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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.

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