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All Roads Lead to Romania

The large anti-virus software vendors put on a brave face when they heard the news that Microsoft are to acquire GeCAD Software a relatively obscure anti-virus company in Romania. “It’s great news of course and show’s Microsoft’s commitment to its ‘Trustworthy Computing’ (TWC) initiative but we still need to understand the full implications”, summarised the reaction from Symantec, Trend, Network Associates, Computer Associated and others. It would however be hard to find any sensible business that would welcome Microsoft’s appearance as a competitor and the global antivirus software market, according to Gartner, was worth $1.1 billion in 2001, growing at a steady 11%, far better than just about any other technology sector.

The writing has been on the wall for some time and I will tell you why, at least in principle, this strategy shift on the part of Microsoft might be a good thing.

Returning to Gartner briefly, last month, it released a study which said that 2003 will be the first year in history in which most industries will spend 5% of their IT budgets on security and that spending in this sector will have grown at a compound annual rate of 28% between 2001 and the end of 2003. In the same period IT budgets overall will have grown only 6%.

When a commodity becomes a necessity prices invariably rise until, in an open market. Competition creates equilibrium. As with the Gas and electricity industries in this country, consolidation is frequently the enemy of competition because as an industry is reduced to a handful of players, prices are inclined to rise over time. The same can be said of the software industry where the ‘TCO’ of security appears to be climbing steadily.

Microsoft has entered the anti-virus business because as part of its TWC strategy, it wishes to have greater control of the process which allows it to respond to viral threats. Presently, it relies on partners who are granted to Microsoft APIs (application program interfaces) but there is a strong argument in favour of building the overall security response into the likes of Windows Update in order to improve the speed of the company’s response to any new virus signature. In other words, this is primarily an architectural and management decision where Microsoft, which has recognised that historically, it is part of the problem, now attempts to become part of the solution.

Anti-virus is of course only one part of the security puzzle and in Windows XP, Microsoft already offers basic personal firewall functionality. Knowing Microsoft’s thirst for ‘innovation’, we can reasonably expect further ‘mission creep’ and the company is already preparing the way with privacy, PKI and Digital Rights Management (DRM) technologies. Finally, .net requires strong security architecture if Microsoft’s Web services vision is to succeed, so I think we can agree that more acquisitions and investments in the security space are likely in the near term.

Why then, is this likely to benefit the customer? Two reasons spring immediately to mind. The first of these lies in the potential for better management of the virus threat, directly from Microsoft. That’s not to say that the other AV vendors don’t do a great job but having its own AV division places a much greater emphasis and responsibility on Microsoft to deal with the problem in a faster, smarter and better way than it has done in the past.

Secondly, there’s cost and the TCO – Total Cost of Ownership – argument. Microsoft should make its anti-virus service free, I hear you say. After all, it if wasn’t for the weakness in Microsoft’s architecture, then business wouldn’t have had to spend billions over the last decade or at least since Dr Alan Solomon called me one day in the late 1980’s and said “I’ve got this really great idea”.

Unfortunately free, while attractive to everyone from a TCO perspective, is unlikely to be an option. Even if Microsoft wished to mitigate its past record by seamlessly including anti-virus into Windows Update, I doubt it could. The European Commission is already investigating the bundling of Windows Media Player as an allegedly‘ anticompetitive’ move and while I doubt that users are complaining too much over the extra functionality, bundling anything for ‘Free’ would attract the unwelcome and expensive attention of competition legislation on both sides of the Atlantic. So free is out of the question, at least for now. This means that Microsoft will have to compete with the other security vendors a thought, which on the surface, appears to leave them collectively unconcerned.

What I think will happen is that Microsoft will offer its own solutions at a competitive pricing level which will force other companies to either drive down their own charges or look elsewhere for business opportunities. I don’t receive a sense that Microsoft sees anti-virus as a ‘cash cow’ to be milked and instead, when you factor in the added features of Windows Server 2003, which include better terminal services and a more secure environment, Microsoft appears to be improving the overall TCO proposition in its latest products.

In the end, this could be good news for business and a grave problem for the two weaker of the top four security vendors but only time will tell.


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