MSSPs - Another one bites the dust - Dell acquires SecureWorks

So I had to update my chart for MSSP history ..Again..

SecureWorks no more (independent). As you all know, last Tuesday (Jan 4th) Dell made this announcement from Round Rock, Texas "Dell today announced it has signed a definitive agreement to acquire SecureWorks Inc"

Financial Analysts were puzzled with the "all-cash" move from Dell. How come a technology giant with $53 Billion in annual revenues, is making a scene with a small services company with $120M revenue?..

Before moving to possible reasoning, let's dig the deeper question: "How Much ?"... Terms were not disclosed but here are the facts:

• As of 2010 SecureWorks was completing all the necessary prep work for an IPO after the 2008 fiasco.

• So it is not very difficult to guess the game changer on SecureWorks side: Bags of cash….

• Dell paid 10x reveunue ($1.4B) for a mediocre virtualized storage company (EqualLogic), so why not paying 10x to a successful company with over 3000 qualified "services" buyer accounts? (for those who pull the calc, it makes $1.2 billion in cash, but of course this is a guess – it looks like the number is around 600M)

• Bean counters will need to factor in the cost of acquiring an acqusition mode startup company with plenty of debt when calculating SecureWorks' price tag.(SecureWorks acquired Lurqh, DNS, and Verisign -$45M- MSS lately - from 2004–2008. SecureWorks grew 492 percent)

• At the end of the day IBM paid $1.3B to ISS in 2006.



Why Dell Acquired SecureWorks?

CATALYST:

Security is the catalyst component in many large scale complex deals even if does not present a larger financial percentage of the whole deal. Lately information security is getting more and more byzantine and unmanageable,so selling security hardware/software/consulting does not quench today’s enterprise level security needs. So instead of acquiring half baked hardware/software solutions (like HP's TippingPoint, Arcsight or IBM’s Guardium, Ounce Labs, BigFix acquisitions) Dell made a shortcut to get the whole security package. SecureWorks can offer full security services with or without “best of breed hardware/software” , they do all they need is a “Dell” box loaded with a homemade software such as iSensor, iScanner etc/.

MSP + MSSP

Merging MSPs with MSSPs enable companies like Dell to offer complex services remotely. Outsourcing performed in the form of “body shop” is so 1990s. Taking over the operations of a large company and their IT staff is not outsourcing / neither sending the same operation to overseas. The leverage is where shared services are utilized .That is why Telecoms like Verizon, BT, AT&T and NTT are behind all “managed service” offerings. When compared with HP and IBM, Dell is much better positioned with their strategy. Please evaluate Everdream, Silverback, MessageOne, and KACE acquisitions of Dell. Dell has been making acquisitions to become the “Shared Services” central of the world. Dell is perfectly positioned to offer services remotely from Data Centers without the outsourcing shops like HP-EDS or IBM Global Services. Remote device management, or in Dell’s words “Distributed Device Management” is the next generation of outsourcing. With SecureWorks, Dell will add another critical piece to remote device management and in-the-cloud offerings : Security. (Dell also acquires Perot Systems to fill in the “services” gap) . With SecureWorks, Dell will acquire Verisign’s remote management platform and SecureWorks’ SIM-On-Demand hosted security solutions… Dell already owns in the cloud Message-One security systems..HP and IBM will need to build services around the security tools they have acquired.

POWER OF MARKETING

SecureWorks reached the first 1000 customers with a very small dedicated team from Atlanta, GA. Targeting small credit unions and healthcare organizations, SecureWorks now has around 3000 managed security services customers. Even if the revenue numbers are limited, Dell will be happy to leverage the SecureWorks’ know-how in acquiring “Monthly Recurring Revenue”.

COMPETITION

HP, Dell, Cisco and IBM are in a tight race to own enterprise data centers…Any leverage is welcome for Dell. Many of HP Enterprise Services (HPES - formerly known as EDS) customer shops are SecureWorks customers. Dell’s SecureWorks acquisition puts HP on a very uncomfortable seat. HP does not have an MSSP like IBM (EDS came with UK based Vistorm but try finding "managed security" on hp web sites today) , and they do not have the know-how for build and run an MSSP (where Verizon has Cybertrust, BT has Counterpane , NTT has Integralis, IBM has ISS etc).. it will be an interesting year to watch remaining managed/in-the-cloud security service providers: Perimeter, Fishnet, Trustwave, Solutionary and zScaler.

Outsourcing shops, and System Integrators (SI)s are puzzled with this as well. Other major players like Fujitsu, AT&T, Raytheon, Savvis, Unisys, T-Systems, Tata, CSC, Wipro, Logica and any other large scale Telecoms offer managed security (MSS) as a part of other offerings. Security heavy weights McAfee (now Intel) and Symantec have conflict of interest when offering vendor agnostic services.



What Does SecureWorks Offer Today?

Managed SERVICES

• SIM On-Demand – SaaS without 3rd party vendors

• Log Monitoring

• Log Retention

• IPS / IDS – via 3rd party CPE and internal appliances

• Firewall via 3rd party CPE and internal appliances

• Web App Firewall

• Host IPS

• Vulnerability Scanning via 3rd party CPE and internal appliances

• Web App Scanning via 3rd party CPE and internal appliances

• Encrypted Email

• Security and Risk Consulting

• Deployment Services

Compliance Solutions

• GLBA/FFIEC – financial services

• HIPAA - healthcare

• NERC CIP - utilities

• PCI – payment services

• FISMA –US government

Vertical Solutions

• Banking Compliance Solutions

• Credit Unions Compliance Solutions

• Utilities Compliance Solutions

• Healthcare Compliance Solutions

• Insurance Compliance Solutions

• Retail Compliance Solutions

• Government Compliance Solutions

Security Research

• Advisories

• Articles

• Counter Threat UnitSM

• Newsletter

• Research Blog

• Security Tools

• Security Threat Analyses

• Webcasts

• White Papers



SecureWorks VC investors

Mellon Ventures Inc., GE Capital, SBK Capital, Alliance Technology Ventures L.P., ITC Holding Co. Frontier Capital (via Lurhq) , Great Hill Partners, and Noro-Moseley Partners.







Recent Relevant Dell acquisitions

• Everdream Software 2007 - MSP - Remote Service Management

• ACS (not Xerox' ACS Inc) 2006 - Application Management

• SilverBack Technologies 2007, MSP - Platform Provider

• MessageOne 2008 - Security As a Service (Content Filtering)

• Perot Systems 2009 - SI

• KACE Networks 2010 - MSP Appliance

Recent Relevant IBM acquisitions

• Internet Security Systems (ISS), 2006 - MSSP

• Consul Risk Management, Inc., 2007 - Risk Management

• Watchfire Corporation, 2007 - Security Testing

• Ounce Labs 2009 - Code/Application Security

• Guardium 2010 - Database Security

• BigFix, Inc 2010 - Patch Management

• OpenPages 2010 - GRC

Recent Relevant HP acquisitions

• SPI Dynamics Inc., 2007 - Application Security Testing

• Opsware - 2007 Network management

• Atos Origin Middle East Group - SI

• Electronic Data Systems, 2008 - SI  (EDS acquired Vistorm)

• 3Com (includes TippingPoint), 2009 - Network and Security Infrastructure

• ArcSight, 2010 - Security Event and Information Management

• Fortify Software, 2010 - Code/Application Security