In the Top 5 Cybersecurity and Compliance Trends for 2020, Ecosystm predicted that 2020 will witness a significant uplift in mergers and acquisition (M&As) activities in the cybersecurity market. Like the consolidation activity in previous booms (such as digital media and web services in the early 2000s), the cybersecurity market is booming globally and creating opportunities for cashed up vendors and private equity firms. The fragmented security market has thousands of vendors and consultancies globally. Every day a swathe of new start-ups announces their ground-breaking new technology. Coupled with significant investments globally in tertiary education and industry certifications for a growing workforce, the next generation of cybersecurity entrepreneurs are entering with force.
Dell has been focusing on their partner program and on simplifying their product portfolio offerings. The Dell Technologies Partner Program announced last year, allows enterprises to seamlessly access partner products and solutions. Regardless of the partner, all solutions under the Dell portfolio count toward the tier status and tier revenue requirements for clients. Selling RSA allows them to streamline their product portfolio and by their own assertion, Dell has not lost focus on the significance of cybersecurity. They reinforced their commitment to build automated and intelligent security into infrastructure, platforms and devices. Claus Mortensen, Principal Analyst Ecosystm says, “Dell never really figured out what to do with RSA or how to position RSA’s products relative to Dell’s and VMWare’s own products. For example, Dell has its own endpoint protection product with SecureWorks and this has a great deal of overlap with RSA.”
RSA has been one of the pathbreakers in the cybersecurity market with their SecurID offering. They also host the largest security conference. RSA Conference gets together leading experts from across the industry to discuss the current trends and challenges, as well as shape the industry through innovations. Talking about the impact of the acquisition on RSA’s brand image, Mortensen says, “It depends on what STG intends to do with the company going forward. Arguably, RSA has been a bit in the shadows of previous owners – EMC and Dell – but if the new owners have a distinct plan for RSA, the brand will benefit”.
The members of the consortium acquiring RSA is interesting in its diversity. It includes the Ontario Teachers’ Pension Plan Board (Ontario Teachers’) and AlpInvest, another private equity firm. STG’s recent acquisitions include RedSeal, a security risk management provider. Mortensen predicts that the key player in this consortium will be STG, who will bring the know-how as well as money to the table. “Ontario Teachers’ and AlpInvest appear to primarily be financial backers. In fact, less involved these two partners are in the management of RSA, the easier it will be to secure a steady future focus for the company.”
As Ecosystm has observed previously, private equity firms will play a role in consolidating the cybersecurity market. “RSA is an almost textbook candidate for an equity firm or an investment bank takeover – a company with a good line of products but with a lack of strategic focus or leadership,” says Mortensen. “If STG can provide that focus – and from that USD 2 billion payment, one would assume that they can – they should have a good chance of increasing the value of RSA. If not, chances are that RSA’s products will be sold off piecemeal in the years to come.”
You can access the full Ecosystm Predicts report here
The news comes days after Insight Partners confirmed another significant acquisition of Israeli IoT security start-up, Armis at a valuation of US$1.1 billion.
The deal between the venture capital firm and the Switzerland-based cloud data management company is expected to close in the first quarter of this year. With its acquisition by Insight Partners, Veeam’s growth is expected to accelerate into new geographies especially the US market.
Veeam was founded in 2006 and has a portfolio including backup solutions, security offerings and data management solutions for virtual environments and more recently cloud native platforms such as AWS and Microsoft Azure. The company was ranked #27 on the Forbes 2019 Cloud 100 list and has a global customer base of 365,000, including 81% of the Fortune 500 companies. Veeam has partnerships with large enterprise vendors and resellers such as IBM, Dell EMC, Lenovo, HPE, NetApp and Cisco.
The acquisition comes almost a year after the initial U$500 million investment by Insight Partners and Veeam’s announcement of ‘Act II” of its growth strategy – expanding its data management capabilities from virtual environments to the cloud. This move is a logical progression of Veeam’s successful ‘Act I’ as Ullrich Loeffler, Ecosystm Chief Operating Officer mentioned in an earlier blog. However, Loeffler notes, “Executing on ‘Act II’ significantly increases the complexity of Veeam’s business across product portfolio, technology partnerships, SaaS applications and addressable markets. Insight Partners will enable Veeam to fast track this transition from the top down by leveraging additional funding and dedicated internal growth teams and experience from over 200 M&As and 40+ IPOs.”
Veeam’s leadership team is expected to change significantly with the company now moving its headquarters from Switzerland to the US. Co-founders Andrei Baronov and Ratmir Timashev will step down from their positions on the board and in the operation, making way for an US leadership team.
Phil Hassey, Principal Advisor Ecosystm, states that the new ownership and announced leadership team under CEO Bill Largent is a gamechanger for Veeam. “Veeam simply had no choice. It has had limited US penetration to date and has been restricted from growth by the ownership structure despite best efforts on their part. It has had to back out of a significant acquisition deal, divesting N2WS after failing to get full regulatory approval in the US,” Hassey says. “In my view, this acquisition is about more than Veeam’s intention to deepen its product portfolio. It is about ensuring an access to the US market in a level playing field and it will also help with the hyper cloud vendor relationships given their strong push to US Federal Government and their US home turf.”
However, while Loeffler also sees the acquisition as a step towards an IPO, he warns, “The rapid transition to a US leadership team is likely to impact Veeam’s unique company culture. Clients repeatedly state the ease of engagement as key selection criterion, besides the solution capabilities, when choosing to partner with Veeam. The fact that both co-founders will not just step off the board but also leave as Veeam employees, will create a gap which will be challenging to fill.”
In all honesty, anyone who has watched Salesforce closely should neither be surprised or concerned by this acquisition. Salesforce is not merely your cloud CRM provider anymore. It has not been for years, but for some outdated perception is the reality.
Salesforce is an increasingly broad and complex enterprise software behemoth. It’s recently reported numbers highlight this. It is on track for US$20B in revenue by 2022, with year to year growth in the most recent quarterly reported numbers just shy of 25%. Sales and Service Cloud represent 60% of quarterly revenues, but the fastest growth is in the platform and increasingly new investment areas. What Salesforce does so well is to identify adjacencies to an evolving core product. The acquisition of Mulesoft in 2018 set the path to solving integration problems that challenged Salesforce deployment for customers. The purchase of Map Anything in April 2019, highlighted this adjacency approach as well as the ability of Salesforce’s ecosystem to develop partners through the AppExchange then acquire into Salesforce.
So how does Tableau fit into Salesforce?
For nearly US$16B, it had better be a precise fit. Tableau is the leader in data visualisation. It is not an analytics platform as such; one does not go to Tableau for deep statistical insight; instead, it uses it to communicate data to as broad an audience as possible. Salesforce has analytics capability as a core pillar, but this has been one of the more disappointing offerings from Salesforce and has far from reached the potential required. Salesforce will only benefit from a functionality and capability perspective with Tableau inside rather than as a partner or third-party application.
Quite simply across the product suite, and as a standalone offering, Tableau will significantly increase the visualisation, both automated and user-led capabilities of Salesforce. In terms of what it means for both companies, of course, there is good and bad. There is a very significant overlap in the customer bases of both products. It is not 100%, but there will be a balance of customer familiarity and the opportunity to cross-sell for Salesforce, and the extensive partner network that it oversees. There will be some cultural challenges, no doubt in the integration. Salesforce talks about Tableau as an independent organisation within Salesforce, and that will work until Mark Benioff believes it doesn’t. The internal but separate approach rarely works, and the Tableau logo will disappear at a point in time as a consequence.
There are a few differences between the integration of Tableau and the most comparable business Mulesoft. Mulesoft was literally up the street from Salesforce in San Francisco and culturally was based on many of the premises of Salesforce. For Seattle based Tableau, there will be a few differences culturally, although nothing that cannot be overcome with communication, honesty and much hard work on the cultural integration.
The on-premise and cloud capability of Tableau may disappear quicker than the road map that Tableau had, again, Salesforce places great import on the SaaS, no Software approach. Advanced analytics and AI capabilities of Tableau are not its fundamental value proposition so that Einstein will remain the lead there, with some added capability. The non-customer centric user of Tableau provides new client opportunities for Salesforce.
The final point of the acquisition is that it proves in 2019 and the future, you cannot be a one trick software firm. To remain relevant, you need multiple capabilities. Tableau struggled with this, VMware famously struggled until the “invention” of hybrid cloud to be more than virtualisation, and SAS Institute and ESRI remain the poster firms for relying on one old product suite.
Salesforce paid a premium for Tableau, even in a capital-rich 2019. In the world of Salesforce, that is rarely the point. One of the challenging aspects in the Salesforce 360 portfolio is fundamentally sharpened; it gains new users, new capabilities and opportunities for the core product to expand. As with all acquisition, the trick will be the integration, cultural alignment, and keeping developers and partners on board.