News today that networking behemoth Cisco (CSCO) and antivirus vendor McAfee (MCAF) next month will ship firewall software puts new pressure on pure-play firewall vendors, industry and financial analysts say.
Although analysts think consolidation among firewall players is likely, the more likely trend seems to be that firewall vendors will disappear altogether as firms morph into broader security vendors.
"There's going to be some consolidation," said Michael Zboray, network security analyst with Gartner Group. "We saw an inkling of that when Cisco bought Global Internet.Com's Centri firewall." Cisco announced today that it will release a new version of Centri on September 1 under the Cisco brand, targeting smaller companies. (See related story)
Cisco entered the firewall market last year and, largely on the strength of its brand and its presence in major accounts, immediately claimed the No. 2 position with PIX, its hardware-based firewall.
"Cisco represents the first entrant from...outside the firewall market that could wreak havoc in the firewall business," International Data Corporation analyst Ted Julian wrote last month in his report on the 1996 firewall market and vendor market share. According to that report, Check Point Software Technologies (CHPKF) led the pack with 35 percent.
Like Cisco, which is best-known for its routers and networking software, leading antivirus software maker McAfee also is pushing into firewalls from its base in a related technology.
"It's a natural synergy with the rest of the company," Carolyn DiCenzo, Dataquest's worldwide director of client-server software, said of McAfee's entry into the low-end firewall market. "Security is a natural extension of McAfee's virus products and of its management [software] products."
DiCenzo emphasized the importance of good sales channels and an aggressive sales force. Increasingly, she notes the people buying antivirus software are also looking at firewalls.
Check Point understood that lesson early. Because it didn't have competitive access to clients, in 1995 it signed Sun Microsystems (SUNW) to resell Check Point's Firewall-1. It has since added IBM and PC maker AST Research to give it the best channels among firewall vendors.
"We're coming to the point where, particularly for the midrange market, what distinguishes vendors is support and distribution channels," said Gartner's Zboray, who points to Cisco and Microsoft (MSFT) as the biggest threats to the "traditional" firewall players.
"They have the potential, through partners or directly, to distribute a reasonably good firewall and give good support," Zboray added.
So far, Microsoft is just nibbling at the edges of the firewall space. Proxy Server 2.0 will perform some functions of full-service firewall software. But Microsoft is not positioning it as a firewall--yet.
IDC's Julian downplays Microsoft's near-term threat to what are considered the main firewall-oriented players. Check Point, Trusted Information Systems (TISX), Raptor Systems (RAPT), and Secure Computing (SCUR) all went public last year.
"Microsoft is inching closer to the firewall market with Proxy 2.0," Julian said. "Although its impact today is limited, the long-term implications are considerable."
The four firewall vendors are actively positioning themselves for a new competition, so any consolidation will probably come among vendors in the 34 percent of the market that still belongs to "others"--a number Secure Computing recently put at 90 companies. Some in that group are already repositioning themselves as virtual private network firms or in related security specialties.
Raptor, leader in the Windows NT space, has bundling deals with Compaq, which also owns a 7 percent equity share. TIS comes from a security consulting background and may pull back to that space.
Both Secure and Check Point want to broaden their portfolios to become security companies, not mere firewall vendors. Check Point is building a security "framework" called OPSEC (Open Platform for Secure Enterprise Connectivity), with itself at the center of more than 75 other vendors. It's also getting its firewall technology built into routers from Cisco rival Bay Networks.
New management at Secure, which has broadened its line through acquisitions of related security technologies, seems to have a handle on earlier difficulties integrating the technologies and companies.
But one Cisco official who helped buy the Centri firewall said virtually all firewall vendors are for sale too. The executive, who asked not to be identified, noted that Check Point's nearly $1 billion market valuation puts it out of the price range of most potential buyers.
Will firewalls be a lasting category in five years?
"Security is lasting category, and a firewall is an entry point into that marketplace," said John Powers, stock analyst at Robertson Stephens. "I don't know if firewalls will be a lasting category."
Market share leaders like Check Point will be consolidators, he predicted.
"It will probably be through a combination of acquisitions but also by simply less successful players drying up and going away," Powers added.