Some thoughts on Barracuda and Purewire

As I've noted earlier, Barracuda's acquisition of Purewire was a smart move for both companies. Barracuda's position will be enhanced by its further expansion into both the SaaS and Web security markets, and Purewire's founders and investors will clearly benefit, as well.

However, from a larger market perspective, the acquisition is a good example of where leading security vendors are headed. While one view holds that the on-premise security market will simply evolve into a SaaS market, particularly at the SMB end of the market that has traditionally been the sweet spot for companies like Barracuda, I believe that the market will evolve into a largely hybrid market comprised of both on-premise and SaaS-based solutions offered by the same vendors. While in the long run small companies will rely primarily on a combination of SaaS solutions for spam and malware filtering plus client-side malware detection and remediation solutions, larger organizations will use client-side solutions and a combination of on-premise solutions and SaaS solutions. The advantages of this approach are several:

• SaaS solutions can perform less processor-intensive tasks in the cloud, like basic spam- and malware-filtering. This will prevent on-premise infrastructure from being overtaxed by spam storms and the like.
• On-premise solutions can then be used to perform heavily processor-intensive tasks, such as deep inspection for DLP and policy management for outbound content, using an on-premise infrastructure that is well-suited to the task.
• The result will be lower and more predictable costs for security, since a given on-premise infrastructure will have a longer usable life between upgrades, and the majority of incoming bits will be filtered out by fixed-price SaaS services before they ever reach the network.

In short, I believe that the enterprise security market will see rapid increases in the adoption of SaaS and continued respectable growth in on-premise boxes, while the SMB market will see a similar trend, but with faster SaaS growth and slower on-premise infrastructure growth. Further, I expect to see a number of SaaS acquisitions by on-premise box vendors over the next six to 12 months.