Healthy Revenue Picture for VPN/Firewall, IDS Markets

While uncertainty reigns in terms of overall enterprise IT spending, a pair of recent studies from Infonetics Research suggests that the VPN/firewall and intrusion detection markets are experiencing at least modest growth.

Infonetics says worldwide VPN/firewall hardware and software revenue hit $668 in the third quarter of this year, up from $642 million in the second quarter. That 4% gain is especially significant given the third quarter is historically the slowest one for VPN and firewall products, according to the firm.

Government spending on security and the need for companies to comply with forthcoming Health Insurance Portability and Accountability Act regulations are beginning to have an impact on security spending, Infonetics says. The cost savings to be had from VPNs, which enable users to take advantage of low-cost Internet connections, is another driver.

In terms of revenue share, Cisco Systems leads the VPN/firewall pack with 39.3%, followed by Check Point Software Technologies at 12.7%. The Check Point number, however, doesn’t include revenue from Check Point software that is sold on top of other vendors’ hardware.

VPN and firewall appliances account for 60% of all hardware revenue in the market while routers with integrated security functions make up 24%; both figures are about the same as last quarter.

Application-layer VPN gateways from companies like Neoteris, Aventail and SafeWeb represent a potential growth area. Infonetics put revenue from such products, which generally require only a Web browser to forge a secure connection to an application, at $10.7 million in the third quarter, but expects it to reach $840 million in 2005.

Infonetics likewise expects the IDS market to experience significant growth, from $94 million in the second quarter of this year, to $135 million in the same quarter in 2003, a growth rate of 42%. Worldwide IDS product revenue this year is expected to reach $393 million, the company says.

Three factors will drive that growth, according to Infonetics: more hardware entering the market, vendors integrating IDS technology with network and security products, and the continued growth of the endpoint security market.

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