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Security vendors have reason to fear Microsoft

Security specialist Jon Oltsik says the consumer security market is about to permanently change.

Consumer Internet security once was a choice between chocolate and vanilla.

Yes, there were plenty of products available, but Symantec's (Norton) yellow and McAfee's red boxes were always front and center at computer, electronics and office-supply stores and ultimately dominated the market. Each year, a secondary player like CA, F-Secure, Panda or Trend Micro would get a bit of shelf space and try to upset market dynamics with lowball pricing, but this tactic never really worked; Symantec and McAfee remained at the top of the heap.

Fast-forward to today. Everything is about to change simply because Microsoft is jumping into the consumer security fray. The software giant has begun selling its OneCare Live consumer security service, an offering that contains security, backup and system tuning tools.

Microsoft's deep pockets, relationships and experience mean that it is sure to upset what once was a cozy little market.

Why is Microsoft's entrance into the market different than past efforts? First of all, the company won't be a wallflower at this party. Expect a toned-down Windows 95-type launch where Gates and Co. spend tens of millions on promotion and advertising.

Second, Microsoft isn't a newcomer when it comes to retail sales. It can put together all sorts of programs and incentives to gain shelf space and cajole consumer electronics sales specialists to move boxes. Finally, Microsoft can throw its weight around in its OEM (original equipment manufacturer) channel. While Dell and Hewlett-Packard won't give Symantec and McAfee the heave-ho, it is likely that PC vendors will bundle Microsoft OneCare Live and leave it to consumers to choose one solution over another.

There is no doubt that Microsoft will alter the consumer security market status quo. The company will likely go from 0 percent to at least 20 percent market share in its first full year of sales. This growth will be based purely on marketing gimmicks and visibility.

In terms of the competition, Microsoft won't "Netscape" the existing consumer security guys by giving away security services and put them out of business. There is too much antitrust risk to this strategy, and besides, there is a lot of dough to be made in security. Microsoft never leaves money on the table.

Nevertheless, Symantec and McAfee will have to learn to live with lower margins, while other marginal consumer players may see their limited shelf space erode entirely. They are the most likely losers here.

Ironically, the biggest winners in all of this market wrangling are the consumers themselves. It's a given that Microsoft will force others to lower their pricing, but the more meaningful outcome of Redmond's market entry will be increased functionality and innovation. Symantec and McAfee are already talking about next-generation security services that bundle in consumer tools such as system tuning, intrusion prevention and identity protection, along with often ignored but essential services like PC backup.

The two companies have no choice but to remain a step or two ahead of Microsoft at all times.

The whole security services battle also opens the market to an entirely new constituency: consumer electronics and networking vendors. While the upcoming Microsoft/Symantec/McAfee battle has garnered all the headlines, consumer networking bigwig D-Link quietly introduced its SecureSpot product, a killer security services gateway device that moves security into the network and does away with the fuss around software installations, disk space utilization and desktop configuration. Like the others, D-Link knows low-cost manufacturing, retail sales and global distribution.

Microsoft's deep pockets, relationships and experience mean that it is sure to upset what once was a cozy little market. Unlike the operating system market where the company towers over the competition, however, Microsoft will eventually be forced to compete on the quality of its product against rivals. This gives everyone a fighting chance and guarantees that consumers will have better security products in the future.