Sophos: Position for Growth or Sale?

Sophos channel chief Chris Doggett is quite happy about the recent string of
announcements by his larger competitors and near rivals. Symantec, McAfee and
others have started offering incumbency protection on software license
renewals, incentives for capturing net-new customers and margin protection. And
he thinks Sophos deserves credit for conceiving those programs and bringing
them to the channel long before other security software vendors.

What do the competitors think about that? So what, since Sophos won’t be
here next year? Or at least that’s what some in the security community would
have you believe. For several months, there’s been a low but consistent buzz
that Sophos is looking to exist in the market through an acquisition by a
larger IT vendor—and presumably not a security company. Prime candidates for a
takeover: Cisco, Hewlett-Packard and perhaps EMC,
each of which lacks antivirus as part of their security portfolios.

Supporting that notion is Sophos’ recent string of alliances and
partnerships in which it’s giving away applications to expand market share.
Over the last six months, it’s struck deals with HP to give away free versions
of its software with Integrity servers and it’s bundling for free its homegrown
data loss protection with its antivirus applications. Presumably, Sophos
launched these initiatives to accelerate market share and undercut Symantec and
McAfee. However, critics say this is also a cheap ploy to create the sense of
momentum in advance of a sale.

Every security vendor is taking aim at market leaders Symantec (No. 1) and
McAfee (No. 2). Typically, smaller security vendors will name a third vendor
that they’re targeting, which is usually the one they have the best chance of
displacing. The third vendor is also—in many cases—the one that has the greater
relevancy in competitive context.

Sophos has always been a strong contender in the security race, but in
recent months its name is being mentioned less often as a competitive target.
For instance, when Panda Security launched its cloud strategy last month, it
listed Symantec, McAfee and CA as the primary targets. In briefings with
channel partners, McAfee talks about challenging Symantec and holding back
Kaspersky Lab. And Kaspersky Lab is positioning itself to take a run at Symantec,
McAfee and Trend Micro. Sophos is conspicuously missing from these talks.

Doggett was genuinely surprised to hear that the competition is dismissive
of Sophos and is speculating about its imminent demise. In fact, he thinks
Sophos is in the best position to benefit from the economic recovery. And he
says that company continues to grow at the expense of market leaders. He points
to IDC data on corporate endpoint security:
Sophos expanded deployments by 34 percent, where Symantec loss 1 percent and McAfee
grew at a respectable albeit smaller 6 percent. 

“Symantec is easy lunch money for the taking,” Doggett jokes.

Another measure of Sophos’ health and strength is its partner satisfaction
and competitive overlap in the channel. In internal surveys, solution providers
give Sophos a 90 percent approval rating for doing a good job in the channel.
And, Doggett says, the company has seen its partners dropping Symantec (10
percent year-over-year decline) and McAfee (down 9 percent).

Doggett recounts that Sophos had plans to go public in 2008, but scrapped
its IPO as the economy was turning south. It was more about the softening
market than the health of the company, he says.

As the economy continues to gain strength, Doggett says Sophos is in a
better position to capitalize on emerging opportunities in endpoint security,
data loss protection and encryption. Because it hasn’t scaled back on channel
capacity and support, he believes Sophos will continue to grow and win
competitive deals with its partners.

“We’re in a stronger position than we’ve been in the last year and prior
years, and we’re in a strong position to take advantage of the recovery,”
Doggett says.

Many people are now saying that security is hot again. The need to protect
increasingly mobile data, cloud-based applications and virtualized environments
is driving the need for security. Economic expansion, as we’re anticipating in
2010, will draw new IT investments that drag security spending. Undoubtedly,
increasing demand for security will spark a series of acquisitions by major
vendors, which continue to invest in their security capabilities. Whether
Sophos will be part of that next wave of acquisitions remains to be seen.

Lawrence M. Walsh is vice president and group publisher of Channel Insider. Click
here to read his blog, Secure Channel, for
the latest insights on security technology and policy trends affecting solution
providers. 

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