ISS Solution Providers Ponder Future With IBM

IBM's cannonball into the deep end of the IT security services market with a deal to buy Internet Security Systems has left some partners hoping their ISS businesses don't drown in the wake.

In a planned $1.3 billion acquisition unveiled last month"the fifth largest in IBM's history"the vendor will bring on new security technology for its Tivoli software line, a fleet of experienced security consultants for IBM Global Services, a managed services platform and a beachhead into ISS's 11,000 customer accounts.

It's a move that took some partners by surprise.

"This is an interesting acquisition, as IBM is not a traditional security player," said Brad Reed, director of Internet security at Compu-quip, a Miami-based solution provider and ISS partner.

ISS has made "absolutely phenomenal progress" over the past year in bringing in channel friendly people and rebuilding its channel team, Reed said. Channel partners drove 75 percent of ISS's sales in 2005, up from 68 percent the previous year.

Some ISS partners are less than sanguine about the prospect of allying with IBM. One who requested anonymity said he has a strong relationship with ISS and was "very discouraged" by the news of the IBM acquisition. "It's always easier to do business with a smaller company like ISS than one of the sheer magnitude and bureaucracy of IBM," the source said.

Still, other partners said they hope IBM will continue building on ISS's momentum. Much of ISS's channel comprises security specialists that haven't previously partnered with IBM"a contrast to IBM's other recent pricey buy, its $1.6 billion deal earlier this month to purchase FileNet, a company whose channel network already significantly overlaps IBM's.

RBTi CEO Mike Comm, a former ISS employee and close partner, said he trusts IBM to do the right thing.

"I think IBM wants to keep its partners. If they start cutting margins, a lot of the resellers will bolt," Comm said. RBTi, an Atlanta-based security solutions integrator, partners with more than two dozen vendors but has not previously worked with IBM. "As soon as it's announced that we have a contact person there, I'll be the first one on the phone. I want to continue the relationship. We have millions in recurring renewals with ISS each year."

Pete Venuta, vice president of sales and marketing at Information Security Technology, a St. Paul, Minn.-based solution provider, said he expects IBM's support and experience to provide significant value to ISS partners.

"Sometimes we question the reasons behind mergers and acquisitions, but in this case it makes sense because the security technology and services ISS offers are well adopted in the industry," he said.

Other ISS partners characterized the vendor's channel efforts as lackluster and said the acquisition could only make things better.

"ISS hasn't shown a high level of commitment to the channel, so I think the acquisition can only help improve the situation [for ISS partners]," said another solution provider who requested anonymity. ISS products are among the best on the market, but it has never been a solid channel company, the source said. IBM said the deal will be a boon to both its partners and ISS's, who will benefit from an expanded product line. IBM intends to integrate ISS's software with its Tivoli systems management software.

Bringing ISS into the fold fits with IBM's goal of expanding its security port-folio. "Security is a strategic growth area for IBM," said Val Rahmani, general manager of infrastructure management services, IBM Global Services, in a conference call.

With managed security services representing a $22 billion market and an increasing number of companies seeking to offload IT security management tasks, IBM, Armonk, N.Y., stands to benefit from adding ISS's managed services might.

"This acquisition bolsters IBM's position in the security marketplace, and specifically, in the rapidly growing area of managed security services. This is a key segment where we're dedicated to extending our leadership position," Rahmani said.

IBM plans to operate the company as an integrated business unit in Infrastructure Management Services, which is part of IBM Global Technology Services, she said.

ISS President and CEO Tom Noonan and founder Christopher Klaus will remain with ISS. IBM doesn't plan to lay off any of ISS's workforce of approximately 1,300 employees.