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IBM Merger Gets Mixed Responses

Raise prices? Win more outsourced security? IBM-ISS deal leaves many wondering what Big Blue will do with its new prize

More than 24 hours after IBM unveiled its $1.3 billion acquisition of Internet Security Services (ISS), IT managers and other experts are still puzzling and debating about its potential impact.

IBM shook the security market yesterday with its purchase of ISS, one of the industry's oldest and best-known independent security vendors. On the press conference call, IBM executives focused most of their attention on the integration of the two companies' managed security services offerings. (See IBM Up-Ends Security Services Market.) But even after a day of mulling it over, those familiar with the two companies couldn't reach a consensus on how the merger will change the complexion of enterprise security environments.

"Since the deal doesn't officially close till October, they aren't telling us much," says Joe Bajek, director of IT at University of Colorado Hospital, a user of the ISS managed security services. "IBM has a lot of strengths in the research and development space, so that could mean new features," Bajek says, adding that he's a bit concerned about potential pricing changes. "If they price it in such a way that we can do it more cheaply through another vendor, or do these things ourselves, then it could jeopardize our relationship with them."

While enterprise IT pros awaited more information, industry analysts debated the impact of the industry splash. "I believe this acquisition was driven by ISS' strong services business," says Richard Stiennon, founder of IT-Harvest, an IT consulting firm. Like many other experts, Stiennon believes that IBM will use the new ISS resources to make a play to become the security outsourcing vendor for many large enterprises. He cites recent acquisitions by other security service providers, such as VeriSign and Symantec, as evidence that the market is shifting toward a security-as-a-service model.

But Paul Stamp, a security analyst at Forrester Research, offers a different view. "IBM already has a strong managed security services business," he says. "ISS may help give it some traction with companies that don't think it has security expertise, but you don't spend over a billion dollars just for that."

Stamp believes that even though ISS is being placed into IBM's services unit, its technology will be integrated throughout the Big Blue product line. "IBM has good solutions in identity management and security monitoring, but it really didn't have traditional threat protection technologies until now," he observes. "ISS really allows it to plug the gaps in its security offerings across the board."

Many observers doubt whether large enterprises will be willing to outsource their security services, but Stamp doesn't agree: "About one third of organizations across the globe already outsource some aspect of security." Many of the outsourcers are in Europe, and the trend is only just beginning in the U.S. "It's tracking to about the same percentage as the overall IT outsourcing market," he says. "In fact, security has become table stakes among IT service providers."

The ISS acquisition does indicate a general shrinking of the security market, analysts agree, but it doesn't necessarily mean the end of the road for security point-products. "Today, there is one less vendor, but last week, IT-Harvest added 17 vendors to its list of security product companies, and that brings the total to 867," Stiennon says. "This acquisition is a sign that the security market is becoming large enough to attract the attention of big players and big money. That's not consolidation."

— Tim Wilson, Site Editor, Dark Reading

  • IBM Corp. (NYSE: IBM)
  • IBM Internet Security Systems
  • IT-Harvest Inc.
  • Forrester Research Inc.
  • VeriSign Inc. (Nasdaq: VRSN)
  • Symantec Corp. (Nasdaq: SYMC) Tim Wilson is Editor in Chief and co-founder of Dark Reading.com, UBM Tech's online community for information security professionals. He is responsible for managing the site, assigning and editing content, and writing breaking news stories. Wilson has been recognized as one ... View Full Bio

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