They may not make chips or computer gear, but that doesn’t make them insecure.
Orange County’s network security companies,one of the larger technology sectors here after communications chips and computer products,are banking on paranoia at some of the world’s largest businesses.
“Systems aren’t as secure as many end-users expect, and that’s a critical point,” said Shawn Abbott, president of the eSecurity division at Irvine-based security hardware and software company Rainbow Technologies Inc.
“Security and privacy are very imperative in any kind of electronic commerce. It’s just beginning to be incorporated in a meaningful way.”
Network security providers say their products address a simple problem: Many companies are simply too big or complex to guarantee their customers’ transactions or their workers’ data access will be totally secure.
As recent hacker attacks have shown, anyone bent on tapping into private databases can do so with relative ease.
“Internet security has gained a lot of ground recently,” said Ron Tamir, a business development manager at Houston-based BMC Software Inc., which has a large security sales operation in Costa Mesa. “Everyone understands that they have a problem, and many people see a reason to get products like ours.”
The business of network security is one of competing priorities. On one side, there are large companies that want to keep sensitive information safe while letting employees get data via the Internet to do their jobs.
On another side, companies want to keep their data secure while allowing customers the ease of conducting business on the Internet.
And, on a third side, companies hope to keep software, music, literature and copyrighted works free from piracy.
Sales of network security products could grow to nearly $14 billion by 2005, up from last year’s $5.1 billion,a 23% compound annual growth rate,according to market researcher International Data Corp. And all types of products could partake in the growth, the report said.
OC’s security market includes established names such as Rainbow and BMC and upstarts such as Irvine’s Access360.
OC’s network security companies seem to be preparing to grow. Rainbow recently partnered with Japan’s Softbank Holdings Corp. to sell its products in Asian markets. BMC, which started out in network security when it acquired Tel Aviv-based New Dimension Ltd. and its North American headquarters in Irvine, has been hiring engineers in Costa Mesa.
Venture capitalists also are investing in network security. Access360 has fetched some $82.5 million in funding and is expected to be one of OC’s most successful initial public offerings once the market for new stock issues returns. The company makes software that manages who can access what information inside large organizations.
“We don’t see ourselves as a pure security play,” said Brian Anderson, Access360’s marketing vice president. “Of course, we do help reduce the potential for cyber sabotage. But we really help companies extend their information network by saying who can get what information.”
But there are storms to weather first. Even if companies see the need for increased security, they’re still grappling with their own cash crunches,limiting the amount of money they want to invest in security upgrades.
That was the subject of a recent warning by Rainbow, which blamed a severe drop off in spending by its customers for a lower-than-expected sales forecast for the third quarter. Revenue could come in up to 20% lower than in the second quarter, the company said, and a planned restructuring would affect earnings.
Even Access360 has had to nip and tuck. The company has stopped hiring new employees for the moment while it waits out the current slowdown. And, despite a recent move to new digs next to Broadcom Corp. in the Irvine Spectrum, the company subleased some of its office space to help ease costs.
But customer weakness actually could play to the advantage of network security players, according to IDC analyst Brian Burke, who called the current economic instability “a double-edge sword.”
“On the one hand, it’s forcing companies to reduce spending,” he said in a report. “On the other hand, it’s forcing companies to look for ways to cut costs, become more security proficient, and build trusted relationships with customers, partners, suppliers, and channels,which are areas security software can help.” n
