The Future of the Firewall Market: New Technology or Convergence?

The Future of the Firewall Market: New Technology or Convergence?

Chris Rodriguez

Research Analyst

Network Security

June 3, 2010

2

Focus Points/Agenda

•Firewall Market Size and Forecasts

•Market Drivers

•Market Restraints

•Market Challenges

•Emerging Trends

•Unified Threat Management (UTM) market size forecasts

•New Technologies and Performance Considerations

•Key Competitors

•Expectations for Future Growth

•Conclusions

3

Technology Segmentation

•The base year for world firewall market study is 2009, and the forecast period is for 2010 to 2016.

•This market is segmented horizontally by small office/home office (SOHO), small and medium-size business (SMB), large enterprise, and service provider.

•Vertical markets covered include telecommunications, government, financial, technology, manufacturing, healthcare, utilities, retail, education, travel and hospitality.

•Geographic regions covered include North America, Asia Pacific (APAC), Latin America, and Europe, the Middle East, and Africa (EMEA).

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Firewall Market Growth Projection

Total Firewall Products Market: Revenue and Unit Shipment Forecasts (World), 2006-2016

•In 2009, firewall vendors shipped 2.0 million products, earning $2,949.0 million in revenues.

•Revenue growth slowed greatly in late 2008, 2009, and 2010 due to economic difficulty, among other factors.

•The market is forecasted to reach $4,630.2 million in revenue by 2016, a compound annual growth rate (CAGR) of 6.7 percent.

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

5

Major Market Drivers

Source: Frost & Sullivan

Large Enterprise Customers Demand

Dedicated Solutions

Evolving Threat Landscape and

Emerging Technologies

Network Refresh Cycles

Next Generation Firewall

Functionality

Superior Functionality than Embedded and

Integrated Security Solutions

New/Existing Regulations

Require Mandatory Security

Baselines

Total Firewall Products Market: Market Drivers Ranked in Order of Impact (World), 2010-2016

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Major Market Restraints

Total Firewall Products Market: Market Restraints Ranked in Order of Impact (World), 2010-2016


Restraint TextCautious Spending Delays

Security Expenditures

Dissolution of the Network Perimeter

Customer Attitudes Towards

Security

Increasing Competition from UTM Solutions

Lack of Customer Interest Due to

Level of Innovation

Embedded Security

Functionality Continues to

Improve

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0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenues (

$ M

illio

n)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Revenue G

row

th R

ate

(%

)

Revenues ($ Million) Revenue Growth Rate (%)

Economic Downturn

Total Firewall Products Market: Unit Shipment and Revenue Forecasts (World), 2006-2016

•In 2009, firewall vendors dealt with unexpected economic pressures as customers delayed replacement and upgrade cycles.

•Firewall remains a critical part of any network and security infrastructure, and sales will rebound starting in 2010.


Mature technology, market saturation, and economic pressures cause slowed growth in 2009, before rebounding in 2010.

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Major Challenges

Adapt to New Technologies and Emerging Threats

Maintain Dominance in Enterprise Market

•Firewalls are already vulnerable to evasion tactics such as port hopping and tunneling.

•The threat landscape continues to evolve.

•Firewall vendors must continue developing new methods of detecting and preventing attacks and unwanted network traffic.

•SMB customers have been drawn to consolidated security solutions that include firewall (UTM).

•Large enterprise and service providers still require high performance solutions.

•Firewall solutions are currently more scalable than UTM solutions.

•UTM products continue to improve performance and scalability.

Adapt to Disruptive Technologies

•Emerging technologies and applications present new attack vectors, and complicate traditional security practices.

•Customers will often accept the risk inherent to using these applications.

•Firewall solutions must enable customers to safely use next generation applications.

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Emerging Trends

•The firewall market was initially highly innovative, with three different product methodologies developed within a short span of a few years.

•Since then, firewall vendors have focused on competing primarily on price and scalability.

•Going forward, the primary strategy for many firewall vendors originally focused on convergence to provide value to customers.

•However, vendors have released new firewall functionality that will help customers to better address emerging technologies and the new threat landscape.

•New and emerging firewall technologies are required to motivate customers to replace or upgrade their existing solutions.

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Emerging Trends

Total Firewall Products Market: Market Timeline (World), 1985-2010


1985 1990 2000 2003 2006 2010

Security breaches demonstrate the

need for perimeter defence

First packet filter firewalls

developed

Application layer firewalls

developed

Stateful firewalls developed

Vendors begin offering Deep

Packet Inspection

Firewalls capable of securing traffic

based on application and

user identification

Vendors begin to consolidate

security functions into firewall

Large vendors adapt emerging

firewall technologies

Firewall solutions now include IPsec VPN capabilities

First Generation Second Generation Third Generation Fourth Generation

Proprietary ASICs used to improve

performance

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Unified Threat Management (UTM) Market Revenue Projection

•The UTM market grew 20.1 percent and generated revenues of $1,971.8 million in 2009.

•This market was characterized by high growth rates before 2009, such as a 32.2 percent growth rate in 2008.

•As the market rebounds, growth rates are expected to increase in 2010 and 2011, before leveling off.


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Reven

ues (

$ M

illi

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)

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400

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Un

it S

hip

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ou

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Revenues ($ Million) Unit Shipments (Thousand)

Total Unified Threat Management Market: Revenue and UnitShipment Forecasts (World), 2006-2016

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Total Market Segment Highlights

Service

Provider

34.5%

Large

Enterprise

51.5%

Small and

Medium Business

14.0%

Total Firewall Products Market: Sales by Customer Size (World), 2009

Key Highlights

• The total firewall market is valued at

$2,949.0 million and was divided among

the following market segments in 2009.

• The large enterprise market accounted

for 51.5 percent of market revenues.

• The service provider market generated

34.5 percent of market revenues.

• The small and medium business

segment generated 14.0 percent of

revenues.

• The small and medium business

segment has been decreasing in recent

years, due to competing UTM solutions.

Note: All figures are rounded; the base year is 2009.


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Product Performance Comparison

Total Unified Threat Management (UTM) Products Market: Product Performance by Vendor (World), 2009


• Dedicated firewall solutions are capable of scaling to 10 Gbps throughput, and will

soon be available as 40 Gbps solutions, as carriers and service providers demand it.

• UTM solutions address a wider range of threats, as well as blended attacks. They

are also much more convenient and can be cost effective.

• However, these solutions are not as scalable as stand-alone firewall solutions. This

high performance is necessary to penetrate the larger enterprise market.

Max. Firewall Throughput Max. IPS Throughput Max. UTM Throughput

Company A 20 Gbps 10 Gbps 1.5 Gbps

Company B 8 Gbps 3.5 Gbps 2 GbpsCompany C 10 Gbps 2 Gbps 1.4 GbpsCompany D 10 Gbps 1.1 Gbps 350 Mbps

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Major Industry Participants

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Conclusions

A considerable percentage of the SMB market has adopted UTM solutions, resulting in a smaller share of the firewall market for this segment.

While UTM vendors claim to be gaining traction in the large enterprise and service provider sector, these organizations will continue to require the high performance of dedicated firewall solutions.

New firewall technologies are necessary to keep up with the evolving threat landscape and emerging technologies.

New firewall technologies will also reinvigorate customer interest, and help firewall vendors to stay ahead of ever-improving UTM solutions.

UTM solutions provide tremendous value by combing firewall/VPN, intrusion prevention/detection, gateway antivirus, antimalware, antispyware, antispam, and Web filtering.

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