State of the Markets

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The overall messaging management market is still relatively small, but it's growing quickly, according to David Ferris, president of Ferris Research Inc. in San Francisco. Messaging management is usually done by third-party vendors that build special monitoring application on top of the two major e-mail systems, Exchange and Outlook from Microsoft Corp. and Domino and Notes from IBM subsidiary Lotus Software Group.

"Overall, our sense of the market for messaging management tools is that it has about $100 million in software revenues annually. It's probably growing at about 100% annually, fueled by the substantial migrations that Exchange customers will undertake over the next two years," Ferris says.

While virus-scanning software from companies such as Wakefield, Mass.-based Sophos Inc. and Sunnyvale, Calif.-based McAfee.com Corp., a division of Network Associates Inc., is commonly used, there is also a large market for more sophisticated software that does more than look for virus signatures.

"That's a very broad church," Ferris says, because many vendors address niche problems within messaging management. Within this market are companies that offer security tools for content scanning and traffic monitoring, including BindView Corp., Baltimore Technologies PLC, Quest Software Inc. and NetIQ Corp.

For smaller players, it's all about finding a unique niche. Sunnyvale, Calif.-based newcomer Mirapoint Inc. offers its Message Director, e-mail firewall software, hardware and storage, which is added to any standards-based messaging environment to process inbound and outbound mail traffic for spam and virus control, policy enforcement and user access.

Rudolf Rauber, IT manager at BMW Group in Munich, chose Message Director, which sits behind a Cisco Systems Inc. firewall, after spam and hacker attacks threatened Bayerische Motoren Werke AG's (BMW) system and the volume of e-mail passing through the network grew beyond what the system's security could handle.

The automotive manufacturer has been using IBM AIX Unix e-mail forwarding systems on top of Hewlett-Packard Co.'s OpenMail. But HP is ending support for OpenMail, and BMW is now evaluating new messaging environments.

"The alternatives we have for a new e-mail system are Domino, Microsoft's Exchange or an Internet standards-based e-mail store," Rauber says. "But in any case, I think we will stay with Mirapoint Message Director as our e-mail gateway to the external world, especially the Internet. [It's] a dedicated e-mail box that is easy to install and operate and that has unbeatable throughput and security capabilities. The latter has become more important since Sept. 11." -- Jennifer DiSabatino

Mobile and Wireless

Emerging companies in the wireless and mobile computing segment will face a difficult six-month period, according to analysts and investors. To stay alive, many of these start-ups will cut costs; partner with big, recognized companies involved with mobile or wireless computing and find new markets for their products, experts say.

While the potential of mobile and wireless computing is mostly untapped, the market is already immense, topping $93 billion in the U.S., according to one estimate by Newton, Mass.-based Cahners In-Stat Group. That figure includes infrastructure investments by wireless carriers, handsets sold by manufacturers and services sold by carriers, but not wireless middleware purchased by enterprises.

Rutberg & Co. in San Francisco reported that the second quarter of this year showed a pronounced downturn in venture funding for wireless companies compared with the year-earlier quarter, with 116 companies getting $898 million, down from 208 companies that got $2.8 billion.

"The wireless market is terrible now, and most wireless developer companies are facing a brick wall, while some are being totally zonked on [venture capital] funding," says Tim Scannell, an analyst at Mountain View, Calif.-based Mobile Insights Inc. A common theme for smaller companies is layoffs of 10% or more of their workforce to avoid having to spend venture capital or find other ways to "save money and survive" alongside the big players such as IBM and Oracle Corp., he says.

Still, big companies in the field, especially wireless carriers, are adding wireless voice and some data subscribers. For example, Sprint PCS Group in Kansas City, Mo., had its best quarter ever for new customers in the third quarter. The Sept. 11 terrorist attacks on the U.S. reminded people that "wireless can be a lifesaver," says Becky Diercks, an analyst at Cahners.

MobileSys Inc., a wireless infrastructure vendor, also in Mountain View, will likely survive the downturn because it has begun to put together relationships with carriers, says Gartner analyst Phillip Redman. ScreamingMedia Inc. picked MobileSys to send wireless alerts to its customers because the vendor had extensive knowledge and agreements with foreign carriers, says Meredith Tanzers, director of marketing at New York-based ScreamingMedia. Burlington Northern Santa Fe Corp. in Fort Worth, Texas, says it picked MobileSys last year because it supports a broad range of wireless protocols that the railroad needs for its broad geography and because MobileSys developed products in Unix, while other vendors were using Windows and porting that version to Unix.

Antenna Software Inc. in New York also has promise, says Jennifer DeMarzio, an analyst at Summit Strategies Inc. in Boston, partly because it has focused effectively on a niche market of high-tech field-service mobility middleware. A recent partnership with Hamilton, Bermuda-based Accenture Ltd. will help, she adds.

A year ago, nobody was offering mobile connections for field workers that were Web-based and open to all types of client devices, says Brian Okun, vice president of marketing at Computer Professionals USA Inc., a New York-based antenna customer. -- Matt Hamblen

Network/Systems Management, Equipment

One need only look at the bottom lines of network heavyweights like Nortel Networks Corp., 3Com Corp., Lucent Technologies Inc. and even Cisco to understand that networking, like all of IT, has taken a beating this year.

Kneko Burney, an analyst at Cahners In-Stat Group, suggests, however, that networking and communications services may not be as adversely affected this year as IT spending as a whole, which Cahners expects to be down 12% from 2000 projections.

Slow economy aside, a problem for network vendors is that traditional network fare, such as routers and switches, is fast becoming a commodity. While Cisco and Brampton, Ontario-based Nortel, in particular, are fully aware of this issue and are pressing ahead with new services, such as network security services for voice over Internet Protocol, some new firms also plan to benefit from the change.

Much of the action yet to come in networking -- the real value -- will be more about the quality of service a user receives and less about the performance of the routers and switches that make up the network, says Paul Bugala, an analyst at market research firm IDC in Framingham, Mass.

Quality of service (QOS) has become a big deal to large companies that want to know which applications and people get priority on corporate networks, he says.

Network provisioning, which refers to adding or moving equipment and adjusting network access permissions as employees change roles, is becoming more important to network managers. "Even large corporations still believe this is the sort of thing that can be done by an intern using a pen and a legal pad," Bugala says.

In response to the growing importance of QOS and network provisioning, new vendors are stepping in to help.

Bose Corp., a consumer audio company in Framingham, has been using a QOS platform called QoSWorks from emerging company Sitara Networks Inc. in Waltham, Mass., to prioritize network traffic while decreasing technical support requirements and additional bandwidth needs across its wide-area network.

"What catalyzed the move to Sitara's QOS system was the potential for slowdowns on the network connections between the Bose headquarters in Massachusetts and distribution centers in South Carolina and Arizona," says Rob Ramrath, director of corporate information systems at Bose. The frame-relay links, Ramrath explains, carry shipping instructions for Bose's direct-sales business. But timeliness of order processing and shipping over that network was at risk because of bottlenecks caused by routine traffic, including e-mail and file-sharing, that also runs over the same network.

The Sitara appliances are special-purpose computers that run on Unix, Ramrath says. They can be set from a central console at Bose's headquarters to indicate what types of traffic in the company's network have priority, by source or application, at any given time. Sitara's QOS units also have built-in caches -- a setup that keeps frequently used data stored on hard drives at the distribution centers and lightens the load on the network. Ramrath says he really didn't consider other vendors because Sitara contacted Bose early on when it was developing its product and solicited Bose's input. -- James Cope

Security Products and Services

It's no surprise that security has suddenly popped to the top of everyone's radar. The market for managed security services is expected to top $17 billion by the end of 2004 as a result of this new focus, a deepening skill shortage and the complexity of managing enterprise security environments, according to IDC.

Dozens of vendors have rushed into the market to tap the opportunity. Their services include everything from firewall management and intrusion detection to planning, building and maintaining security architectures.

The market leaders will be the ones that offer a broad range of services, that are well-funded and that are able to establish a trust relationship in a market where outsourcing is still a relatively new concept, says Allen Carey, an IDC analyst. The challenge for newcomers is to quantify the value they bring to an organization. They need to be able to show "a [return on investment] that is attached to the service they are delivering," he says.

"There has been an increased awareness of security services post-Sept. 11," Carey says. "[Users] are looking for companies that possess a deep portfolio of services in order to maintain a consistent level of security within their organizations."

Take for example, Waltham, Mass.-based start-up Guardent Inc.

When Applied Materials Inc. was looking for a firm to help it define enterprisewide security procedures, the $9.6 billion maker of parts for the semiconductor industry selected Guardent for its level of expertise and depth of services. The company's grasp of both the technology and the business implications of protecting information also played a role, says Mark Koenig, director of global information security services at the Santa Clara, Calif.-based company.

"Most of the other services that I have come across take a very technology-centric approach to information protection," he says.

Guardent was founded in April of last year by three executives from Razorfish Inc., a Web site design and development firm in New York. Flush with more than $50 million in venture funding, Guardent offers a range of round-the-clock outsourcing services aimed at helping companies manage intrusion-detection, antivirus, firewall and vulnerability-assessment functions. It also offers a range of security-related consulting and integration services. Among its investors are Citigroup Inc.'s e-Citi unit, Mercury Interactive Corp. and Sequoia Capital.

What sets Guardent apart from other security firms is the breadth of its offerings, says Carey. The company is among a handful of firms that offer both consulting and managed security services. That gives Guardent a competitive edge over firms that limit their outsourced services to just one aspect of security, such as firewall administration or intrusion detection, he says.

Also important is Guardent's expertise in the field, says Paul Brown, IT director of Delta Dental of Rhode Island. Guardent is helping Delta Dental develop a formal enterprisewide security policy that among other things will help ensure the company's compliance with regulatory requirements. "We looked at KPMG and PricewaterhouseCoopers and chose Guardent because they were able to convince me that they understood my company's unique security needs and were going to blend that with internationally recognized procedures," says Brown.

Guardent certainly has its challenges. The company has to deal with a slew of well-funded rivals in the managed security space including firms such as @Stake Inc. in Cambridge, Mass., and Foundstone Inc. in Irvine, Calif. And far bigger and more established companies such as IBM's global service business have also begun expanding into the space. -- Jaikumar Vijayan

Supply Chain Management

Software vendors that help companies get a grip on their inventory costs could exploit current market uncertainties and enjoy the projected growth in this area, say analysts.

But while most users are aware of the large supply chain management software firms such as i2 Technologies Inc., SAP AG and Manugistics Group Inc., there are also smaller ones that offer very specialized tools from which users can benefit. Take for instance newcomers Rapt Inc. in San Francisco, which specializes in risk management, and Optiant Inc. in Somerville Mass., which lets users design and configure their supply chains using what-if scenarios. Given slowdowns in global supply chains resulting from the Sept. 11 attacks, these tools can help end users facing disruptions to just-in-time manufacturing processes, says Kevin Omarah, an analyst at Boston-based AMR Research Inc., in a recent report.

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