Will McAfee Lose Its Way Under Intel?

Few could argue that Intel's acquisition of McAfee has the potential to elicit a security paradigm shift with the integration of security on the chip set. But despite repeated promises from Intel to continue running McAfee as a standalone business, VARs say the deal connotes sense of doom for SMB channel relations, the future of packaged security software and McAfee's relevance as a competitive industry player.

Some McAfee partners say the merger doesn't bode well for the mid-tier and SMB reseller, as the driven, enterprise-oriented culture at Intel will only enable the biggest VARs to remain profitable and meet required sales quotas.

"When companies get bought out by a bigger company, it's rarely good for the average channel partner," said Andrew Plato, president of Anitian Enterprise Security, a Beaverton, Ore.-based solution provider. "It's good for the massive value reseller -- their business models tend to align. A larger company is going to tend to align to a channel program skewed for larger volume versus smaller volume."

Some VARs contend that McAfee's gradual move away from the SMB -- demonstrated by a partner program that rewards larger deals and an acquisition strategy that's focused on high-end start-ups -- will only accelerate as the integration process continues. The strong financial backing and global reach provided by Intel does not necessarily mean McAfee's problems with SMB VARs are going to get better, partners said.

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Daniel Duffy, CEO of Fresno, Calif.-based Valley Network Solutions, said that his company had previously started pulling away from McAfee because of its lack of SMB focus. "Part of the problem is that they don't seem to do well in secondary and tertiary markets and SMB. I don’t think that this [acquisition] is going to make it better."

Next: McAfee's Turbulent Channel History

McAfee's channel issues haven't been confined to SMB partners: In the past, partners have had to deal with high executive and field representative turnover, lack of focus, integration challenges following acquisitions and disparate channel policies. It's a track record that doesn't inspire confidence.

"I'm kind of scratching my head. [$7.7 billion] is a lot of money for a chip maker to pay for a software company that’s doesn't have its act together," said Jim Freeman, CEO of Englewood, Colo.-based Attain Technologies.

In September 2008, Lisa Loe replaced Dave Dickison as vice president of North American channels, which she occupied just a few months before leaving in December of that year. Her departure left a gaping hole in channel management, which was temporarily filled by then Senior Vice President of Worldwide Channel Operations Roger King, before Fernando Quintero came on board as the Americas channel chief in spring of 2010.

McAfee partners for years have said the constant turnover has made it difficult to establish long-term channel relationships and receive timely support. Conflict between internal direct and indirect sales has also enabled McAfee to undermine channel deals, according to solution providers.

Some solution providers also worry that their business with McAfee could be disrupted if Intel, as widely speculated, integrates security into its chips, thereby changing the security industry paradigm and lessening the value of packaged security software.

Next: What Intel-McAfee Could Mean For The Desktop AV Market

"If security is embedded in the chip set, it negates the need to add packaged software. Theoretically you don't even need hosted security. It's just part of the hardware," Duffy said.

Freeman said the fusion of security onto the chip would almost certainly be the final nail in the coffin for the desktop AV space, which has largely become commoditized and unprofitable.

"If we go from the OS layer down to the silicon layer, it may totally eliminate (traditional security software) from the conversation. The next Wintel might eliminate the need for desktop AV," he said, adding that over time the trend toward silicon-based security would ultimately force VARs to adapt or put them out of business completely. "That's the slow death that's really hard to avoid in the channel."

Some VARs believe that Intel’s security land grab and an endpoint security market that's significantly tipped toward the chip vendor could give the company an unfair advantage over competing but smaller security software vendors -- and their channel partners. "It's unfair competition," said one solution provider who asked to speak off the record. "If everything's embedded in the chip, you don’t need any licensing. It just seems like it just could easily give them an unfair portion of the market quickly."

Next: Can McAfee Maintain Its Competitive Edge?

Freeman said that the merger could also impede McAfee's agility and ability to innovate as it increasingly becomes immersed in the integration process.

"In today's environment, if McAfee takes their eye off the ball, they're going to get hit with a pitch. With the likes of Kaspersky and others that are much more nimble, much more aggressive competitors, that internal focus on integration is something we'd refer to as picking lint out of your belly button," he said. "McAfee's going to be very 'belly button focused' for a while, and they're going to get displaced by an ever growing number of competitors."

Despite the potential for disruption, McAfee insists that its relationships with partners won’t change. In the days and weeks that followed the acquisition, McAfee channel executives have made efforts to reassure its channel base that the company would continue to operate as a separate security division at Intel.

"It's business as usual, before and after close," said Alex Thurber, McAfee senior vice president of worldwide channel operations, told CRN. "The idea is we'll run as a separate subsidiary and that things will not change. Everything we know is that we'll stay a separate entity. I've called just about every major partner we have after the acquisition, and everybody's very positive. Channel partners are very positive about it."

McAfee executives have pointed to RSA, which EMC has run as an independent subsidiary since acquiring the company in 2006, to bolster their claim that McAfee will remain a separate entity with business as usual.

Next: Where The EMC-RSA Analogy Falls Short

However, this logic may be flawed: Long-time RSA partners maintain that even though the company attaches "the Security Division of EMC" to its title, its channel program has significantly transformed over the years to strongly reflect the cutthroat, direct-sales oriented EMC culture. As a result, the notion of RSA as a "boutique" security vendor has melted away.

"From a channel perspective, RSA has become a lot more 'EMC-like,''' said Ken Phelan, chief technology officer for Montvale, N.J.-based RSA-partner Gotham Technology Group. "RSA's channel program has really taken a cue from EMC programs and processes. It's literally taking a page out of the EMC manual."

One RSA partner, who asked to speak off the record, said that RSA has lost its agility, particularly in terms of field reps and partners being able to make decisions in the field quickly. "If you get a sale, it's not so easy anymore," he said. "You can't be out with the customer trying to make quick decisions. It's going to bounce back to the larger organization."

Intel's pledge to maintain the status quo at McAfee is likely to be a temporary endeavor at best, as many security analysts contend that the acquisition is the first step of a much broader security integration plan for Intel's entire product line.

Plato said that the acquisition will also likely change the playing field for smaller security competitors, in light of the fact that McAfee has helped position Intel as a formidable competitor with other endpoint players. "All of those companies should be a little nervous about this. This could bring a real competitor to their space," he said.

Next: How Security Vendors Can Stay Competitive With Intel/McAfee

Plato said that it would behoove more focused companies with strong products, such as Kaspersky or Sophos, to diversify from the endpoint arena and branch out into operations, in order to stay competitive and allow their channel partners to remain profitable.

An expanded portfolio should include offerings in vulnerability management, integrity monitoring or unified agents that can provide multiple functions in one box, according to Plato. "That's becoming the model. That will be competitive against an Intel/McAfee behemoth in the future," he said.

But despite the potential for disruption, there are McAfee partners who feel that concerns about McAfee's integration strategy -- and whether its product lines would be compromised or altered later on -- have been overblown. Intel's global reach and backing could lead to more marketing dollars for McAfee and raise awareness for security issues in general, says Lou Rubbo, principal for Centennial, Colo.-based Dirsec.

"The rollup does not decrease the security availability out there. Hopefully it does raise it to a higher level of awareness," Rubbo said. "Security is a lot more focused now across the board. There's more credibility and more people are thinking about security. Certainly there's more spending in spite of the weak economy."

Rubbo added that he'd have bigger concerns if McAfee were acquired by another security company, which could indicate a possible power struggle between "best of breed" product lines with the merging of two security technologies.

"Within the industry, within a security firm, that would have been a different story. There would have been more involvement," he said. "Intel's line of business is completely separate, so we hope they treat McAfee as their security arm."