Securing dollars

Managed services is also booming -- dragging managed security along for the ride. According to a mid-year IDC study, managed services in the Asia-Pacific through 2004 earned US$13.3 billion in the enterprise market and US$63 million in the telecom market, excluding Japan. Value-added managed services are expected to grow some 15 percent in 2005. Managed security services are 2.6 percent of that total, IDC says.

Dave Stevens, managing director at SecureTelecom and Brennan IT, says the managed services model is succeeding. His entire business was built around the promise of recurring revenue, he adds. This year, the sixth year of its operation, saw SecureTelecom grow 44 percent by turnover, and in 2004, the company increased revenue 86 percent. That is despite having “quite a battle” to get prices down.

“The last three years it has just taken off,” he says. “I don’t think we’ve got any unsecured creditors left, [except] maybe larger clients that have their own kit or their own firewalls...I think the first [investment] was a couple of $100,000 and in the first year or eight months, we probably put in another $500,000 or $600,000,” he says.

Latest capital budgets top $2 million, just to keep pace with various “bits and pieces”, Stevens says. Resellers can use a vendor’s tool and add Cisco or Juniper or Netscreen top line product. That is the right way, he says. The wrong way is to run the service on a Linux box and “some managed application you think will do the job”, he says. “That doesn’t work. You can do it with a Linux box, but it’s just the management time just to get a firmware upgrade rolled out to 200 clients,” Stevens advises.

Stevens also says resellers need to choose gear with care. He says the first firewalls they bought “just broke”. “They weren’t designed to run the firewall base we were running,” he says. So SecureTelecom bought the biggest Netscreen boxes out instead. “The sales went up. The salespeople started to believe in it. Our productivity improved,” Stevens says.

Stevens says the company is migrating lots of services from Windows to Linux. “We achieve great increases in stability with maintenance and those sorts of things,” he says. “[But] we tend to want a commercial product. We have written a few applications ourselves, but the development time on them is just not worthwhile.”

Managed services -- such as for internet protection, IDS or packet filtering, not so much anti-virus or anti-spam -- may offer higher than normal margins because of the added value. But it all balances out because one cannot buy an expensive box to do something properly and then pass that cost on direct to the customer.

“It’s not for everyone either. I imagine the ASX doesn’t outsource the true core of its security. Defence doesn’t outsource it. The banks don’t outsource it,” Stevens says.   

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