Verizon Business and McAfee Head for a Cloud Partnership

| Oct 9, 2009 | Managed IT Services | Competitive Update

| Analysts: Amy Larsen DeCarlo, Bernt Ostergaard

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

Event Summary

October 8, 2009 -- Verizon Business will offer McAfee’s entire line of enterprise security products and services, including PCI compliance services for Level 4 merchants (99% of all merchants) that present the greatest security risk, but also generate a third of all credit card transactions. McAfee has tapped Verizon Business’ data center outsourcing and expert consulting and managed services capabilities. Additionally, the companies will jointly develop a suite of next-generation, cloud-based managed security services.

Analytical Summary

• Current Perspective: Very positive on the announced strategic alliance between Verizon Business and McAfee aiming to deliver cloud security services to SMEs globally, because together both parties get a significant new market opportunity and provide a much stronger end-to-end proposition to customers.

• Vendor Importance: High to both McAfee and Verizon Business, as they strive to develop competitive OpEx-based SME security offers that can be rolled out globally. Verizon Business has the global network, deep enterprise security expertise, supporting security personnel, and extensive CPE resale program to be both a good partner for future cloud security development efforts and an excellent channel for the vendor’s products. McAfee brings an extensive catalog of solutions running the gamut from anti-virus software to global threat intelligence analysis as well as a strong presence in the small and medium enterprise segment.

• Market Impact: High on the global SME security market, because organizations in this high-growth segment are gravitating to the kind of cost-effective security-as-a-service offerings McAfee and Verizon Business plan to create.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Managed IT Services | More information

Recommended Competitor Actions

• Carriers with a McAfee partnership today, such as BT, should review this relationship as they develop their own SME cloud security services. There are several alternatives to McAfee. Selection criteria should include all-inclusive simplicity for both fixed and mobile users, a simple payment model, and good cross-selling and up-selling opportunities.

• Major carrier competitors should emphasize that this announcement initially is a simple resale deal between a carrier and an MSS pure-play. Furthermore, competitors should refer any inquiring customers to their own cloud service rollouts. However, it is important that the core established MSS-carrier security partnerships have a clear cloud migration roadmap. Carriers also need to review their ability to report and share cloud revenues with their partners; this is not a trivial task.

• IBM should downplay the alliance as a standard channel partnership. The company should emphasize the breadth of its own security expertise, as well as its ability to serve SME clients around the world using a mix of its own security technology and solutions from third-party vendors.

Recommended Competitor Actions

• Right now, this is a straightforward reseller deal, similar to many existing relationships on the market. Customers should focus on the cloud-based managed solutions that are being developed under the agreement to leverage Verizon’s managed security services platform, global IP infrastructure, advanced security operation centers, and expansive footprint of data centers as well as McAfee’s world-class security technology powered by its global threat intelligence. SMEs must question the companies about actual rollout schedules for these cloud services.

• Many SMEs know they have to adopt more and more cloud services, but hesitate partly due to complexity and partly due to the required internal reorganization. Cloud security services from a Tier-1 telco and a Tier-1 MSS provider allay some complexity concerns and can be introduced with little or no additional skills requirements.

• This announcement is good news for SME companies with PCI compliance requirements, shareholder concerns about corporate security and governance, and a CapEx squeeze. However, before signing up with the new venture, they should query their present carrier and their present security product providers about their cloud plans. As indicated above, the Verizon-McAfee tie up is in line with broader market trends, and we expect many competitors adopting similar business models.

• In particular, SMEs with international activities should sit up and take note. Here is a strong global carrier, with hitherto limited SME relations outside its U.S. home market, partnering with a very familiar SME security provider to offer well-known security services across most global markets. This is a great entry point for a longer-term relationship.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Managed IT Services | More information

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