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Competitors Pounce on CA's Netegrity Buy

Competitors are publicly happy about Computer Associate's $430 million acquisition of Netegrity , but there might be a hint of trepidation over the combination of the two security software players.

Less than a day after officials at the Islandia, N.Y., company announced the acquisition -- which pairs CA's eTrust Identity and Access Management suite with Netegrity's Web access software -- it seemed everyone with a stake in the network identity management industry had something to say.

"They can talk like they're happy about it, but I think a lot of that noise is nervousness on their part," said Earl Perkins, a senior analyst with META Group, a research firm of which Netegrity is a customer. "And it's mainly because it's confirmation that the market continues to consolidate, and over time it's going to squeeze."

Sun Microsystems immediately announced a migration tool targeting SiteMinder customers -- Netegrity's flagship Web access, single sign-on (SSO) product -- to its Sun Java System Access Manager, which is free to SiteMinder customers.

The migration tool has been around for some time, said Sara Gates, Sun vice president of identity management, and it was used earlier this year to bring Blue Cross/Blue Shield over from SiteMinder to Access Manager.

Gates said the company is willing to forgo the $5 to $7 per user they could charge for an Access Manager license to give it the chance to up-sell these new customers to their Identity Manager and Directory Server software applications.

"People are making broader identity management architectural decisions," she said. "That's how we make money; we get them with their access management environment migrated and then we offer them the chance to upgrade to market-leading products in the other two categories in this market.

Officials at Oblix, one of the best-of-breed companies in the space that provides identity and Web services management software with Netegrity and which is closely partnered with Microsoft , said Netegrity had reached the end of its rope and needed the CA buyout to save itself.

"Netegrity was great in the single sign-on business, but once the market got redefined to be a broader set of capabilities that define the identity management business, Netegrity went off focusing on portals and all the other stuff and really kind of missed the boat," said Prakash Ramamurthy, Oblix vice president of products and technology. "Once they milked all the install base they had to go and win new customers, we were beating them head-to-head in all these identity deals, even with existing SiteMinder accounts."

Over the past 10 months, Netegrity has been downgraded by 21 investment firms, including J.P. Morgan Chase, Goldman Sachs, AG Edwards and UBS Warburg.

But according to META Group's Perkins, Netegrity's business plan was sound and its executives had a good growth strategy in place before the buyout, garnering more than 700 customers to its SiteMinder product alone.

"In the Web access management market, of which Netegrity was the leader -- and in most markets like that which are relatively mature -- you'll always see signs of decay or pressure around the edges of the leaders," he said. "When you're king of the hill, there will always be someone on the lookout for whether there are rockslides or whether someone's getting tired at the top. Certainly, on a quarter-by-quarter basis, you'll notice there's going to be slippage, but overall Netegrity's performance in terms of its customer base, its growth, its technological capabilities -- they looked pretty sound."

Sun's Identity Manager, along with IBM's Tivoli Identity Manager, Novell's Nsure and, even to an extent, HP's Select Identity represent the "stack," companies with a suite of security software management applications, of which identity access and management is just a part. CA's acquisition of Netegrity, Perkins said, puts it in the same company as the other stack providers.

HP officials quickly pointed out the technology merger problems the company faces with Netegrity's addition to the CA eTrust portfolio, mainly the combined company's need to resolve two entirely separate identity provisioning applications.

"Customers with either solution should be worried about the supportability of their installations, because there is no obvious functional integration between the two," company officials said in a statement. "Regardless of what the converged roadmap looks like, let alone when it will be executed, their customers will undergo extensive disruption to their business continuity and expensive migration and convergence costs."

Perkins concedes the point, saying stack vendors are now coming out with second-generation identity management tools, and CA is going to need to integrate quickly or miss out with customers. He said IBM-Tivoli is coming out with a revamped product that incorporates its acquisition of Access 360 a couple years ago, while BMC Software is getting ready to launch a top-to-bottom revamp of its Control-SA identity management software suite.

He also said developers for the two companies will have problems combining CA's eTrust Admin with Netegrity's IdentityMinder eProvision.

"CA's facing the challenge of saying, 'one of you has got to go right now,' or figuring out a marketing way of selling both of them right now," he said. "As far as the overlap with the other suites, there's not that much of an overlap. I think they can easily fit those into the eTrust suite and it wouldn't be that significant."

Toby Weiss, CA's senior vice president of product management and marketing for eTrust solutions, doesn't think the existence of eTrust Admin and eProvisioning will create the problems Perkins fears, saying there's room for both.

"I think that makes certain assumptions there," he said. "You know, if you look at the mainframe where we have ACF2 and Top Secret, we have two [similar] products on the mainframe."

In regards to HP's sour integration pronouncement, Weiss is equally unconcerned, pointing out there were many CA customers using Netegrity products and vice versa in the past with no integration problems, primarily because most vendors have integration tests that they conduct beforehand.

"What it reads to me is a couple things," he said. "One, they recognize that Netegrity is the leader in that space and clearly going after the leader. And two, from what it sounds like, they don't have any integration with Netegrity. My experience from customers is customers always prefer integration."