HP ArcSight buy: The industry impact

HP agreed to acquire security software company ArcSight yesterday for $1.5 billion, but why and what does it mean for the tech industry?

ANALYSIS HP became the second major tech company in a month to make a giant splash in the security industry when it agreed yesterday to acquire ArcSight for $1.5 billion (972 million).

Last month, Intel announced the purchase of McAfee in a deal that was admittedly far bigger than HP's buy, but both may signal a shift in the security landscape, if not the technology sphere as a whole.

So why did HP make the move and what does it mean for the security segment and IT sector at large?


Unlike Intel's McAfee purchase, HP's move yesterday was hardly a bolt out of the blue. Rumours had been circulating over the weekend and many had expected the announcement to arrive on Monday as it did.

"HP has always been on the list of companies we expected to make an acquisition in this area," Gartner vice president and distinguished analyst Mark Nicolett told IT PRO.

"[ArcSight's] technology is broad scope monitoring technology for security events. Any company that has got a broad portfolio, you can see how it would dovetail in."

In its own segment of the security sector, ArcSight is the biggest vendor around. It has been growing 40 per cent a year, Nicolett explained, so it is not hard to see why HP moved in. Of course, the next step is what the company does with the new products and capabilities it has acquired.

Nicolett said HP will either use what it has bought to be competitive, or it will work in an uncompetitive way by using the new capabilities as an add-on to existing products, as other companies have done in the past. Of course, it may do both.

In the long term, while HP may integrate ArcSight's technologies into its wider portfolio, it is unlikely the tech giant will become a major player in security, the analyst added.

"HP is just another vendor entering the market."

A paradigm shift

From one perspective, the ArcSight acquisition is as simple as it sounds. HP has entered the market and it will have an impact on the security segment, but perhaps nothing major.

However, there could be something of a paradigm shift or evolution in the market as a result of acquisitions such as HP's and Intel's, according to Rob Bamforth, principal analyst at Quocirca.

Historically, the bigger security companies would swallow up smaller, more specialist firms to offer a broader portfolio, whereas now, tech giants are buying the lager security businesses to again widen their capabilities, Bamforth said.

This has partly been precipitated by the need for greater security for assets, he added, rather than just for protecting companies at the boundary level.

"[The acquisitions] are also reflective of an overall trend of security moving away from the perimeter and into assets," he told IT PRO. This is the "next step as security becomes integral in other products," he added.

"Bringing it closer in should yield benefits."

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