Verizon Business Makes Global Security Play with Cybertrust Acquisition

| May 14, 2007 | Enterprise Security, Internet/Managed Services - U.S.
| Competitive Intelligence Report

| Analyst: Counse Broders

Current Perspective: Positive
Vendor Importance: High
Market Impact: Very High

Event Summary

On May 14th Verizon Business announced that it will acquire Cybertrust, which provides information security services. Financial terms were not disclosed. The move will boost Verizon Business’ position in the managed information security services sector and help it better cater to large business and government customers. In addition to helping Verizon Business’ global security services, Cybertrust brings with it a solid identity management suite, Security Operation Centers (SOCs) in EMEA and Asia-Pac, and ICSA Labs, an independent division of Cybertrust, that provides security product certification.

Analytical Summary

• Current Perspective: Positive on Verizon Business’ acquisition of Cybertrust. While the company has been no stranger to security firm acquisitions (see NetSec purchase), this move brings into the fold a major global player, helping Verizon counter the 2006 IBM/ISS merger and positioning it better against its rival AT&T.

• Vendor Importance: High to Verizon Business as the company needed to step up its managed security efforts so that it would not lose ground in this area to rivals. The move boosts its global security efforts, adding key patents, identity management, personnel, and other resources in one quick effort, instead of spending the time to do this in an organic way.

• Market Impact: Very high on the managed security market for several reasons: it brings a key global security element to Verizon Business, which already had a solid security solution, and it will combine resources under the Verizon Business umbrella, making for a stronger position while forcing competitors to evaluate their commitment to competing in the global security space.

Recommended Competitor Actions

• Competitors in general will need to take steps to review their global security position, and determine their preparedness to compete on this level, or to focus on regional sectors or niches. With the recent wave of mergers (BT/Counterpane, IBM/ISS, and now Verizon Business/Cybertrust), the market is getting crowded for those hoping to compete globally.

• For competitors looking for a player that is talking up managed risk, a partnership could be pursued with KSR which has offered its own managed risk service since introduction in November 2006.

• Orange is thrust into a difficult position, having worked with Cybertrust for some of its managed security services via its partnership. It will need to quickly assess whether it wants to continue in this partnership arrangement, or determine if it needs a new partner, or to make an acquisition. With fewer independent and focused players remaining, the bar has been raised for Orange.

• IBM can point out that Verizon is obviously reacting to its own acquisition of ISS which it completed in 2006. It can also note that not only did it get an extensive global managed security service in the deal, it also got a security hardware business that blends well with IBM’s professional approach for global enterprises.

• AT&T will need to evaluate its own position for global security. It has done a terrific job taking its higher end services (such as its Internet Protect) and offering variations on its services that appeal down-market. While it has been no slouch in the global market, it must evaluate its security profile to meet worldwide demand.

Recommended End User / Customer Actions

• End users will find that this move should prove useful to both companies and in turn, to their users; Verizon Business customers will gain added global security resources to help with their company’s protection, and Cybertrust customers gain the comfort that Cybertrust will now have deeper resources and backing for their security efforts.

• Prospects should approach this merger with caution initially, as the combination of assets and organization arrangements could be disruptive in the short term until there is a comfortable strategy that has coalesced post-merger. Longer term, the global reach of Cybertrust along with the backing and other resources that Verizon brings to the table will provide a worthy consideration of MNCs.

• Customers using a pure-play MSSP should seriously consider the new combined global carrier-MSSP approach being spearheaded by BT, IBM, and now Verizon. On the one hand, these service providers become even further entrenched in their accounts – on the other hand, they provide more transparency and easier management combined with standards adherence to allow for migration back from an outsourced model to an in-house or co-sourcing model.

Top