Security Vendors and Professionals Feeling Economic Pinch

Lockdown Networks, Inc. is the most recent of several security vendors announce going out of business. Other vendors, such as Vernier Networks, Inc. are in the process of changing their name and security focus of the company. In other news, security breaches continue to make the news, as security professionals share information on how to get security funding in a tight economy.

Focal Points:

• Officials from Lockdown Networks recently stopped operations of the company. Company representatives said that the combination of a weak economy, along with the relatively slow adoption of network access control (NAC) technology were the main reasons for their lack of success. Weak demand in turn drove an inability of the vendor to get further venture funding to continue operations. Lockdown follows several other NAC vendors that have not succeeded, including Caymas Systems, Inc. which was purchased by Citrix Systems, Inc. which discontinued its product, and Vernier Networks, which is in the process of changing its name and product focus.
• Officials from Hannaford Brothers, Co. recently acknowledged the loss of over 4.2 million credit card records. The theft likely occurred over the last three months during the process of credit card authorization. Officials said the theft was limited to credit card and debit card numbers and their expiration dates. Hannaford had been using Rapid7 LLC's NeXpose, its enterprise vulnerability management solution, to perform network security scanning in compliance with the Payment Card Industry (PCI) Data Security Standard. News reports have cited over 1800 cases of fraud that have resulted from this breach. As a result of these breaches, there have already been two lawsuits initiated against Hannaford for breach of contract and negligence in its duty to protect data of its consumers. Experton Group predicts these types of lawsuits will increase dramatically in the future, as customers look towards corporate security failures as the new litigation target.
• At a recent security event, several IT security executives discussed what actions they could take to defend their projects against potential impending budget cuts, which are anticipated as a result of the recent economic downturn. Most security officers agreed that future security budgets will be under intense scrutiny, which will require innovative thinking to justify every dollar spent. Recent security intrusions can help bolster the rationalization to spend on security prevention, highlighting the significantly lower costs of prevention compared with recent and upcoming real losses as well as pending litigation. In addition, some realignment may need to be made to focus on risk avoidance over new technology deployments for IT.

Experton Group believes security vendors will face continued consolidation, especially in areas where vendors’ solutions are offered in a single domain. While NAC vendors have been significantly affected due to slow adoption rates, Experton Group expects these adoption rates will increase faster as a result of an increased focus on security in the enterprise. Those vendors that have leading siloed solutions are likely to be purchased by larger security vendors. IT executives should closely examine risk factors and include these in justifying security investments in future IT budgets.