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A Discussion of the Cyberoam Opportunity for UTM Globally and MEA

A Discussion of the Cyberoam Opportunity for UTM Globally and MEA. Presented to Cyberoam February 13, 2011 James Brehm, Senior Consultant. Table of Contents. 1. Introduction

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A Discussion of the Cyberoam Opportunity for UTM Globally and MEA

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  1. A Discussion of the Cyberoam Opportunity for UTM Globally and MEA Presented to Cyberoam February 13, 2011 James Brehm, Senior Consultant

  2. Table of Contents 1. Introduction 2. Overview of the MEA Business Environment and Corresponding Security Landscape (high level discussion of security technologies - endpoint/UTM/SSL VPN/FW/etc) 3. UTM Market Size and Trajectory a. UTM Market Size (Global Market Size as compared to MEA Market) b. Growth rate / trajectory c. Drivers and restraints d. Opportunities, challenges and threats 4. Competitive Landscape (Global as compared to MEA Market) a. Competitive Positioning b. Position Direction c. Discussion of Global Market Share and Regional Tendencies 5. Cyberoam's Future Positioning? 6. Conclusions 7. Q&A

  3. Who is Frost & Sullivan • The Growth Consulting Company • Founded in 1961, Frost & Sullivan has 50 years of assisting clients with their decision-making and growth issues. • Over 1,500 Growth Consultants and Industry Analysts across 40 global locations • Over 10,000 clients worldwide - emerging companies, the global 1000 and the investment community • Developers of the Growth Excellence Matrix – industry leading growth positioning tool for corporate executives • Developers of T.E.A.M. Methodology, proprietary process to ensure that clients receive a 360o perspective of technology, markets and growth opportunities • Three core services: Growth Partnership Services, Growth Consulting and Career Best Practices

  4. Global Perspective • 1,500 staff across every major market worldwide • Over 10,000 clients worldwide from emerging to global 1000 companies

  5. What stage is the MEA Network Security market in right now?

  6. If the Security Market were the World Cup Tournament, What Round are we In?

  7. We’re Still a Long Way from Maturity

  8. Where are we today and why has it taken so long?

  9. Industry Conflict, Emerging Threats, Changing Market…

  10. Business Environment and Vertical Market Discussion

  11. First We’ll Look at the Global Market

  12. Then We’ll Focus on Regional Implications

  13. Methodology – (ISC)2 Members Survey A total of 7,547 (ISC)2 members were surveyed during the Fall of 2010 by Frost & Sullivan. The table below shows the sample size by region.

  14. Methodology – Non-Members Survey A total of 2,866 non-members were surveyed during the Fall of 2010 by Frost & Sullivan. The table below shows the sample size by region.

  15. (ISC)2 Members SurveySalary Increase or Incentive in 2010 by Region • Three out of five (ISC)2 members received a salary increase or incentive in 2010 and 33% had no change in their salary or benefits. • More members in the Americas reported a lower salary increase of up to 5% and 39% of members in EMEA reported no change in salary or benefits. Salary Increase or Incentive by Region Q46a) Did you receive a salary increase, including benefits and incentives, in 2010? Base: All member respondents (n=7547).

  16. Non-Members Survey Salary Increase or Incentive in 2010 by Region • Three out of five non-members received a salary increase or incentive in 2010 and 35% had no change in their salary or benefits. • More non-members in the Americas reported a lower salary increase of up to 5% and 42% of non-members in EMEA reported no change in salary or benefits. Salary Increase or Incentive by Region Q46a) Did you receive a salary increase, including benefits and incentives, in 2010? Base: All non-member respondents (n=2866).

  17. Half of Organizations Using Cloud Computing Services • The use of cloud computing services by organizations does not differ significantly between members and non-members. Cloud Computing Services Q. 10. Does your organization currently use any of the following services? Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866).

  18. New Skills Required for Cloud Computing by Region New Skills for Cloud Computing by Region • For (ISC)2 members and non-members that said cloud computing requires new skills, the top two skills that are required are a detailed understanding of cloud computing and enhanced technical knowledge. • There is no significant difference by region in regards to the skills required. Q. 12b) What skills will be required of information security professionals for dealing with cloud computing? Select as many as apply. Base: All member and non-member respondents who answered (n=7744). Note: Multiple mentions.

  19. Security Concerns of Cloud Computing • Both (ISC)2 members and non-members have the same concern regarding the exposure of confidential information, sensitive data loss and weak systems. • Non-members have greater concern about cyber attacks and disruptions that affect the operation of the data center. Security Concerns of Cloud Computing (Top and High Concern) 11. Thinking about the different security aspects of cloud computing as a general service, how much of a security concern is each of the following for your organization? Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866).

  20. ¾ Require New Skills for Cloud Computing by Region • Just under three quarters of (ISC)2 members said that cloud computing requires new skills for security professionals. • By region, four out of five in APAC said that cloud computing requires new skills with 71% from the Americas and 73% in EMEA. New Skills for Cloud Computing Services by Region Q. 12a) In your opinion, does cloud computing require information security professionals to develop new skills not previously required? Base: All member respondents (n=7547).

  21. 1/3 Have No Formal Policy for Unmanaged Mobile Device Usage • Seven out of 10 (ISC)2 members said their organization has a formal policy for unmanaged mobile devices compared to 64% of non-members. • By region, members were more likely to indicated their organization has a formal policy in place than non-members. Formal Policy for Unmanaged Mobile Device Usage by Region Q. 33. Does your organization have a formal policy covering unmanaged mobile device usage? Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866).

  22. Half Consider Social Media Important • Non-members place greater importance on the use of social media tools for information security than members. • Both members and non-members in APAC place the highest importance on social media tools. Importance of Social Media Tools by Region Q. 37. How important is the use of social media tools to you as an information security professional? Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866).

  23. (ISC)2 Members SurveyPotential Security Threats For Their Organization • Security threats related to application vulnerabilities, mobile devices, internal employees and virus attacks are of the greatest concern reported by (ISC)2 members. • Organized crime, cloud-based services, cyber terrorism and contractors are not as great a concern to members. 27. Thinking about your own organization, please rate the following potential security threats on the degree of concern you have for each. Base: All member respondents (n=7547). Note: Percentages less than 5% are not displayed.

  24. (ISC)2 Members SurveyPersonal Use of Sites During Work Hours • Two thirds of (ISC)2 members said that employees are allowed to access LinkedIn during work hours. • Just over half reported that personal use of blogs and Facebook is allowed during work hours. Q. 35a) Which of the following are employees allowed to access for personal use during work hours? Select as many as apply. Base: All member respondents (n=7547). Note: Multiple mentions.

  25. (ISC)2 Members SurveyImportance of Social Media Tools by Region • Only 12% of (ISC)2 members consider the use of social media tools as very important for information security. • Members in APAC place greater importance on social media tools than members in the Americas and EMEA. Importance of Social Media Tools by Region Q. 37. How important is the use of social media tools to you as an information security professional? Base: All member respondents (n=7547).

  26. (ISC)2 Members Versus Non-Members 2010Growing Demand for Training (Top 8) • A higher proportion of members reported a growing demand for training in information risk management and security architecture and models than non-members in 2010. Non-members have a greater demand for access control systems training than members. Q. 25. In which areas of information security do you see a growing demand for training and education? Select as many as apply Note: *New category in 2010 GISW Survey. Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866). Note: Multiple mentions.

  27. (ISC)2 Members Versus Non-Members 2010Growing Demand for Training (Next 8) • There is greater demand for security administration training for non-members than members. This is likely a result of non-members being more junior than (ISC)2 members. Q. 25. In which areas of information security do you see a growing demand for training and education? Select as many as apply Note: *New category in 2010 GISW Survey. Base: All 2010 member respondents (n=7547). Base: All 2010 non-member respondents (n=2866). Note: Multiple mentions.

  28. Enterprise Security Overview Security is a Complex Universe UTM

  29. Vertical Markets and IT Processes Network Security Users, End Points, Devices, Sensors, and Controllers

  30. Key Vertical Markets Globally Financial • This segment includes securing financial services entities such as banks, credit unions, insurance, and brokerage firms. • This segment includes federal, state, and local government purchases for government agencies, military, and defense projects. • This segment includes hospitals, pharmaceutical companies, clinics, and other medical facilities. • This segment includes companies involved in manufacturing, engineering, and industrial design. • This segment includes telecommunications carriers and service providers. • The others category is comprised of customers across many vertical markets such as retail, media, education, hospitality, and utilities. Government Healthcare Manufacturing Telecommunications & Technology Others

  31. Vertical Market Distribution Total UTM Market: Revenues by Vertical Market (World), 2009 As is typical, the financial and government markets are the leading vertical markets in the security industry. These markets continue to account for a large amount of UTM sales, combining for 29.8 percent of market revenues. The “others” category accounted for 30.6 percent of the market, indicating that the UTM market is very vertical independent and is in demand across industry sectors. The telecommunications and technology sector accounted for the largest share of UTM sales at 18.7 percent, led by sales to communications carriers and service providers. Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  32. MEA Vertical Market Distribution UTM Market: Revenues by Vertical Market (MEA), 2009 The telecom and energy sectors continue to be fueled by consumer demand. We expect they will continue to grow for the next few years. The “others” category accounted for the largest percentage at over 30 percent of the market, indicating that the UTM market is very vertical independent and is in demand across industry sectors. Education and Awareness are keys to winning “others”. As is typical, the financial and government markets are two of the leading vertical markets in the security industry. These markets continue to grow, however are nearing maturity. Source: Frost & Sullivan

  33. Vertical Market Distribution Forecasts (Contd...) Total UTM Market: Revenue Forecasts by Vertical Market (World), 2006-2016 Others include: Education, Hospitality, Retail, and Utilities Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  34. Market Size and Trajectory Drivers, Restraints, Opportunities and Threats

  35. Market Overview Market Overview Research Methodology Unified Threat Management (UTM) technology emerged around 2004 as a solution that could uniquely meet many challenges plaguing network administrators and security teams. UTM integrates several security functions, such as network firewall, network intrusion prevention, gateway antimalware, gateway anti-spam, VPN, content filtering, and load balancing, into a single network appliance. This provides customers with complete, affordable, effective, and easily managed security. The UTM market has grown significantly over the years as the demand for integrated security has increased, offset primarily by the ability of point solutions to provide deeper functionality and high performance. • This research service tracks and forecasts unit shipments and revenues from sales of UTM solutions. • The base year is 2009, and the forecast period is for 2010 to 2016. • Vertical markets covered include financial, government, telecommunications and technology, manufacturing, healthcare, retail, utilities, media, hospitality, and education. • The UTM market is segmented horizontally by small office/home office (SOHO), remote office/branch office (ROBO), small and medium-sized businesses (SMB), and enterprise. • Geographic regions covered include North America, Asia Pacific (APAC), Latin America, and Europe, the Middle East, and Africa (EMEA).

  36. Market Overview (Contd…) Product Definition Deployment Options • To avoid double counting of revenues, only product sales from the original solution provider will be counted, including OEM product licensing to other companies. • To qualify for inclusion, the solution must be a single appliance that offers multiple network security functions. • UTM vendors offer various security applications in their solutions, but at a minimum, solutions should include firewall, IPsec VPN, and intrusion prevention capabilities. • UTM vendors offer modular security applications to extend the capabilities of the core product as the customer requests. • Network appliances are the preferred method of sale for UTM solutions. This solution is relatively easy to deploy and manage. • Some UTM vendors offer a software version of their product via ISO image or other physical media. These solutions allow customers to deploy the product on their own choice of hardware. This method of deployment is counted as a unit sale in this report. • Select UTM vendors offer a virtual UTM appliance based on VMware.

  37. Market Engineering Measurements, Analysis, and Trends Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  38. Market Engineering Measurements, Analysis, and Trends(Contd...) Market Stage Price Sensitivity The UTM market has been in a stage of high growth. During the difficult economic climate of 2009, UTM vendors showed double digit growth rates. For many large vendors, the growth of UTM product lines offsets losses in other areas. Although growth was diminished compared to previous years, the market is expected to rebound with strong growth rates in the near future. UTM products range from $300 for SOHO/ROBO solutions to $16,000 for large enterprise customers. The average sale price for UTM products in 2009 was $6,868, due primarily to the large number of small and medium-sized businesses. Customers in the SMB range are most price sensitive, while large enterprise customers focus more on overall value than price. Competitor Market Entry/Exit Market Concentration The integrated security strategy is an important one for many vendors, and market exits are rare. 3Com discontinued its UTM product line, as did a small niche participant, freedom9. Overall, the market size has been very stable at 40+ competitors. There are many niche vendors that focus solely on providing UTM products. These vendors have steadily grown in market share over the years. Despite this growth, the top five competitors still accounted for 51.3 percent of market revenues in 2009.

  39. Market Size and Forecasts (Contd...) Total UTM Market: Revenue and Unit Shipment Forecasts (World), 2006-2016 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan In 2009, UTM vendors shipped 287,100 products, earning $1,978.1 million in revenues. This is forecasted to reach $7,009.1 million in revenue by 2016, representing a healthy compound annual growth rate (CAGR) of 19.9 percent.

  40. Market Size and Forecasts (Contd...) Total UTM Market: Revenue Forecasts (World), 2006-2016 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan The UTM market generated revenues of $1,971.8 million in 2009. This market was characterized by high growth rates before 2009, such as a 32.2 percent growth rate in 2008. However, due primarily to economic recession, the growth rate dropped to just 20.1 percent in 2009. As the market rebounds,growth rates are expected to increase in 2010 and 2011, before leveling off.

  41. Market Metrics Key Highlights Total UTM Market: Sales by Customer Size (World), 2009 • UTM vendors have traditionally targeted SMB and SOHO/ROBO networks. In 2009, these segments accounted for 53.6 percent market revenues. Total market revenues are expected to shift towards the enterprise market, as UTM products improve in functionality and reliability. • The cost effectiveness of UTM solutions is the primary reason for the market’s focus on the SMB segment. • Enterprise customers with large but distributed networks often invest in UTM solutions for their cost effectiveness and ease of management. This is common with customers in the retail and hospitality industries, but can apply to any enterprise organization with remote offices and branch offices. • The largest deployments are in the telecommunications vertical with carriers who need to secure their own data center or to service providers who want to protect their clients’ data. • However, a select few UTM vendors are able to meet the demanding performance needs of these customers. Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  42. Market Metrics (Contd...) Key Highlights Total UTM Market: Sales by Distribution Method (World), 2009 • With 93.7 percent of revenues coming from the distribution channel, most vendors can identify a direct correlation between their growth and their ability to find effective value-added resellers (VAR) and systems integrators (SI) to partner with. • VARs and SIs must deal with many different solution providers. This can confuse sales teams and increase overhead costs. Channel partners have embraced UTM solutions because these solutions reduce the number of total supplier partners. • In the UTM market, direct sales are typically reserved for the largest customers due to the high volume of sales. Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  43. Market Dynamics Total UTM Market: Market Drivers and Restraints with Timeframe (World), 2010-2016 Shift Towards Consolidated Solutions Regulatory Compliance High Penetration into Enterprise Market Evolution of Enterprise Network Environments Improved Services Capabilities Network Infrastructure Upgrade and Replacement Cycle Impact Market Drivers Low Short Term Mid Term Long Term Low Market Restraints Currently Deployed Network Security Applications Customer Budgetary Constraints Impact Customers are Past the Hype Stage Point Solutions Outperform Consolidated Solutions Lack of Acceptance in the Enterprise Market High High Source: Frost & Sullivan.

  44. Impact of Industry Challenges with Timeframe Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  45. Analysis of Industry Challenges Capitalize on Economic Recovery Offer Best-of-Breed Functionality The information security industry has proven to be very resilient in the harsh economic climate of 2009, and UTM vendors reported growth for the year. Limited IT budgets swayed interest away from expensive point productsand towards cost-effective UTM solutions. This interest will carry over into 2010, but vendors must be prepared to compete against best-of-breed solutions as well. A critical area of improvement for UTM vendors is in product performance. Customers will not value a product that cannot provide effective security. UTM’s value proposition lies in its ability to integrate a wide breadth of security applications. However, customers will value best-in-class security functionality the most. Vendors cannot take a check mark approach to security. Target the Appropriate Customer Base Focus on Next Generation Technologies As simple as it may sound, many SMB-focused UTM vendors are attempting to penetrate the enterprise market while enterprise-focused vendors are planning for the SMB. The requirements for the two segments are vastly different, and few UTM vendors have truly succeeded in both. Vendors are cautioned to weigh the costs of attempting this expansion. Few UTM vendors have developed a strategy that incorporates virtualization or managed services. Identifying these future trends and capitalizing on them will greatly improve a company’s share of the total market.

  46. Regional Revenue Distribution Total UTM Market: Revenues by Geographic Region (World), 2009 Key Highlights • Adoption of UTM products has been very strong in the North America region. This area accounted for 45.3 percent of market revenues in 2009. • Currently, large multinational security and technology companies are prime contributors to growth in the Asia Pacific (APAC) region. • Europe, Middle East, and Africa (EMEA) contributed 36.4 percent of total market revenues. This region was led by UTM vendors headquartered in the developed countries of Western Europe. • Latin America is still developing as a suitable market for UTM vendors with 1.8 percent of total market revenues. Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  47. Regional Revenue Distribution Total UTM Market: Revenues by Geographic Region (World), 2009 Key Highlights • Adoption of UTM products has been very strong in the North America region. This area accounted for 45.3 percent of market revenues in 2009. • Currently, large multinational security and technology companies are prime contributors to growth in the Asia Pacific (APAC) region. • Europe, Middle East, and Africa (EMEA) contributed 36.4 percent of total market revenues. This region was led by UTM vendors headquartered in the developed countries of Western Europe. • Latin America is still developing as a suitable market for UTM vendors with 1.8 percent of total market revenues. MEA equates to 7.3% of global sales Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  48. Europe, Middle East, and Africa: Unit Shipments and Revenue Forecasts Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  49. Europe, Middle East, and Africa: Unit Shipments and Revenue Forecasts (Contd...) UTM Market: Revenue and Unit Shipment Forecasts (Europe, Middle East, Africa), 2006-2016 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

  50. Europe, Middle East, and Africa: Market Summary The Europe, Middle East, and Africa (EMEA) region includes many highly developed countries such as the United Kingdom, Germany, France, and Israel. Many European organizations are showing interest in UTM because of international regulations and the importance of telecommunications for commercial activities. Newly industrialized countries such as Turkey and South Africa are also contributing to UTM sales in EMEA. UTM solutions have gained much traction in the EMEA region, led by highly developed countries such as the United Kingdom, Germany, and Israel. UTM product sales in EMEA generated $717.7 million in revenues in 2009. For the year, the EMEA region accounted for 36.4 percent of total UTM market revenues. This market is forecasted to grow to $2,579.4 million by 2016, representing a strong calculated annual growth rate of 20.1 percent. The EMEA share of the UTM market will gradually increase to 36.8 percent by 2016.

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