Overview of the Network Security Market in the Asia Pacific region

The APAC network security market recorded a decline of -1.6% in 2009, following the fallout from the global financial meltdown, which finally took its toll on the business environment in the region. In contrast to the robust growth momentum which characterised the 2008 market, sentiments in the 2009 market, particularly in the first half of the year, were decidedly more muted as many enterprises in the region buckled down and tightened their budgets in anticipation of long-drawn climate of recession. However, with the global economy showing signs of recovery towards the latter half of the year, which brought about greater optimism, spending momentum in the network security arena picked up significantly across several markets in APAC. In light of the improving business outlook, the network security market is expected to bounce back in the coming year, with CAGR hitting 8.8% in the next seven years (2010-2016). Considering the challenging business conditions, many security vendors in the space experienced a tough start to 2009, with business opportunities rapidly diminishing in the APAC network security arena. Markets across the APAC region posted declines in the network security market on a YoY basis in 2009, with the exception of markets such as Singapore, New Zealand, the Philippines, China and Australia, all of which posted positive YoY growth rates in 2009. With technology convergence rapidly emerging as a central theme in the network security arena in the past few years, the value proposition offered by these converged security solutions, whereby multiple security technologies were being offered on a single platform, became highly attractive and compelling to enterprises looking for what were essentially value-for-money deals. In this way, the financial meltdown actually served as a catalyst for a greater market acceptance and adoption of converged security platforms, be it integrated security appliances or secure routers/switches, among the APAC enterprises. As expected, the government vertical emerged as the top spender on network security technologies in 2009, in the face of a weakened spending power among the private enterprises. The public sector was also heavily driven by a rising need to enhance their existing security infrastructure in light of IT becoming a critical component in their operational setup. As such,

the economic slowdown gave many governments across the APAC region a chance not only to boost spending in their economies, but to upgrade their security systems in the process as well. In addition, the year continued to witness the emergence of peripheral verticals such as mining, oil/gas, agriculture and healthcare, as keen adopters of network security technologies. One key reason for this trend could be attributed to the maturing mindset that APAC enterprises possess towards IT security nowadays.

We have observed the following key trends in the network security market:

• Despite the economic slowdown, enterprises in the APAC region continued to invest in security solutions due to their maturing mindset towards IT security, as businesses became more reliant on IT in order to remain competitive.
• Moreover, as the notion of doing business was made increasingly inseparable from IT, enterprises were being forced to divert more attention to the rising need for adequately secured corporate networks and IT assets.
• Technology convergence was a key trend charting the growing customer preference for platforms capable of integrating multiple security technologies onto a single device. Such an approach was not only viewed as being cost-effective, but was also perceived as enabling enterprises to enjoy simple management of their security systems.
• With private sector spending on the down, the onus for network security investment fell upon the public sector. As a result, the government vertical emerged as a key spender on network security solutions in 2009, no doubt fuelled by a greater dependence on IT systems to drive administrative processes, as well as the growing slew of e-government initiatives introduced in recent times.

Award Recipient: Fortinet

The 2010 Asia Pacific Frost & Sullivan ICT Award for Network Security Vendor of the Year is presented to Fortinet in light of the excellent strategies undertaken by the vendor, both from the technology and business perspectives, which have enabled Fortinet to record an excellent year-on-year growth rate in 2009. The strong showing registered by the vendor against the backdrop of a global economic slowdown could be attributed to Fortinet's foresight in being the thought leader for technology convergence, as well as its ability to constantly innovate itself in order to stay relevant to the changing enterprise

dynamics. Moreover, the go-to-market strategies driven by the vendor were also valuable in helping Fortinet effectively communicate its value proposition to the enterprise end-users, thus enhancing its reputation and mindshare in what was a highly competitive and saturated network security market segment.

Proponent for Technology Convergence

Being a strong pioneering proponent of technology convergence in the network security arena, Fortinet was able to enjoy greater mindshare in light of the growing receptivity towards converged platforms in the enterprise market in the Asia Pacific region. Moreover, the economic slowdown also forced many enterprises to turn to integrated security appliances in their bid to reduce CAPEX and OPEX costs, a situation which benefitted security vendors such as Fortinet which offer multi-faceted security protection for corporate networks on a single platform.

Innovations on Security Platform

Fortinet continued to lead the way in extending the scope of the integrated security appliance in 2009 by introducing a range of features which further extended the security capabilities of the converged platform. By integrating features such as application management and data loss protection, the vendor was quick to acknowledge the changing needs of enterprise users, particularly in areas such as data protection and business applications usage. Likewise, Fortinet also tried to redefine the integrated security platform beyond its traditional focus on security by incorporating WAN optimization technology into the solution. This approach was particularly apt in light of the growing popularity for integrated security appliances at the branch offices, many of which were also suffering from performance issues brought about by weaker bandwidth speeds.

Effective Go-to-Market Strategy

To accelerate penetration of the high-end market, Fortinet was successful in recruiting well-established Tier-1 channels in the region into its fold. In particular, these channels were crucial in enabling Fortinet to successfully gain market share into highly competitive verticals such as the service provider, government and BFSI. Likewise, beyond opting for quality channels, the vendor also adopted a vertical-focused approach in their channel strategy, with partners being leveraged upon to offer a more customized touch-point to the respective vertical end-users, all of which had highly varied security requirements for their corporate networks.

• Enterprises with limited IT resources on their end are likely to turn to the services model as a way to protect their corporate networks, with managed security services expected to witness a strong growth trend in the near future.

AWARD DESCRIPTION

The Network Security Vendor of the Year category is conferred to the vendor that has shown exemplary growth and performance in 2009 in Asia Pacific. The contenders of this award are evaluated based on the following key criteria:

• Market leadership and market share growth
• Revenue growth
• Product innovation and technology strategy
• Go-to-market strategy
• Key achievements

Category definition

• Firewall/IPSec VPN
• SSL VPN
• IDS/IPS

METHODOLOGY

Creating a shortlist of nominees The companies short listed for each of the Frost & Sullivan Asia Pacific ICT Awards were selected by our analysts, based on their expert knowledge and analysis of the market.

The companies were typically studied on their revenues, market share, capabilities, and overall contribution to the industry. The short listed companies were interviewed, and the analysts compared the data collected with proprietary Frost & Sullivan resources, as well as secondary research available from public sources. Selecting the award recipient The companies' profiles were presented to an independent panel of judges to determine the most deserving recipient for each Frost & Sullivan Asia Pacific ICT Award.

For the Network Security Vendor of the Year Award, the judges were:

• Edwin Chew - Director, Clinical Systems, Integrated Health Information Systems
• Eric Lauzon - Global Chief Information Officer, International Baccalaureate
• Joseph Tan - Chief Technology Officer, Certis CISCO
• Ng Yoke Weng - Group Chief Information Officer and Group Chief Technology Officer, SingTel

Robust Business Growth and Expansion

In a year characterized by a sluggish business environment brought about by the global financial meltdown, Fortinet remained one of the bright sparks in the network security arena, as the vendor continued to witness robust growth rates for its business across Asia Pacific. In many ways, Fortinet's success could be attributed to its ability to ride on the wave of rising receptivity towards technology convergence and its growing mindshare as a security-centric vendor offering excellent value from a price-performance perspective.

Conclusion

Frost & Sullivan believes that a successful combination of innovative technology initiatives and effective enterprise business strategies was critical in propelling Fortinet into the topmost tier of vendors in the network security market. Moreover, its successful ascent up the value chain is likely to further strengthen its position as a top network security player, with the Fortinet branding expected to do even better in the face of maturing attitudes towards technology convergence among Asia Pacific enterprises. In light of this, Frost & Sullivan is pleased to recognize Fortinet with the presentation of the 2010 Asia Pacific Network Security Vendor of the Year.