Enterprise Technology - 2019 Outlook
The development of cybersecurity platforms, greater adoption of SD-WAN for security and networking, cloud services from security and storage vendors, and Dell's role in HCI are all key issues to watch in 2019 following a strong 2018.
Tech spending was strong during 2018 in the networking, storage and especially cybersecurity sectors covered by OTR Global’s Enterprise Technology group. The cybersecurity sector grew and expanded as attacks continued to proliferate and find new points of entry. While cloud migrations had initially stalled some tech spending as cloud deployments displaced on-premise infrastructure, in many cases customers realized they still needed on-prem technology. Many customers found it vital to update networking gear to enable speedy uploads and downloads of workloads and data. Advances in storage technology and a move toward hyperconverged infrastructure fueled spending as customers took advantage of faster speeds and smaller footprints to keep on-prem environments efficient. Global economic uncertainty remains a gating factor as tariffs weigh on some hardware sales; GDPR continues to drive specific security needs in Europe and Brexit’s impact remains unclear.
Platform Building Becomes Key
The legacy firewall vendors retain broad footprints by virtue of their long incumbency, but their success at building out platforms to connect products and services has been uneven. Palo Alto Networks Inc. has been the most successful at platform-building, helped by its sales force and partners becoming well-versed in the platform story. The successful branding has drawn in new customers, and refreshes have expanded existing customer footprints, while new product categories help Palo Alto expand beyond next-generation firewalls. Palo Alto’s less mature Application Framework, however, remains the weaker link in Palo Alto’s platform story.
Fortinet Inc. took a different but equally successful approach, building its platform through partnerships with other security vendors. Fortinet’s Security Fabric allows customers to benefit from using a variety of specialized security vendors all under the Fortinet ecosystem. This strategy has helped Fortinet gain more traction moving upmarket into enterprise accounts. Fortinet’s integrated platform has been a significant conversation driver, but will it continue to be seen as a unique factor as competitors build up their own partner ecosystems? Furthermore, will Fortinet continue to be able to move upmarket and acquire new customers at its current pace? Check Point Software Technologies Ltd.’s Infinity Architecture helps keep Check Point relevant, but ongoing sales execution issues and a lack of clear messaging limit the company's ability to catch up to its competitors. Adoption of the company’s Infinity security platform and consumption model will be key to results during 2019.
Cloud, SD-WAN Drive Innovation
Cloud migration and SD-WAN adoption are pushing customers to evaluate new security offerings. SD-WAN has been a strong sales driver for Fortinet since SD-WAN functionality was added to FortiOS 6.0 in 2018, basically allowing customers to use a single product and vendor for both SD-WAN and security. Zscaler Inc. has become the de-facto security partner for many of the SD-WAN vendors, aside from Fortinet and Cisco Systems Inc. However, Palo Alto’s hybrid cloud architecture approach, featuring Wildfire and GlobalProtect, and Cisco with its expansive customer reach and Umbrella offering are seen as significant competitive concerns.
GlobalProtect is dominating many Palo Alto customer conversations, though it’s not yet resulting in significant sales for most partners. In the shorter term, OTR Global will be watching to see if Palo Alto’s strength in the firewall space and its marketing machine are enough to keep them top of mind as more companies evaluate alternative architectures that favor cloud-native vendors like Zscaler. There is some expectation that Palo Alto will continue to double down on its cloud strategy, aided by its new executives that hail from the cloud world. In the longer term, can Zscaler’s momentum continue without addressing the needs of hybrid environments? Check Point, which is often viewed as more reactive, has lagged among the security vendors in terms of cloud strategy. In 2018, Check Point launched CloudGuard SaaS and public and private IaaS, and more recently acquired Dome9, which provides security capabilities across the three main public cloud platforms.
Endpoint Sector Crowded
The endpoint security segment remains crowded. Symantec Corp. is seen as the most competitive endpoint solution among the established security vendors, and security partners report their customers are maintaining their legacy endpoint solutions while adding on next-generation endpoint products. However, as customers become more comfortable with their next-gen endpoint products, the risk to Symantec could grow. With an internal investigation completed but an SEC probe ongoing, the company is now dealing with unexpected executive departures and a reorganization. Nevertheless, partners expect customers to prefer integrated solutions, which could help Symantec longer term, especially if customers perceive the technological gap to be closed.
Carbon Black Inc. has emerged as a leader in next-gen endpoint, though it is viewed as less disruptive than some other endpoint players, notably CrowdStrike Inc., which could have a potential IPO in 2019. Blackberry Ltd.’s acquisition of key competitor Cylance has minimized some of the competitive pressure -- at least in the short term. OTR Global will be watching to see if this is more than a short-term knee-jerk response and which endpoint vendors gain from any share shift. In addition, as many channel partners favor CrowdStrike in endpoint discussions, a potential CrowdStrike IPO could add more competitive pressure. OTR Global also will monitor whether Palo Alto’s integration of Secdo, expected in early 2019, will make Palo Alto more technologically competitive and improve Palo Alto’s win rates in endpoint opportunities. Palo Alto has said Secdo’s EDR technology will extend beyond the endpoint and into the network and cloud, so we will be watching for how Palo Alto plans to productize that, and any impact that may have on 2019 revenue. OTR will also be tracking whether Fortinet’s partnership with Symantec on endpoint security and cloud will be impactful for either vendor.
Storage and Networking
Dell Integration Ripple Effects
Dell Technologies Inc.’s ongoing integration of EMC and VMware has potential ripple effects across multiple enterprise tech sectors. Dell and its EMC storage division have always been fierce competitors willing to use aggressive marketing and pricing to gain footprint, and channel partners have praised the integration of Dell, EMC and VMware products and a strategy to leverage each in cross-selling opportunities. Other partners believe the Dell EMC portfolio is too broad and confusing to customers and needs streamlining.
Advanced Networking Benefits Cisco
Cisco also has assembled a platform of networking and security products that have helped fuel solid results throughout 2018. Cisco’s improved security products, Meraki wireless portfolio and Catalyst 9000 switch line drove sales, with the Cat9k series consistently outperforming sources’ expectations. Growing interest in SD-WAN adoption, while still in early days, is helping Cisco as the Viptela SD-WAN product gains traction; Cisco expects that product segment to become more important in the coming quarters as products mature. SD-WAN competition is fragmented with the most solid challenge coming from Dell’s VeloCloud. Tellingly, Dell is now marketing VeloCloud as “VMware NSX SD-WAN by VeloCloud,” highlighting its software-defined networking nature and the competition with Cisco’s ACI SDN. Channel sources have commented that NSX and ACI can complement each other in many environments, but that may change as both vendors further develop their offerings.
Cisco partners expect adoption of advanced products like Tetration (data center analytics) and Network Assurance Engine (proactive troubleshooting) to extend and entrench its strong competitive position. While adoption of Cisco’s DNA (Digital Network Architecture) Center platform has lagged partners’ forecasts -- some judge it too expensive and others said customers are not yet prepared to take full advantage of its capabilities -- other new and ramping products including the midrange Catalyst 9200 switch and Viptela SD-WAN are likely to help it maintain sales and competitive momentum through 2019.
Storage Battles Continue
Technology advancements such as the wider use of the NVMe protocol in storage and servers is also likely to fuel some new spending as customers take advantage of ever-increasing speeds to efficiently process huge volumes of data, particularly those generated by IoT devices. NetApp Inc. and Pure Storage Inc. continue to trade claims about being better and faster than the competition. Edge computing also is likely to benefit from the IoT trend, fueling growth in the HCI sector. HCI pioneer Nutanix Inc. has managed to hold onto the lead position, but faces challenges from nearly every other enterprise technology hardware vendor including NetApp, Cisco and Hewlett-Packard Enterprise Co. However, Dell currently poses the strongest threat with its VMware VxRail, VxRack and VSAN offerings, which have been around almost as long as Nutanix and have the broadest market exposure via the Dell, EMC and VMware customer bases. Channel partners viewed Nutanix’s recent move to uncouple its software from the hardware platform as a competitive necessity, given VMware’s software roots.
If Dell uses its newly public status as a way to raise its marketing profile, it could intensify the longtime rivalry between NetApp and Dell’s EMC storage division. New products and a new management team helped NetApp re-emerge as a strong competitor in storage during the past few years -- and EMC’s decline and subsequent upheaval after Dell’s takeover also gave NetApp an edge. However, all the traditional hardware vendors have grappled with displacement by public cloud deployments. NetApp was early in partnering with the hyperscale cloud vendors, but the early advantage won’t last long; Pure unveiled its own suite of cloud offerings that run on Amazon.com Inc.’s AWS in November, and Dell EMC has multiple existing and upcoming ways to link storage with cloud providers in addition to being the hardware behind AWS’ Storage Gateway.
The 2018 increase in DRAM prices -- which allowed many hardware vendors to raise prices -- has reversed, possibly benefiting some of those vendors if they can keep pricing at the higher levels, but it could be a headwind to revenues if customers push for lower ASPs. NetApp’s success during 2019 will depend on its ability to stay ahead of the curve, helping customers make seamless transitions in and out of public and hybrid clouds and keeping EMC at bay in competitive engagements.
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