The worldwide market for NAC appliances dropped 32 percent from the third to fourth quarters of 2008, and then another 7 percent in the first quarter of this year, according to a recently released report by Infonetics Research. The dramatic drop in revenues for NAC appliances overshadowed declines in other network security sectors, including VPN/firewall/UTM, IDS/IPS, and SSL VPNs, according to the research firm.
Infonetics says the NAC appliance market, which was at $48 million in this year's first quarter, dropped from $52 million in the fourth quarter of 2008, and $76 million in the quarter before. Much of the decline has had to do with NAC's biggest customer, financial services, taking a big hit in the economic crisis, according to Infonetics.
But that doesn't mean NAC appliances are dead, says Jeff Wilson, principal analyst for network security at Infonetics. "NAC is a small market that is still fairly heavily dependent on financial services money -- due to their regulatory concerns -- so while the drop was bad, it was very temporary," Wilson says. "The lack of IT budgets for 2009 and January and February exacerbated the problem."
Infonetics says the NAC appliance sector will begin to recover next year, reaching close to $700 million by 2013. Wilson says NAC will rebound because the technology's drivers remain. "The fundamental forces driving users to deploy NAC are still very much in place: regulations, proliferation of threats, increasing distribution of network resources, and use of untrusted devices to access network resources," he says.
NAC has had its struggles during the past year. Wilson says it's possible a NAC-specific vendor or two could be shuttered or become acquired given the current economic climate. Stand-alone NAC vendors have been working on diversifying their customer base beyond financial services, education, or retail, and expanding into security services, Wilson says. "Federal government has been fairly strong, [as well]," he says. "They've also all tightened their belts, cutting unnecessary spending to get themselves in a better financial position to last until late this year when things start to turn around in a big way."
StillSecure, which sells NAC software, acquired a managed security services firm in February. Today, StillSecure's NAC business, which is mostly federal government customers, makes up about half of its business, and the rest, its IPS and managed services offerings. "I see all security going into the services [space]," says Alan Shimel, chief strategy officer for StillSecure. "I think that for many [organizations], security technologies are increasingly complex to manage and administer, especially in tough economic times. They don't have the resources to do it well, so they outsource it."
Shimel says the NAC market's appliance sector has also suffered from the maturity of the market -- vendors like Cisco and Juniper are building NAC into their networking products, and endpoint vendors like McAfee, Sophism, and Symantec are building it into their host-based security tools, for instance. "The appliance-based model gets squeezed on two ends -- on the infrastructure side and the endpoint," he says.
So what will spur NAC appliance sales to rally next year? Infonetics' Wilson says it will be "pent-up spending" that was put on hold this year, as well as NAC standards, will give it a bump. "The IETF is getting closer to developing some standards for NAC, which is really a much-needed process," he says. "I doubt there will be standards-based products outside of supporting 802.1x, which is already an established standard, but the specs that they're working on based on Trusted Computing Group specs will be much more solid."
Still, the decline in NAC appliance revenues this past year was no surprise, he says. "We weren't surprised by the results, and none of the smaller vendors were in panic mode because, frankly, most vendors selling NAC realize that they're dealing with a complex, multiyear solution sale," Wilson says. "The people still in the business are in it for the long haul and had already made some necessary adjustments to their businesses when the market didn't explode in '07 or '08 as some had predicted."
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