Big And Getting Bigger

Ask security integrators that landed a spot on CRN’s 2005 Fast Growth Security list and they will tell you: another year just like it.

The consensus among the integrators presented in this year’s Fast Growth Security report is that 2005 is indeed shaping up to be as good as—or perhaps even better than—last year. Integrators such as Nexum and Acuity doubled revenue in the past year and said they are on track to do it again. And nearly all other integrators on the list expect to equal or surpass their 2004 growth rate.

In this report, CRN presents 10 security integrators that excelled in 2004. To make the list, the integrators had to demonstrate at least 25 percent growth in revenue between calendar year 2003 and 2004 and a significant security practice. Each company also needed to be in business for at least three years and to have had 2003 revenue of at least $1 million. CRN profiled five of the integrators, each of which represents the diversity of approaches in the market. A list of all 10 Fast Growth companies can be found on page 40.

Though each company maintains a slightly different business model, all share an optimistic view of the years to come. "I haven’t seen anything like it," said DirSec Principal Greg Hanchin. "It’s just starting, and that’s the scary part."

Over the past several years, staffers at DirSec spent a good deal of time evangelizing to clients the need to allocate funds specifically for security. This year, the efforts have paid off and customers are coming to the table with well-funded security budgets. "Customers are now really starting to spend," Hanchin said.

At Gotham Technology Group, CEO Ira Silverman said he has seen a similar bump in spending. The integrator generates about 50 percent of its revenue from security, much of it related to compliance requirements. Last year, corporate CEOs were directing the majority of compliance spending largely to protect themselves from Sarbanes-Oxley, Silverman said. But this year compliance is part of the overall IT budget. "In some cases, the money is taken from other areas and reallocated to security," he said.

CRN’s own research bears this out. For several months, security has dominated the list of technologies for which solution providers have the highest near-term sales expectations, according to CRN’s Monthly Solution Provider Survey. In June, security-related categories—including antispam, antivirus, firewalls and intrusion detection—held the top spots on the list of 10 technologies carrying the highest sales expectations among solution providers.

Moreover, for nearly three years, CRN’s Monthly Business Spending Survey has found security is the top spending priority for small, midsize and enterprise companies. More recently, the reports suggest that security has become nearly as important for midsize companies as for large firms, a sign of the growing scope and sophistication of IT systems at midsize companies and the need to make those systems secure.

While many integrators are implementing basic security technologies, CRN’s Fast Growth integrators say they are offering advanced firewall and VPN services and innovative solutions to monitor content, block threats and manage the identities of corporate users.

Almost all of the integrators featured in this report said they offer some level of managed security services, and many said they are seeing significant interest among small-business customers in particular.

Jay Kirby, chief sales officer at Troubadour, said managed services are attractive to many customers because they don’t have to continually evaluate, purchase, upgrade and manage complicated security technologies. "We’ve found, especially with small business, clients don’t want to buy products and maintain them," he said. "What it takes to run these complex products is a challenge."

Troubadour also offers what is known as "umbilical services," mainly for midsize companies. The integrator sets up a security system and manages it while training the client’s staff to take over day-to-day operations.

Growth in managed security services is substantial. MSSP Perimeter Internetworking said its business has grown 1,900 percent in five years. Other Fast Growth integrators are expanding security operating centers throughout the country.

Not surprisingly, another hot button for Fast Growth Security integrators is compliance. Most expect their clients to continue perfecting HIPAA compliance this year. But the real growth could come as a result of new regulations to protect consumer information, they said.

The news media has focused increasingly on the growing incidence of consumer data theft. That peaked in May, when Atlanta-based CardSystems Solutions reported to the FBI that as many as 40 million credit-card numbers were potentially exposed during a security breach.

Business Vitals’ Jeffrey Brewer expects to see legislation this year that could set more specific requirements at the federal level for the way consumer data is protected and stored. Congress has yet to meddle with the "nitty-gritty" of consumer data protection, he said. "But the regulatory pace will quicken, especially as security failures continue to gain public attention," Brewer said.

JOHN ROBERTS contributed to this story.