Kaspersky Sets Its Sights On The Enterprise

Say what you want about the off-the-beaten path anti-virus adventure known as Kaspersky Lab, but it's one company that knows how to inspire partner loyalty.

During its Americas Partner Conference in February, channel partners were spirited away to the Caribbean town of Punta Cana, Dominican Republic, where collaboration took place over locally rolled cigars and mutual shots of native island brew Mamajuana. And on a torch-lit beach, holding a Mai Tai by the 80-degree surf, every channel partner was emphatically on board to take this company to the top.

"We love our partners," said Kaspersky Lab CEO Eugene Kaspersky, from his resort suite overlooking the beach. "They are part of the same team … like a family. The company is loyal to our partners and our partners are loyal to the company."

That fact was further reinforced with an extravagant partner conference in which Kaspersky covered the flight and room bill at Punta Cana's opulent Moon Palace Resort for its channel partners.

"All I had to do was pay for airport parking," said Jimmy Cone, chief operations officer for ITXen, based in Wilmington, N.C.

It's just one of the reasons why many of Kaspersky's partners choose to focus 100 percent of their security sales and technical talent on the Russian vendor rather than on bigger brands like Symantec, McAfee and Trend Micro.

As a testament to the company’s ability to generate loyalty, Kaspersky is ITXen's only endpoint security vendor, Cone said. Officially launched in January of 2010, the brand new company has seen security sales already grow by about 7 percent in the last four months, and Kaspersky anticipates that growth to accelerate.

This as Kaspersky is set to mount an offensive to overtake larger rivals. With a new wave of enterprise and midmarket products and services, Kaspersky boasts that his company will become the third largest security company in the world this year and then move to become number one -- yes Number one -- in endpoint security by 2014.

But with the memories of island rum and rhythmic ocean tides starting to fade for channel partners, Kaspersky and company executives are going to have to tackle some monumental challenges, including how to get channel partners to sell, service and support a complex new line of midmarket and enterprise security products and services.

It would be foolish to dismiss Kaspersky's colossal market ambition. The Moscow-based company has zoomed up the market share charts with its unique brand of technical prowess and partner loyalty that some have dubbed Kasperskonality.

Kaspersky Lab has maintained its fourth place position in the antivirus market over the last year, according to research firm IDC, shooting up from around 4.2 percent in 2008 to 5.3 percent at the end of 2009, making it the fastest growing security software vendor in endpoint security, according to the Canalys Worldwide Enterprise Security Market Overview for Q4 2009 -- this despite a worldwide economic recession that crippled industry growth and slashed IT budgets.

While still only occupying single digit market share, the recent growth puts Kaspersky on the heels of competitor Trend Micro -- No. 3 of the "Big Three" security companies -- whose marketshare continues to hover at around 6.9 percent.

"In the last 12 months we almost have completed our plan for our global partner network development. We're still on the way but finally we're everywhere," said Kaspersky. "This year, we're going to be number three in endpoint security."

Trend Micro declined to comment on Kaspersky's speculation.

Next: Kaspersky Primed For Growth

And last year's growth doesn’t seem to be an anomaly. The company experienced more than 70 percent growth in the consumer space in 2008, with endpoint security marketshare rising from 1.1 percent in 2007 to around 4.6 percent at the end of 2008 -- a figure largely buoyed by its strong presence in the consumer space, according to the research firm NPD Group. The company grew 30 percent last year, and anticipates growing at least 35 percent in 2010, said Kaspersky Lab Chief Operating Officer Eugene Buyakin.

Right now, consumer sales occupy the lion's share -- about 63 percent of the business -- while corporate sales comprise about 30 percent. However, executives say they anticipate that 30 percent number to increase as the company continues to strategically target corporate accounts and gain credibility in the enterprise.

"The biggest challenge is on the one hand, we created the foundation for future growth and built future technologies," Buyakin said. "At the same time we have to grow right now right here. It's really balancing long-term and short-term goals."

As part of its enterprise push, Kaspersky brought on channel veteran Nancy Reynolds as its new vice president of corporate sales, and former Trend Micro SMB channel executive.

The enterprise market where Reynolds is leading the charge is a whole new ballgame. In the enterprise, security solutions are more complex and carry much higher price tags with longer sales cycles. That won't be without its fair share of challenges for Kaspersky, experts say. It's one thing to experience exponential growth in consumer and SMB markets. It's quite another to expect that same rocket-like growth will naturally translate into larger markets -- markets that are inherently more cautious and skeptical when choosing and partnering vendors.

For enterprise and mid-market companies, decisions regarding IT purchases must pass a complex litmus test that takes into consideration detailed return on investment models, complicated budget cycles, a myriad of compliance regulations and internal policies. Enterprise businesses often look to partner with vendors that can offer a full array of high-end solutions, which include DLP, encryption, access control and log management, among other things.

"The large enterprise market is different. They're dealing with much more complex issues. There's much more focus around compliance and data privacy and much more interested in reducing cost and complexity, pulling functions and features under a single vendor and technically under a single management policy infrastructure," said Paul Roberts, senior analyst of enterprise security with the 451 Group. "Playing in that space requires Kaspersky to have some pieces that it doesn't have now or hasn't fully birthed."

Next: Kaspersky At Your Service

Recent product releases seem to reinforce that same enterprise focus. In October of 2009, Kaspersky launched Kaspersky Open Space Security, incorporating a newly renovated management console, Kaspersky Administration Kit 8.0, touting greater visibility and control, and full compatibility with Windows 7.

Keith Maskell, Kasperksy Lab vice president of corporate business, said that Kaspersky will be releasing Version 9 of its Administration Kit later in 2010, which, among other things, will distinguish itself in the market with increased interoperability across a wide array of platforms.

The company will also be rolling out a version of its corporate Mac security product, slated for release during the third quarter, executives said. Maskell emphasized that the Mac release was increasingly important for resellers, as more enterprise organizations adopt Macs into their IT environment.

But one of the biggest uphill battles facing Kaspersky will be in launching a truly competitive hosted and managed services offering on par with some of their biggest competitors. The company plans to release hosted Web and e-mail content filtering services along with hosted malware detection services.

Trial sales of Kaspersky's impending hosted services are slated for a global launch some time in September. The company also plans to unveil a hosted product for the SMB by 2011 and then scale upwards for larger companies and governments.

The SaaS/hosted services model is scheduled to be offered either as a pure cloud scenario or a hybrid solution that features a combination of both on-premise and in-the-cloud solutions, executives said.

It will also be developed with a channel-friendly distribution model and delivered via Kaspersky reseller partners, although Kaspersky stopped short at specifying whether the service model would be implemented 100 percent through the channel.

In addition to recruiting new enterprise level and service-oriented VARs, Kapsersky Lab executives said they also plan to help enable current partners to embark on Kaspersky Hosted Services with comprehensive technical and sales training offered through Kaspersky University, the company's online training portal, as the new model is rolled out. The company will also develop and disseminate collateral and sales tools to partners.

Partners are currently preparing for the service push by undergoing the various trainings and certifications, which so far have been offered for free, partners say.

Kaspersky is also paving the way for its foray into the larger markets with trial sales of its enterprise products that partners can deliver to their enterprise customers, allowing them to pilot the product on a smaller scale before the massive rollout later this year.

Thus far, about 75 percent of Kaspersky partners could be ready to make the jump to Hosted Services by the time that the first wave is officially rolled out this fall, Reynolds added.

"The low hanging fruit is messaging security, antispam and virus scanning around e-mail," 451 Group's Roberts said. "I think their largest audience for this is still very much the SME. They see increasingly the need for a hybrid strategy that comprises both on-premises protection as well as cloud."

Next: Playing With The Big Boys

Despite its big ambitions, Kaspersky might have to play catch-up to establish that its developing service model is largely achieved and sustained through the channel in order to put itself on an equal playing field with competitors. Nearest competitor Trend Micro has already launched a slew of hosted services, such as Hosted Email Security and its line of Worry Free products, which are hosted by the company but sold through channel partners just like a software offering, executives said.

"Other organizations (than Trend Micro) are adding services that VARs can potentially resell and add. I'm not sure how that will work," said Michelle Drolet, CEO of Framingham, Mass.-based TowerWall and Trend Micro partner. "Where does the margin go?"

Services now comprise about five to six percent of Symantec's business following its acquisition of MessageLabs in 2008. Much of the company's messaging and content filtering services are hosted in the cloud by Symantec, but the security giant is also dealing with the aftermath of failings around its Sell With program, that aimed to hand over the bulk of its services to partners, but instead fueled some channel tensions by juxtaposing a direct services model with a channel-oriented one.

Recently, Symantec announced that it planned to hand over large swaths of its consulting and professional services division to its channel -- a services strategy shift that partners say was "promising," as it’s the model evolved into one that was more channel centric.

"When you're trying to compete against the person who manufactures the software, generally your margins get eroded," said Jonathan Dambrot, managing director of Prevalent Networks, based in Warren, N.J. "When you get rid of some of that I would anticipate there's no longer that competition. I would expect that our margins should improve."

But Kaspersky's comprehensive release represents something channel partners have been demanding for a while. This isn't the first time Kaspersky has attempted to launch services, partners say, although it's probably the biggest and most public effort to date.

Kaspersky channel partners said that up until now, the company's services offerings haven't been ready for prime time.

"That's one area that I'm still a little skeptical," said John Burton, co-founder of Network Performance Inc., based in South Burlington, Ver. "The jury's still out on that one. They have attempted it a couple of times. Unfortunately it hasn't passed muster so far. The proof is in the pudding."

Burton said that this time around said he's taking a "wait and see" attitude, but isn't ruling anything out.

"They've been careful not to roll anything out that is premature," he said. "They don’t have a black eye on it yet."

And partners said that that the impending release of Kaspersky's Version 9 of its Administration Kit and management console would be the company's catalyst for its entrance into the enterprise services space.

Partners overwhelmingly hailed the last Administration Kit, Version 8, as a solid product. "The ease of which the product is able to be administered is going to be a significant advantage for CIOs and IT administrators," ITXen's Cone said.

Even with those advantages for CIOs, some partners are happy staying firmly focused on antivirus in the SMB and are not willing to step up to the enterprise with Kaspersky.

John Lane, senior solutions architect for Logical Front, based in West Jordan, Utah, said he doesn't see ’many enterprise companies interested in managed services.’

That could change down the road as Kaspersky expands its portfolio with more complex enterprise-class products, Lane said.

In light of the impending services launch, Reynolds said that she planned to recruit more enterprise and service oriented channel partners over the next 12 months, with the tentative aim of hiring around two to three regional or multi-regional security solution providers per major metro area. At the end of the day, VAR recruitment could potentially total anywhere between 100 and 200 over the next year, executives said. The goal? To reach the $1 billion revenue mark, Reynolds said.

For now, the company has a ways to go. In 2009 Kaspersky's sales hit $391 million. This year Kaspersky sales are expected to be up 40 percent.

"We'll get there. But you absolutely have to have a robust channel. Not just your traditional VARs," Reynolds said. "You have to look at managed services. You have to look at alliances."

Reynolds said the company was going to focus on key verticals in the Americas, which include K-12 education, public sector, healthcare and state and local businesses. "We're following the money," she said.

And it's paying off for partners who see Kaspersky winning in the marketplace and displacing better known rivals with its solid products.

"It feels to me as if they've got the right groundwork, the way their product is performing," Cone said. "It's just you're cutting into a market that's been so well established for such as long time. Their performance is going to be their main 'in.'"