Barracuda Networks, the networking appliance vendor headquartered in Campbell, CA, announced today that they entered into agreement to acquire Purewire, a Web security services startup in Atlanta, in a cash/stock deal.
I have to say this announcement came as somewhat a surprise to me. Barracuda is a known networking appliance vendor, selling low-cost, on-premise network security appliances from firewalls to antispam devices. When I spoke to the Barracuda folks a few months back, they remained skeptical about the whole cloud computing craze. This move to acquire Purewire, unexpected as it was, serves as another testimony that cloud computing has reached mainstream status.
Barracuda made a name for themselves in industry by targeting small to medium businesses. Their SMB-oriented sales strategy has paid off, as Barracuda were able to make a number of acquisitions in the past two years. In 2007, they acquired NetContinuum, a Web application firewall company. Following that, they acquired BitLeap and Yosemite, which form the foundation of their cloud backup services, and now Purewire.
Even with their cloud backup services, Barracuda is still largely a vendor for on-premise security products. Switching from selling appliances to selling services is a non-trivial change. Distribution partners who are used to pushing boxes have to be re-trained to sell services. Incentive models have to be changed to entice them to sell services, or new distribution partners have to be acquired. Barracuda will do well to bring in more experienced personnel in service marketing and sales.
The technical brains behind Purewire are fairly well respected in the industry. By acquiring the company and retaining the expertise, Barracuda gains research credentials, which are needed in order to enter a new market (e.g., cloud services). It is therefore crucial for Barracuda to retain the founding staff of Purewire. The formation of the Barracuda research lab, made up largely of former Purewire personnel, is seen as a positive sign. One would expect the research lab to, in addition to performing threat research, drive innovation to turn Barracuda’s other on-premise products into service offerings.
But what is in this deal for Purewire? Won’t it be better if they were acquired by someone like Symantec? Additionally, why is Purewire looking for an exit so early? The company was only established in November 2007. I suspect this deal came at the right time for Purewire, who probably needed an additional infusion of funds in order to scale. Is Barracuda the right company to take Purewire, who already has a slew of industry awards and recognition, to the next level? Barracuda certainly has the financials to do so, but can they execute as well in the cloud space as they did for on-premise security? It remains to be seen.
In the mean time, this is positive news for Barracuda customers — they now have the option of buying appliances or services. For the larger industry, Barracuda’s ferocious marketing engine will now be tuned to promote services, which means more competition in the cloud security service space. Ultimately, that is a good thing.
This blog entry is cross-posted to Chenxi Wang's blog at: http://chenxiwang.wordpress.com.