John Katsaros

The Cloud as Supply Chain Management

In his CA keynote, Dr. Ajei S. Gopal, EVP of the Products and Technology Group, introduced the best simple way of understanding the ongoing transition to "Cloud" computing that I've heard so far. He said that IT is going through a transition very much like what manufacturing has gone through for many companies over the last decade. For example, today Cisco manufactures essentially nothing, instead using a network of contract manufacturers and logistics specialists. Ajei's point was that if you're part (say) of Cisco's Global Supply Chain Management team ("manufacturing") your mission is getting high-quality products quickly to Cisco's customers at the lowest possible cost (where "high-quality" and "quickly" are complex issues). If a company does its own manufacturing there is the risk of focusing on (say) the fact that you are best-of breed at wave soldering 21-layer PC boards, and thinking that's what counts the most, whereas the supply chain mission is pure and aligned with the business. Legacy IT shops are very much like legacy manufacturing. Moving forward, more and more options open up for outsourcing aspects or all of IT (e.g., use of SP resources, SaaS, ...). The new (and better aligned) IT mission is a direct analogy: how can you deliver high-quality, agile services and applications to the business at the lowest possible cost?

Barracuda Catches Another Fish

Barracuda's mid-October acquisition of Purewire (SaaS-based secure Web gateway provider) didn't get a lot of press attention. When it comes to acquisitions, Barracuda is known as a bottom fisher (as evidenced by their failed attempt to acquire Sourcefire) — often buying distressed properties that it can quickly rebrand and put back into the market. Which is why the Purewire acquisition seems puzzling. Purewire was positioned as an innovator in the "hosted" Web security field which many expect to replicate the strong growth that occurred with the hosted anti-spam companies, many of whom are experimenting with hosted Web filtering services. So you've got to wonder why the Purewire investors were willing to get out so early in the game at what we're assuming might not be the best of terms (even waiting a couple of weeks would have increased its value as evidenced in today's news of Cisco's acquisition of ScanSafe for $183M). On the Barracuda side, this acquisition is the company's first step into the hosted security services market. After building its brand on selling low cost security appliances, providing hosted Web filtering services is an interesting move — it probably won't be long till they add hosted e-mail anti-spam services to the mix. In that case, how will Barracuda, positioned as the price leader in the appliance space, brand itself in these hosted markets?

 Recent Barracuda Acquisitions

MX Logic Rings the Bell

At the end of July, McAfee announced its intentions to acquire anti-spam SaaS provider MX Logic for $140M (plus possibly $30M more based on an earn out). That brings the total acquisitions in the anti-spam (software and SaaS) acquisitions to over $4B since 2004. MX Logic had over 40K customers with over 4 million end users. MessageLabs, acquired by Symantec in Oct 2008, had sales of $145M, 19,000 customers (8 million users) in 86 countries (63% of its business from EMA). Timing is everything - MessageLabs with twice the end user base, was acquired by Symantec for $695M ($86 per customer versus the $34 per customer that MX Logic got). Who would have thought that this would be such a lucrative market? We always like to remind people that there are just a few hundred high volume spammers out there who have created over $3B in liquidity events in the past five years. (No wonder spam products don't completely shut down all spam and put spammers out of business - talk about co-conspirators...)

 Anti-Spam Hall of Fame