SecureData grows through managed security services

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1 SecureData grows through managed security services How has SecureData grown its managed services business? SecureData has invested heavily in training and recruiting skilled security professionals to provide 24-hour support to its customers SecureData adopts a pragmatic approach to security, offering a robust end-to-end strategy It differentiates itself by its ability to combine its own security solutions with those of its technology partners to create offerings that are tailored to its customers unique needs As businesses become more open to outsourcing some of their IT needs, channel partners have started to move away from relying solely on a volume-based product sales model to offering consultancy and managed services to capitalize on the opportunity. While this business model offers higher margins and provides a source of more predictable recurring revenue for partners, the transition requires a lot of investment and strategic changes to ongoing business processes. In the enterprise security market, SecureData stands out as a partner that has invested in this opportunity by transforming into a managed security service provider (MSSP). Investing in its people and technology SecureData was founded in 1992 and is based in the UK with a presence in Europe, Africa and the United States. It was initially a value-added reseller (VAR) of enterprise security products. In 2002, it made the decision to move into services, which it believed would evolve to become a significant part of the IT industry as a product-based approach could not solve all of a customer s problems. It started by building an approach that was primarily product-led, but began to wrap services around its offerings. It accepted early on that it could not build an effective services business without taking a short-term dip in profits. It began to gradually build a services business, one contract at a time. It grew its monthly customer contracts and also began to work with systems integrators, such as CAP Gemini, Atos and BT, which resell its specialist security services. This indirect approach accounts for approximately 25% of its business. Three years ago, SecureData decided to put services at the front of its business, with products providing the underlying platform. It has developed a successful service-led business model by developing its own services, which are layered over the technology of its vendor partners. Today, managed services account for 46% of its total revenue, with consultancy 26%, product revenue 16% and solutions support 12%. This is a major shift from previously being primarily product-revenue driven. The company has seen good growth since its inception, with a turnover of about US$41 million for financial year 2014, representing growth of 30% year on year. SecureData obtained the backing of investment firm August Equity in 2012, which has helped it expand geographically and also enabled it to make acquisitions.

2 To grow its managed services business, investments have been made in two key areas: people and backend technology. Of its 129 employees, 70% are security professionals, including 30 security architects and around 60 certified technical experts. Its technical experts are distributed across two Security Operations Centers (SOCs) located in the UK to provide 24/7 customer support. With 70% of its employees being security professionals, it has shown that it is focused on ensuring that customers security needs post-sales are well supported. Recruiting skilled security professionals is a major challenge for MSSPs, due to skill shortages and high costs in recruiting and retaining talent. The company made early investments in this area by developing its own training program from the ground up and delivering this through its academy system based in Eastern Europe. This has ensured that it has a steady pool of security professionals to tap into. Taking ownership of the training program and not relying on third-partyprovided training has helped it overcome a key barrier, and maintain a high standard of skilled staff trained to support its internal security strategy. But it has also effectively used acquisitions to expand its skill sets. The purchase of SensePost in 2013, a South African company focused on security consultancy and delivering training programs to IT managers, enabled SecureData to expand its technical expertise. The transition from a VAR to an MSSP was not easy, as its sales team was only proficient in selling products. Selling services requires more customization according to individual customers needs. It is difficult to get sales people used to selling product licenses to sell services on a monthly basis. SecureData offered its own structured two-year training program in its academy to equip its sales team with the necessary skills. To incentivize its team, the commission reward for closing a services deal is three times more than for a product sale. Each sales person is focused on driving either direct or indirect sales. The direct sales team meets regularly with prospective large enterprise customers and engages them through targeted messaging campaigns on social media around its solutions and industry trends through its blog and white papers. The indirect team actively reaches out to large service providers and systems integrators to raise awareness about the services it can provide. Most of the sales will be done

3 by its partners sales team. This has allowed the company to focus on delivering its services, as the systems integrators account managers tend to do their own internal referrals for specialist MSSPs across accounts. In terms of technology, SecureData has been actively growing its ecosystem with key security vendors. It has 17 technology partners to date, including security vendors such as Cisco, Juniper Networks, Check Point, Arbor Networks and LogRhythm. SecureData has also invested in growing its own solutions, particularly in big data analytics, which it has identified as an opportunity for growth. It recently acquired a 25% stake in Paterva, a South African analytics software company. SecureData will be able to deploy and integrate the big data analytics software, Maltego, into its solutions, which will further strengthen its SIEM offering. This presents it with a strong differentiator by cutting through a lot of the logging reports produced by solutions such as Splunk and provide its customers with relevant information on key network incidents. SecureData s key differentiator over other MSSPs is its ability to combine its own security solutions with those of its technology partners to create offerings that are tailored to its customers needs. But it will still take some time for it to be able to fully integrate its solutions. A comprehensive security strategy is needed Security threats have become more advanced and traditional signature solutions alone are no longer sufficient to defend against attacks. A comprehensive security solution includes a combination of traditional signature solutions complemented with advanced security capabilities and a highly skilled team equipped to identify and mitigate such attacks. But many companies inhouse IT security teams have limited resources and are often overwhelmed by the large inflow of data to investigate. This has resulted in huge financial losses for businesses as attacks slip through undetected. Many have considered outsourcing their security infrastructure to third parties able to offer dedicated 24-hour support and better equipped to handle such attacks to complement their existing security teams.

4 SecureData has been able to differentiate itself through its end-to-end security solutions. It understands the need for a comprehensive security strategy and has based its solutions around its core security strategy, Access, Detect, Protect and Respond (see Canalys report, Access, detect, protect and respond, published 16 December 2013). As part of this strategy, there are over 17 networking and security services, from switching and routers to data loss prevention (DLP) and firewalls, which can be customized to suit a customer s requirements. These services can be delivered as managed services or as on-demand cloud services. Managed services can be delivered either as on-site services or through its data centers located in the UK. Its managed services range from firewalls and web content security to switches/routers and Chief Information Security Officer (CISO)-as-a-service, in which a senior security consultant will be on-site on designated days every month to provide support to the customer. These services can be further customized according to customers needs by providing additional functionalities, such as data-loss prevention or distributed denial of service. Cloud services are deployed as a hosted service to its customers. These include Internet Gateway, which uses the private IP VPN provided by BT to simplify and secure network traffic. Other services include phishing-as-a-service, vulnerability assessments, SIEM, global load balancing and intelligence-as-a-service. This is a threat intelligence platform using the big data analytics software of Maltego, Skybox and LogRhythm, complemented by SecureData s own monitoring platform. The offering aims to create more meaningful reports and event alerts by cutting through the volumes of events data collected from monitoring and logging systems. Driving greater growth Canalys expects managed services, particularly security, will continue to be a key driver of growth in the channel over the next few years. SecureData has a comprehensive security solution to address this opportunity. In light of the NSA revelations, businesses and governments are increasingly conscious about where their data will be stored when deciding to outsource security infrastructure to a third party. This will be an important consideration for many due to the nature of security and the sensitive data it entails. With all three of its data centers located in the UK, SecureData has a stronger value proposition in selling to the European market as compared with other MSSPs that do not have a dedicated data center in the region. But it must have additional data centers in key markets such as Germany, either its own or through its partners. SecureData will also need to demonstrate that it is able to provide the necessary support as it takes on more customers and fulfill its service level agreements (SLAs). Growth will, however, depend on the UK economy as the UK market accounts for more than half of its total revenue. It will need to scale its business model to expand further. SecureData will also face greater competition as it has to compete against larger channel partners and vendors, such as AT&T, NTT Communications and Fujitsu, which have ventured into managed security

5 services and are financially strong. The competition will intensify as many of its existing technology partners, such as Websense and Check Point, have been developing their own managed services offerings. These vendors would be less motivated to direct customers to SecureData. It will need to handle its relationships with these vendors carefully and consider partnering with local MSSPs or security consultancy firms to leverage their expertise of local markets and provide on-the-ground support to its customers in a country. With the flurry of M&A activity in the security market in recent years, SecureData may become a possible acquisition target by systems integrators and service providers, including its indirect partners, that wish to acquire a specialist vendor to better support their customers security needs. Published in: IT Security Analysis EMEA (ISAE), IT Security Analysis Worldwide (ISAW) To change which s you receive please go to the Canalys client web site and manage your profile. Canalys has a liberal policy with regard to the re-use of information that it provides to its clients, whether within reports, databases, presentations, s or any other format. A client may circulate Canalys information to colleagues within his or her organization worldwide, including wholly-owned subsidiaries, but not to a third party. For the avoidance of doubt, sharing of information is not permitted with organizations that are associated with the client by a joint venture, investment or common shareholding. If you wish to share information with the press or use any information in a public forum then you must receive prior explicit written approval from Canalys. Copyright Canalys All rights reserved. Americas: Suite 316, 855 El Camino Real, Palo Alto, CA 94301, US tel: APAC: Room F/G, 7/F, Jinjiang Xiangyang Tower, 993 Nanjing West Road, Jing An District, Shanghai, tel: APAC: 1 Robinson Road, AIA Tower, #14-02, Singapore, tel: EMEA: Diddenham Court, Lambwood Hill, Grazeley, Reading RG7 1JQ, UK tel: inquiry@canalys.com web: