The Network Security and Data Center Appliance market, consisting of the Firewall, Content Security, Intrusion Detection System and Intrusion Prevention System (IDS and IPS), and Application Delivery Controller (ADC) markets, is forecasted to grow at 6% five-year CAGR and go from $14 B in 2019 to $19 B in 2024.  Growth at 6% is slightly weaker than the typical high single-digit pattern we have seen over the last decade, but considering the ongoing COVID-19 pandemic is explicable. Several of the key takeaways from our forecast report include:

• The ongoing COVID-19 pandemic will continue to impact the market both negatively and positively throughout 2020 and into the first half of 2021, assuming that an effective therapy or a vaccine is developed that allows society to restabilize.
• In aggregate, the network security market, which consists of the Firewall, Content Security, IDS, and IPS markets, will continue to experience both positive and negative factors. The negative factor of delayed spending will have a slight advantage, however, leading to flat Y/Y growth in 2020.
• We expect that post-pandemic, the network security market will return to the overall growth of 8% Y/Y from 2021 to 2024 and reach $17.1 B in 2024.
• The network security market will vary significantly from historical growth trends during the pandemic. We expect that the Content Security and Firewall market will rebound and return to nominal growth post-pandemic. However, the IPS and IDS market will not and will continue to its long decline.
• During the pandemic, the ADC market will be affected by both positive and negative factors. Overall, we anticipate that the positive factor of surge spending will keep growth in positive territory at 1% Y/Y in 2020.
• Post-pandemic, we expect that the ADC market will accelerate slightly faster than we predicted in our previous forecast due to the combination of positive factors ranging from market demand and vendor dynamics. The five-year CAGR of our current forecast is 1% versus our prior forecast of flat growth.

For a near-term perspective on the effects stemming from the pandemic, please refer to our recently published blog: Network Security Market Not Immune to the Pandemic.

The Top Four Trends Impacting our Forecast

• Investment in enterprise IT transformation will accelerate due to the pandemic and drive overall market growth. Many enterprises that are neither digitized, multi-cloud present, nor mobile-friendly have experienced more business continuity problems during the pandemic than those farther into their transformation. Expect investment to be broad-based in the service of securing new applications, new data centers, and connectivity solutions for mobile, branch, and campus environments.
• The pandemic has drastically increased the ranks of teleworkers. While we expect many teleworkers will eventually go back into the office, we also believe that the percentage of teleworkers post-pandemic will be significantly higher versus pre-pandemic, falling somewhere between 20% and 45%, as work and cultural norms change in favor of teleworking. Anticipate that secure connectivity solutions will stand to benefit as enterprises invest for the long-term.
• We expect the pandemic will accelerate enterprise automation and expand the network and application footprint that needs to be secured. Many enterprises want to automate manufacturing processes to ensure business continuity while implementing physical distancing. We believe the increase in automation and the associated expansion of the network footprint will continue post-pandemic, as the growth in connected devices, commonly referred to as the Internet of Things (IoT), accelerates.
• Investment by public cloud service providers and telco service providers will continue to grow to support the higher number of enterprise IT workloads and 5G on their platforms, respectively.

If you need to access the full report to obtain revenue, units, pricing, relevant segmentation including technology, end-users, use cases, regions, vertical markets, etc., please contact us at dgsales@delloro.com

 

About the Report

Dell’Oro Group’s Network Security & Data Center Appliance 5-year Forecast Report offers a complete overview for the Firewall, Content Security, Intrusion Detection System and Intrusion Prevention System (IDS and IPS), and Application Delivery Controller (ADC) markets and discusses the short- and long-term market and technology trends that shape the forecast.

 

In just over half a year, COVID-19 has made its presence felt far and wide.  But it has been capricious.  The pandemic has caused severe illness for some individuals, while in others causing no symptoms. With 1Q20 squarely in the rear-view mirror, our data shows that the network security market experienced a similar phenomenon.  On the whole, the network security market paused in 1Q20 and registered small growth of just under 1% Y/Y.  But within the individual four product segments including Content Security, Application Delivery Controller, Firewall, and Intrusion Prevention Service, we track, 1Q20 played out very differently, with some seeing significant growth and others a marked deceleration:

The content security segment was the strongest as it accelerated to 16% Y/Y growth in 1Q20. Within this segment, we include secure web gateway products, which count remote access connectivity among its feature sets.  Before the pandemic, few enterprises were capable of supporting all employees as teleworkers.  There was no precedent.  With the pandemic turning most employees into full-time telecommuters’ virtually overnight, enterprises had to augment their remote connectivity infrastructure quickly.

Moving to a neutral segment, which experienced both growth and deceleration tension, was the application delivery controller (ADC) segment. While ADCs posted a modest revenue growth of 3% Y/Y in 1Q20, individual vendors experienced mixed results.  Some vendors saw overall revenue acceleration, while others hit headwinds.  There was no single factor that determined whether a vendor experienced tailwinds or headwinds.  There were at least three factors we identified, including uses cases serviced, market verticals sold into, and geo region exposure.

In the negative-neutral territory was the firewall segment, which experienced a marked deceleration in 1Q20 when compared to recent history. While still in the positive territory at 3% revenue growth Y/Y, it was not close to the high single or low double-digit growth we have typically seen.  The number of projects paused outnumbered the ones that went forward. In some instances, those that went ahead were reactionary projects caused by the pandemic.  For example, we heard from VARs and system integrators that small teleworker firewall appliances sold well and exhausted all available vendor inventory quickly.

Lastly, in negative territory was the intrusion detection service (IDS) and intrusion prevention service (IPS) segment with a Y/Y revenue decline of 4.2%. To be fair, the IDS and IPS market had already entered its twilight years before the pandemic’s arrival.  With IPS features in firewalls becoming good enough, the standalone IDS and IPS market has been under pressure for several years.  The pandemic added an extra layer of headwinds as remaining IDS/IPS projects got put on pause.

Looking at the rest of 2020, we expect it will continue to be a bumpy market, but cautiously optimistic that network security will be one of the first IT markets to bounce back.  Pandemic or not, IT security has been and will continue to be a top business imperative.  We do not see demand vanishing outright, but do see some continued project delays, as well as priority shifts between different product segments, as evidenced in 1Q20.  We are currently updating our 5-year forecasts, and in an upcoming blog will dig deeper into longer-term expectations.

To learn more about Dell’Oro Group Network Security and Data Center Appliances market research program, please check out the Network Security page for more information.

Every year vendors rally around certain words and the RSA Conference 2020 was no different. It had been about ten years since my last RSA conference after regularly attending in the 2000s. After nearly 40 hours of meetings and vendor conversations at Moscone Center in San Francisco, I kept hearing how vendors were inventing (or reinventing) themselves to deliver SASE, SD-WAN, Zero Trust Networks, and/or SOAR with a sprinkle, or even a good helping, of SaaS.  Let’s break down what’s behind the buzz:

1. SD-WAN (Software Defined – Wide Area Network):

On the first day, the IT gods gave us routers for each branch office and expensive dedicated links. Eventually, businesses got tired of paying the high price for dedicated links. Plus, they wanted to improve the user/app experience that at times could get unstable, full of lag and generally poor. Behold: the SD-WAN routing solution was developed that can make snazzy forwarding decisions based on rich set of inputs, including user, app, latency, congestion and more, to deliver better user/app experience over cheaper commodity Internet links. It turns out many of these SD-WAN solutions also aim to provide network security. But many are not as effective as pure-play security solutions, such as FW/NGFWs.  Just so happens that the barrier to entry to implement SD-WAN isn’t like doing carrier routing. Thus, several security vendors have added sufficient routing capability to claim SD-WAN functionality.  At RSA 2020, I had some good discussions with Fortinet and Palo Alto Networks, both of which are investing heavily in the space.

2. Zero Trust Network:

Back in early 2000s I helped get Network Access Control (NAC), an ancestor to Zero Trust Networks, off the ground. I ran the IETF RADIUS extensions working group, which developed some of the open authentication standards leveraged by NAC and, now, Zero Trust Networks.  While NAC flamed out for being ahead of its time, I found Zero Trust Network solutions at RSA conference as a more usable, superset form of NAC solutions from my yesteryear.  Zero Trust Network solutions are all about implementing a multi-segmented network by orchestrating between endpoints, access edge (campus, branch, cloud user edge), and applications/data being accessed.  At RSA 2020, the folks at Cisco and Juniper Networks walked me through their campus network solutions.

3. SaaS (Security-as-a-Service):

While most think SaaS equals Software-as-a-Service, I prefer to think of it as an acronym for Security-as-a-Service. Boxes/appliances will never completely disappear, but the clear trend is to deliver services as a service where you want it and how you want it. Whether it’s NGFW/FW, email security, ADC/WAFs, web gateways, IPS, DLP, or ATP you can get it in a SaaS model, whether it’s a virtual machine, hosted service, or true pay-as-you go offering. Every vendor at RSA, or least everyone that wanted to be hip and cool, had a SaaS play.  This is a very exciting space for security vendors that I plan on digging deeper here at Dell’Oro.

4. SOAR (Security Orchestration, Automation, and Response):

Everyone at RSA 2020 wanted to SOAR in some way. But to my mind, SOAR boiled down to the cool new name for a central dashboard for policy, visibility, and analytics. Fifteen years ago, we called SOAR’S predecessor the “Single Pane of Glass.” But with a decade and a half of refinements, SOAR seems to be soaring higher than the pain caused by the early-gen single panes of glass. At RSA 2020, I noticed the focus on bringing together a vendor’s product/solution portfolio with complimentary, third-party solutions. It looked like vendors had finally internalized the maxim that security can’t and shouldn’t always be delivered by a single vendor. Like SaaS, every hip vendor had a SOAR-type offering, whether or not it was referred to as SOAR.

5. SASE (Secure Access Service Edge):

I saved the SASE (pronounced “sassy”) kid for last. As the new kid on the block, SASE is in that awkward phase that all young buzzwords/markets go through when industry lacks black-white clarity on what’s in it and who’s delivering it. This reminds me of the days when early cloud providers were hammering out the technicalities of IaaS, PaaS, and SaaS.

From what I can tell, we’ll continue in the storming and form phase a bit longer. But through the dust I can see that SASE, at its core, is anchored by an in-the-cloud gateway service. Thus, at minimum, SASE will replace on-prem security web gateway appliances with a side helping of Cloud Access Security Broker, Data Loss Prevention, applied threat intelligence, and even FW/NGFW capabilities brought together under a single administrative panel. At RSA, I had the pleasure of talking with the zScaler, Cisco, Palo Alto Networks, and ForcePoint SASE teams.

In future blogs, I’ll dig deeper into why I think these ideas caught wind. But for now, keep an eye out for a year filled with SASE security clouds over SD-WAN and Zero Trust Networks with some SaaS and SOAR… at least until RSA 2021. If you attended RSA 2020 and have different takeaways, drop me a note at mauricio@delloro.com. I always appreciate other perspectives.