Data Loss Prevention Vendor Gains From Channel-Only Focus

Shedenhelm, who took the CEO reins in March 2004, made the decision to change the security software maker's course after a venture capitalist pointed out that its technology was ready-made for preventing critical data such as credit-card or debit information from leaving a network.

"At that point there wasn't a market called data loss prevention," Shedenhelm said.

Palisade launched its first data loss prevention product in October 2005 and beefed it up last July. Now the company has modules that cover the full range of data loss compliance solutions including the Payment Card Industry (credit- and debit-card information), HIPAA (confidential patient information) and Gramm-Leach-Bliley (corporate financial information).

And in December, Palisade launched its PacketSure Appliance, which it touts as a single product solution for auditing, blocking, encrypting and preventing sensitive data from being sent outside the network.

With an ever-increasing number of companies revealing data breaches, Shedenhelm expects sales to double this year to $8 million. He also expects Palisade, which has made a significant investment this year to build up its channel ranks, to break even by midyear.

"This is a gold mine," he said of the data loss prevention offensive. "This is a huge market opportunity over the next five years with double-digit growth."

The data loss prevention move is not the only big bet Shedenhelm has made. One year ago, he shifted the company from a direct-sales model to a 100 percent channel model. That meant convincing a board of directors and replacing direct-sales reps who "didn't want to give up control to the channel," he said.

Shedenhelm, a former reseller, felt that the company's success depended on building a network of channel partners. "Companies are more comfortable buying security products from trusted advisers in local cities," he said.

Since it officially launched its channel effort last January, Palisade has signed up 75 VARs. The company also is adding channel reps as it moves to increase its partner ranks to 125 to 150 in the United States this year. Shedenhelm said the reseller effort is being boosted by 45 percent margins for partners that register deals with Palisade compared with an industry average of 20 percent to 25 percent.

"No one offers that type of margin in this space," he said.

David Wren, vice president of SpearTip Technologies, a St. Louis security specialist that became a Palisade partner five months ago, said the deal-registration program margin boost is extremely attractive.

"What sets Palisade apart is their ability to protect confidential data you don't want to leave the network," he said. "There are not a lot of products on the market that we have been able to find that do this."

Wren said he also likes the fact that the Palisade product set is not overdistributed. "That shows their commitment to the partner," Wren said. "Palisade is very good about protecting partner margins."