Virtsec- The Street is Voting

SECURITY VENDORS CAUGHT NAPPING

I recently discussed the coming shift from netsec to virtsec and its potential impact on security vendors.  This chart (as of October 25 at least) is telling in that it appears that while Wall Street comprehends the shift to virtualized production data centers it doesn’t see any security vendor positioned to monetize the shift. 

A recent Pacific Crest report predicted $1-$2 billion virtsec industry within a few years.  Clearly the security vendors have been unable thus far to produce credible products or visions for tracking to the growth of virtualization in production data centers.  So they track with tech seasonality and miss the virtualization opportunity upside. 

It may take years for these vendors to re-architect into form factors conducive to data center virtualization.  As I discussed there are significant business and technology barriers.  Another problem is that virtsec will grow at a faster pace than what hardware types may comprehend.  

Software that can work on commoditized platforms can scale at much faster rates than hardware requiring manual installation economics.  The change will be fast. Virtualization has already put major players on the defensive when it comes to the data center OS battle.  

Its secondary effects, which include tilting the market from fat pipes to smart, powerful blade servers will play havoc with the netsec industry.  (As recent Brocade and Cisco announcements signal the networking world is going thin and fabric while the netsec world watches in amazement.) 

When you combine the sheer distribution power of software on commoditized platforms with the shift to data center fabric architectures you get the potential for an unusually fast and profound disruption in companies, channels, careers and capitalizations.  When the disruption takes place the security players will be glad to track to tech seasonality.  

I’ll go on record now to predict the shift in second half of 2008 to 2009.   At that point the market will turn against billions in market caps and reward virtsec innovation.

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