Analysis of the Web Application Firewall Market Asia-Pacific March 2013 1
Research Team Research Manager Edison Yu Research Manager ICT Practice (65) 6890-0928 edison.yu@frost.com Lead Analyst/Strategic Review Committee Leader Cathy Huang Industry Manager ICT Practice (65) 6890-0249 cathy.huang@frost.com Contributing Analyst Tetsuya Niihara Industry Analyst ICT Practice (65) 6890-0253 niihara.tetsuya@frost.com Contributing Analyst Misun Yoon Research Analyst ICT Practice (82) 2-6710-2061 misun.yoon@frost.com 2
Research Team (continued) Contributing Analyst Vu Anh Tien Research Analyst ICT Practice (60) 3-6207-1032 anhtien.vu@frost.com 3
Greater China Breakdown 58
Greater China Breakdown The Web Application Firewall (WAF) market witnessed a strong growth in the Greater China region 2012, mainly fuelled by the strong demand experienced in the Chinese WAF market. The Chinese WAF market grew by 43.4 percent on a YoY basis and the overall Greater China market recorded a high growth of 40.0 percent. 2012 saw a growing incidents of hackers targeting at web applications or websites for an enterprise. It is easily become an target of the hackers as the hacking incidents were very pervasive in the region. In addition, the value proposition of the WAF solution became much clearer to the users as enterprises understand much better the difference between a WAF and a network-based firewall/ IPS. Across verticals, the government continued to lead the spending in the WAF market, followed by the BFSI vertical. 2012 saw a growing user cases for organizations in adopting the WAF solution to protect their websites regardless whether the website is being more static or interactive. In addition, other verticals such as retail, healthcare, transportation, education also witnessed strong growth in terms of the WAF adoption as a greater level of reliance on the web into their operation setup. For instance, online ticketing, online registration, results release via the Web, so and so forth are the common examples how these organization leverage the Web in their businesses. In terms of the competitive landscape, NSFOCUS continued to lead the Greater China market. 2012 saw another local Chinese vendor Venustech grow significantly in the WAF market. Venustech has upgraded its product from its traditional IPS based which greatly enhanced the performance and user experiences. Greater China (China, Hong Kong, Taiwan) Source: Frost & Sullivan analysis. 59
Greater China Market Revenue Forecast Key Takeaway: The WAF market in China is predicted to maintain a high growth in the Greater China region with revenue expected to reach $246.6 million in 2019, at a CAGR of 34.4 percent. Web Application Firewall Market: Revenue Forecast Greater China, 2012 2019 CAGR = 34.4% 300.0 50 Revenue ($ Million) 250.0 200.0 150.0 100.0 40 30 20 Growth Rate (%) 50.0 10 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 Revenue 22.3 31.1 42.4 58.7 84.0 115.5 151.6 194.8 246.6 - Revenue Growth Rate 39.7 36.2 38.4 43.2 37.5 31.3 28.5 26.6 0 Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis 60
Greater China Market Revenue Forecast by Country Key Takeaway: The WAF market in China is predicted to have the highest growth rate in Greater China region with revenue expected to reach $122.3 million in 2018, at a CAGR of 36.4 percent. 220.0 200.0 180.0 160.0 Web Application Firewall Market: Revenue Forecast by Country Greater China, 2012 2019 CAGR (China)=35.3% CAGR (Hong Kong)=30.1% CAGR (Taiwan)=29.2% Revenue ($ Million) 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 China 18.0 25.8 35.6 49.9 72.4 100.1 131.4 168.7 213.7 Hong Kong 1.8 2.1 2.6 3.3 4.3 5.8 7.9 10.4 13.3 Taiwan 2.5 3.3 4.2 5.4 7.3 Year 9.5 12.3 15.7 19.6 Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis 61
Greater China Market Revenue Forecast Discussion The overall Greater China WAF market is expected to grow at a CAGR of 34.4 percent in the forecast period. While the distribution of the WAF demand will not change significantly, with government, BFSI, SP verticals account for the majority of the WAF investment in the market. There is a huge potential from the BFSI vertical in the coming years in terms of the WAF adoption. As of 2012, the demand from the BFSI were mainly coming from the insurance, securities, stock brokerage and other financial services companies in the region. The major banks, for instance those national banks in China still hold the wait-and-see attitude towards the WAF solution. It is expected that these banks to adopt WAF solutions in the coming years as there are more successful references to approve the value proposition of WAF to them. Similarly, the demand from SP vertical is also expected to grow healthily in the region, especially when the enterprises are more open and receptive towards services model. The managed WAF services or cloud-based WAF services are expected to drive the market further. Last but not least, with the fast growing reliance of Web into their business operations or delivery, the need to protect the web assets/web servers becomes increasingly prominent. As such, the demand from other verticals such as retail, energy, healthcare, education, transportation and so forth will witness robust growth moving forward. The Chinese WAF market is expected to grow at a CAGR of 35.3 percent in the next 7 years, reaching a total market size of USD 213.7 million in 2019. As for Hong Kong and Taiwan, the forecasted CAGR of two markets are 30.1 percent and 29.2 percent respectively. Source: Frost & Sullivan analysis. 62
Greater China Market Percent and Revenue by Vertical Market Government vertical continued the lead in the Greater China WAF market in terms of the investment in 2012. In particular, the adoption rising from the government vertical in mainland China was significantly strong in the year compared to 2011. BFSI vertical recorded a strong YoY growth of 43.2 percent in the year and continued to capture the 2nd largest market share in the WAF market. This year saw a growing adoption among financial services, securities, brokerages firms in addition to the banks adopting the WAF solution in view of protecting their online presence. This is particular true in Hong Kong, where is the regional financial hub. The manufacturing vertical witnessed a particular boost in 2012, particularly in the Taiwanese WAF market. The adoption of WAF among high-tech manufacturing companies in Taiwan saw an excellent growth in the year. With the US economy on its way of recovery, the manufacturing vertical in Taiwan and even China were positively influenced. The commitment for them to secure their web Market Share by Revenue Total Web Application Firewall Market: Greater China, 2012 Education 2.7% MFG 3.3% E-Commerce 11.0% SP 18.4% Others* 13.1% Note: BFSI Banking, Financial Services & Insurance Govt Government SP- Service Provider MFG - Manufacturing Others include verticals such as pharmaceutical, retail, logistics, oil/gas, energy, mining, agriculture, IT/ITes and BPO etc. BFSI 22.1% Govt 29.4% servers and applications drive them to adopt the Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis. WAF solutions. 63
Greater China Market Percent and Revenue by Horizontal Market Large enterprises continued to dominate the Greater China WAF market. The prominent demand came from key verticals like government, BFSI and service provider verticals. 2012 saw a fast growing adoption in the service provider vertical. Many of which were used for their internal usage and more importantly, a sizable proportion of it were used for managed services. In addition, some of the WAF vendors directly introduced the WAF-as-a-Service/ cloud-based WAF services to the market in 2012. One of the target audiences for them is the SMB segment. While the security investment in the Greater China market, particularly in the mainland China market is dominated by the LB segment, the adoption from the SMB towards WAF is definitely going to increase, be it in the form of products or services. Market Share by Revenue Total Web Application Firewall Market: Greater China, 2012 SMB 24.6% Note: LB Large Businesses SMB Small & Medium Businesses LB 75.4% Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis. 64
Greater China Market Percent and Revenue by Technology The dominance of the standalone in the Greater China WAF market is mainly because of the high demand towards the standalone WAF in the mainland China market. The standalone WAF accounts for 89.2 percent share in the Chinese WAF market in 2012. In comparison, the standalone WAF contributes about 60 percent in the Hong Kong and Taiwan WAF market. The perception towards add- on/software module of WAF was much more welcomed in Hong Kong and Taiwan. Unlike the mainland China, the WAF market is not dominated by local vendors which tend to focus more on the standalone rather than add-on module. As some of the key WAF vendors introduced the cloud-based WAF services to the market in 2012, the services format is also going to grow significantly in the market moving forward. Market Share by Revenue Total Web Application Firewall Market: Greater China, 2012 Add-on 10.8% Stand alone 89.2% Key: Stand alone Operate independently (Hardware +Software) Add-on Software based WAF Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis. 65
Greater China Market Share Key Takeaway: Local Chinese WAF vendors hold the dominance in the market due to the strong demand coming from the mainland China. Percent of Revenue Web Application Firewall Market: Greater China, 2012 Fortinet 3.7% Armorize 1.0% Radware 2.1% Citrix 4.0% Others* 8.9% NSFOCUS 25.6% F5 5.5% Barracuda 6.4% DBApp Security 10.0% imperva 11.9% Venustech 20.9% * Other companies include yxlink, and other small local players. Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis. 66
Competitive Landscape Analysis Web Application Firewall market: Key Strategies and Tactics, Greater China, 2012 NSFOCUS Venustech NSFOCUS continued the market leadership in the 2012 Greater China WAF market, with a strong YoY growth for its revenue. In comparison with many other contenders in the market which tend to focus on diversity of functionalities, NSFOCUS s WAF solutions emphasize the capability of attacks protection and simplicity in terms of policy management. This resulted in a better user experiences for many of their users. From the demand perspective, in addition to its traditional key verticals, such as government, the other verticals such service provider and FSI were also seen a strong boost in terms of the demand. The vendor is expected to launch a high-end model with 10G throughput in 2013. Venustech captured the second largest position, with a 20.9 percent market share in the Greater China region. Almost all the revenue in the Greater China region were coming from mainland China alone, which the vendor recorded a highest revenue growth among all the vendors and a market share of 25.2 percent in 2012. The perception among enterprise towards Venustech s WAF solution was significantly enhanced when they moved away from the IPS-based WAF. In addition, 2012 saw Venustech putting concerted efforts in promoting their WAF solution. By leveraging on some of their loyal clientele in the IDS/IPS, Venustech managed to penetrate the government, energy, BFSI, sectors for its WAF solutions. Source: Frost & Sullivan analysis. 67
Competitive Landscape Analysis (Continued) Web Application Firewall market: Key Strategies and Tactics, Greater China, 2012 imperva DBApp Security Imperva continued to be the third largest WAF vendor in the Greater China region, with a growing market share. More importantly, Imperva continued to take the market leadership position in both Hong Kong and Taiwan WAF market in 2012. Imperva s WAF solutions continued to maintain its technology excellence, be it from the attack protection (from the OWAPS top 10 attacks) or reporting capability, deployment, or scalability. More importantly, the vendor also introduced the cloud-based WAF services in 2012. It is expected to target the customer segments which has relatively weak internal IT resources and open to the services model. Within the region, Imperva continued to do well in the BFSI and E-Commerce verticals in 2012. DBApp Security had a steady performance in the 2012 Greater China WAF market. The vendor witnessed a revenue growth of 39.5 percent in the market. Nonetheless, its market share witnessed a marginal decline which mainly because some of other contenders in the market, such as global ones like Barracuda, F5, Citrix and some other local Chinese vendor Yxlink also grow their presence in the market significantly in the year. The WAF solution from DBApp Security continued its good mindshare in the key verticals like e-commerce, government and telecos mainly because of its strong technical capabilities. The vendor won a significant deal in the service provider in the year which considered a breakthrough for them. Source: Frost & Sullivan analysis. 68
Greater China Market Competitive Environment Web Application Firewall Market : Competitive Structure Greater China, 2012 Number of Companies in the Segment More than 14 Competitive Factors Key End-user Groups Major Segment Participants Cost, performance, branding, sales support, reliability, integrated capabilities, channel partners, and long-term viability of the vendor Government, BFSI and Service Provider NSFOCUS, Venustech, imperva, DBApp Security Greater China Market Share of Top 3 Competitors 58.3% Other Notable Segment Participants Distribution Structure Barracuda, F5, Citrix, Fortinet Distributors, resellers, system integrators, and service providers Source: Frost & Sullivan analysis. 69
The Last Word 103
The Last Word Predictions 1 The WAF capability becomes one of the key differentiators for Application Delivery Controllers (ADCs) as customers look into the security perspective more seriously while they want to ensure the performance of the applications. 2 Similarly, the WAF will become an important feature or services for other technology segments, such as SSL VPN, Firewall and so forth. 3 The adoption of Managed WAF services or WAF-as-a-Service will become more prominent in the coming years. Source: Frost & Sullivan analysis. 104
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Appendix 106
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