd. (run by chairman Shabtai Shavit, a former head of the Mossad), which has technology for detecting airborne chemicals. This technology could be used to protect airports, for example.”
In your opinion, how can Israeli companies succeed in the security sector?
“I think that the key for success at almost every Israeli technology company is to find a large sales channel partner. There are few technology companies, outside of Check Point, that were wholly Israeli and succeeded. Check Point’s brand is pushed in the world. When people buy Check Point, they know the product is Check Point’s. There’s a simpler strategy, which is to consolidate a number of products in a single package. When Check Point, Aladdin, and even Whale Communications Ltd. (acquired by Microsoft Corp. (Nasdaq:MSFT) a few weeks ago) made sales, they usually went through a distributor who sold several key products to a customer. For example, a customer will buy from a distributor a protection system that includes Check Point’s firewall, together with a number of other products, such as an anti-virus from other software providers. It’s the distributor who provides the package.
“This is equally true in the homeland security sector. It would be correct for a homeland security company to link up with a distributor who will provide packages from several software providers. Another option is to use an OEM-type distributor, or to cooperate with another manufacturer.”
What can IT security companies do against the threat from Microsoft? It seems that Symantec is under pressure.
“All that means is that when a certain technology become standard, such as anti-virus or firewall, Microsoft integrates it into its operating system or another products package. This leaves Symantec, for example, to create the next products. Obviously, they will feel pressured so long as they rely on ant-virus. They have to move on and renew themselves.”
Published by Globes [online], Israel business news - www.globes.co.il - on June 14, 2006