2006 Shaping Up As A Good Year For Security Vendors

Thanks in part to government-compliance regulations and increasingly sophisticated identity thieves, 2006 should be a good year for security solution providers and vendors.

Regulations from the Federal Financial Institutions Examination Council (FFIEC) will require banks and financial institutions to adopt some form of two-factor authentication technology for online financial transactions by the end of 2006. This, along with other compliance issues, such as HIPAA privacy regulations, is fueling steady growth, security VARs said. VARs are benefiting through increased sales of two-factor authentication solutions, mostly with tokens, said Paul Adamonis, manager of security technology solutions at Forsythe Technology, a solution provider in Skokie, Ill. The company is projecting a 20 percent increase in its security sales for 2006, Adamonis said.

Compliance-regulation audits also are providing growth for security solutions in data and vulnerability management, said Tom Tucker, president of Akibia, a Westborough Mass.-based solution provider. “You have to accumulate all that data. How do you manage that?” Tucker said.

Jon Fisher, CEO of Santa Clara, Calif.-based online authentication vendor Bharosa, said he expects a 50 percent increase in revenue from the company’s financial services customers in 2006 because of the deadline for the FFIEC regulations.

And while VARs are anticipating increased sales in security solutions to financial services customers, they are not the only sectors that need solutions to comply with new privacy regulations, Tucker said. Health-care providers and even higher education customers now need better security to protect sensitive data, he said.

“We’re seeing quite a bit of activity with schools and higher education. They have a lot of data that needs to be secure,” Tucker said. Akibia’s sales in security-related products and services, including compliance consulting, should increase by about 20 percent to 25 percent in 2006, Tucker says.

Aside from compliance regulations continuing as a major catalyst for increased sales of security solutions, the need for added layers of security also will drive growth this year, said Mike Meyer, channel partner manager at Fortress Network Security, a solution provider based in Louisville, Ky. “People are more aware of security issues, but now they are saying, ‘Hey, I need to add an extra layer.’ It used to be that you had to sell the idea of security, [but] not anymore,” Meyer said.

With the cost of other security products dropping, such as two-factor authentication tokens, security solutions that previously were out of reach will become affordable for SMB customers, leading to strong growth in that market as well, Myer said.

“Packages for 25-user environments used to be very expensive for small businesses. Now, you can hand out smart cards and tokens to all employees,” he said.

Monte Robertson, president of solution provider Software Security Solutions in Lakewood, Colo., said he expects to see more consolidation among vendors in 2006, specifically among companies that only make antivirus and antispyware software. By themselves, they will have a hard time competing since customers are demanding more features in a single product suite.

Other VARs agree. Brian Moody, vice president of sales and business development for San Jose, Calif.-based Computer Media Technologies, sees the same trend in consolidation, such as Symantec’s recent acquisition of IMlogic, which provides security and access controls for public instant-messaging clients.

“Customers want a unified product. That’s the key,” Moody said.