Louis Rabon remembers a time when a security box cost $100,000 and carried a 40 percent margin. As one of a handful of RSA resellers in two- factor authentication, there was little competition and reasonable demand for security specialists such as Rabon’s Loop Technology. Now a box can be virtualised and take up one core of a 10-core processor – and the prices have come crashing down.
“The margins are smaller and the price is smaller. That $100,000 box might be $10,000, and the margin is not 40 percent it’s 17 percent, if you’re lucky,” says Rabon, Loop’s services manager.
Rabon’s security practice has shifted further into services as a result. Where the company once made 95 percent of its revenue from hardware and 5 percent from services, the goal is now an even split.
“We’ve gone into higher-level consulting services now. We realised the value in being the trusted adviser and we bring them on a journey to increase their security posture and that they continue to mature their security infrastructure,” Rabon says.
Competition has also picked up. Security is easier to implement and sell, and there are many more vendors in the market. Security-as-a-service sold by vendors is challenging established service providers.
“Not only are these services available everywhere, sometimes you can go direct to the vendor. McAfee are offering cloud services now so rather than a managed services solution McAfee will do it for you,” Rabon says.
Despite such growth, appliances still have a strong future, at least for the next few years. Knowing how to sell and what to sell is less clear after an explosion in vendors selling security products. Some of the new entrants are networking vendors who have built security features such as firewalls into their switches. Security vendors have returned fire by moving into networking and blowing open the definition of a security appliance.
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