The IT security sector is good for producing start-ups that soon disappear, seemingly without trace. Of course, this is not a bad thing. Whilst it is true some wither on the venture capital vine, many others get acquired as the good idea they came up with (or imitated) gets recognised as a necessity and then absorbed into the security mainstream though acquisition.
In this way whole genres of security products have more or less disappeared. For example, most spam-filtering, SSL VPN and data loss prevention (DLP) vendors have been absorbed by the security giants; Symantec, Intel Security (nee McAfee), Trend Micro or other large IT vendors that deal in security – HP, IBM, Microsoft etc.
However, there is another path, for a small niche vendor itself to grow into a broad-play vendor. The aforementioned three security giants all came from an anti-virus background. Another that is now challenging them, started out addressing the need to make our online business lives fast, then safe and has now joined the security mainstream – Blue Coat.
Blue Coat was founded in the mid-1990s as CacheFlow, its initial aim being to improve web performance. However, it soon saw the need to address web security as well and changed its name to the more generic Blue Coat as it added content filtering and instant messaging security to its portfolio. By 2003 it had 250 employees and turnover of around $150M.
13 years on, in 2016 Blue Coat now has 1,600 employees. The company last reported revenues in 2010 of around $500M before being bought by private equity firm Thoma Bravo in 2011 for $1.3B. Thoma Bravo has now sold Blue Coat on to Bain Capital for $2.4B. A nice mark up, but one that reflects a lot of acquisition investment that has taken Blue Coat even further from its origins to becoming a vendor that can address broad enterprise security requirements.
The acquisition trail for Blue Coat started well before 2011. Entera, Packeteer and NetCache all enhanced its network performance capabilities. Whilst Ositis (anti-virus), Cerberian (URL filtering), Permeo (SSL VPN) added to the security portfolio.
The Thoma Bravo takeover saw the pace increase:
- Crossbeam (firewall aggregation) gives Blue Coat a platform to build on both its enterprise and service provider customer base.
- Netronome, which Blue Coat says is now its fastest growing product line, enables the inspection of encrypted web traffic, addressing the growing problem of hidden malware coming in and stolen data being egressed.
- Solera is a full packet capture reporter; whatever we may think of service providers being required to store data long term, if regulators say they must, Blue Coat can now assist with the job.
- Norman Shark for malware analytics
Since the Bain Capital takeover there has already been two more. First, Elastica, one of the early cloud access security brokers (CASB). This gives Blue Coat the capability to monitor and audit the use of online applications, a growing need with the rise of shadow IT as lines-of-business and employees increasingly subscribe to on-demand services without direct reference to the IT function. The other is Perspecsys for the encryption and tokenisation of cloud data.
Through all this Blue Coat has also been investing in supporting capabilities; this includes building a threat intelligence network and the integration of all the various acquisitions. Blue Coat’s delivery has typically been via on-premise appliances which still suits many of its customers, especially service providers. However, Elastica is a cloud-based service, capabilities from which will be integrated into its appliances and Blue Coat says the future looks increasingly hybrid.
As a private company Blue Coat does not disclosed revenues. However, with all the acquisitions and value-added in the five years it must be close to joining the rare club of IT security vendors with revenues in excess of $1B. Blue Coat has become and should remain a major player in the IT security sector providing it does not lose its way bringing all these acquisitions together into a set of coherent offerings.