McAfee Finalizes Spinout, Stresses Platform Strategy

Today McAfee officially becomes an independent private company valued at approximately $4.2 billion, culminating a divestiture process that began in September. Technology investment firm TPG will own 51 percent, while Intel retains a 49 percent stake. Chris Young stays on as CEO, with VP of global channel operations Richard Steranka keeping the reins of the partner organization.

Young promised a prompt rebrand at the November Focus conference, and the company has met its self-imposed April goal.

Intel acquired McAfee in 2010 for $7.68 billion in a bid to beef up its software and services while baking security into its silicon. McAfee now has about 10,000 channel and 125 Security Innovation Alliance technology partners and does business with 90 percent of the Fortune 100 and 62 percent of the global 2000. Steranka, who previously laid out the company’s portfolio and channel-program strategy in depth, told Channel Partners that the spinout has funded long-awaited investments that will benefit partners.

“There’s this opportunity to address one of the areas that we’ve been in constant dialogue with our partners on, and that’s ease of doing business,” said Steranka. “How could we streamline the way that our partners work with us, order from us, quote, configure?” He says his team is well aware that Intel’s business model – providing silicon to OEMs and then influencing through resellers – is substantially different from selling software through the channel.

“With the opportunity and the necessity to stand up our own infrastructure and back office, we can now design it and have it purpose-built for our partner community as opposed to trying to do workarounds,” he said. Specifically, Steranka promises that configurators and tools for simplifying the ordering and closing process will launch over the next 12-18 months, joining the existing Salesforce instance that allows partners and inside sales to work collaboratively on opportunities.

Then, there’s the promotional spend.

“The brand is going to be the big change, and it’s going to come in unison with a relaunch of our marketing, obviously focused on the platform and the architectural strategy that we rolled out at Focus,” said Steranka, adding that there will be significant co-marketing opportunities.{ad}

“The brand changes, I think that’s something the partners look forward to,” he said. “In fact, I kind of joke most never stopped calling us McAfee in the first place.”

That may be so, but tech watchers realize that the McAfee name cuts both ways. Eric Parizo, senior analyst focusing on enterprise security with GlobalData, even argued that the brand has outlived its usefulness and should be abandoned.

“To the general public, the McAfee brand has long been associated with legacy antivirus technology that is perceived to be ineffective, as well as with founder John McAfee and his police encounters, YouTube videos or presidential aspirations — even though he is no longer associated with the business,” Parizo says.

Still, he understands the rationale behind the decision to …

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… keep the name and says McAfee maintains it can achieve dramatically accelerated revenue and customer growth following its spinout from Intel.

“It’s still well-known, is still strongly supported by channel partners as a product brand, and the company believes that there’s enough positive history behind the brand — not to mention today a very strong technology portfolio and leadership team — that it can be resuscitated successfully,” says Parizo.

And of course, there’s enormous cost and uncertainty inherent in rebranding, especially in the crowded and fiercely competitive enterprise security market.

Drawing on resources that can be better spent raising awareness of the expanded portfolio may not even be necessary for some customer segments, says Lester Keizer, CEO of Las Vegas-based solutions provider Business Continuity Technologies, because the average end-user has one criteria for success. “All they want is for it to work,” says Keizer. “Ninety-five percent of the time, they take our recommendation as their trusted business partner.”{ad}

In fact, he says, the more he can put his own brand on a solution, the better for customer stickiness.

Certs On the Rise

As to the channel program, Steranka says he’s seeing partners pare down their security portfolios.

“I’ve got a significant number of partners that, over time, just kept amassing more and more vendor relationships, to the point where they realized, ‘Wow, we have hundreds in some cases,’” he said. “They really want to back off and get down to a core set of strategic partners.”

Of course, to be that strategic security partner, a supplier must have a compelling technology story up and down the infrastructure stack, from endpoints to assets in the cloud, as well as a strong incentive program and access to education and selling and enablement tools. Steranka insists that McAfee gets that and is positioned to be an end-to-end provider.

And, that yen for exclusivity runs in both directions: Suppliers are tired of trying to wring value from a long channel tail and are demanding commitments from partners, often in the form of expensive-to-achieve certifications.

“At the beginning of this year we announced the addition of service-delivery specialization requirements to the Platinum level status,” said Steranka. “The expertise required by partners in both designing and implementing and supporting that platform is so key to our success with our customers that we felt it was imperative.”

That services-specific concentration involves four certifications and applies to McAfee’s entire solution set, from endpoint to data protection to hybrid infrastructure to operations. Achieving the highest-metal status requires three certs, but Steranka says most Platinum partners have all four.

“There’s training at both an individual product level as well as at a solution level,” he says. While partners can test out, McAfee still wants a …

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… sit-down with its professional services team for an assessment.

“We want to have full confidence in them and to make sure, if we’re telling our customers that these are the partners you should work with, that they’re capable of delivering spectacular results,” says Steranka. In return, McAfee provides branding to make sure top partners are recognized in the market as well as financial considerations, whether front-end investments in the business or rebates based on performance.

Keizer responds that MSPs and VARs are not on board with the trend toward more certifications.

“I co-chair the Partner Advisory Council for CompTIA, and just two weeks ago heard from partners around the country who voiced their opinion on this,” he says. The problem? Cost, driven partly by the ongoing critical shortage of security expertise, partly by the internal effort of tracking certs. It all adds up to overhead.

Still, the upside for partners is receipt of some valuable services business leads.{ad}

“Margins in product-only for partners has been declining,” says Steranka. “The majority of money right now … is in services, from implementation and deployment all the way through to managed security services. That’s becoming an increasingly larger part of our business.”

Steranka says he’s seeing a shift in the partner community, with traditional resellers beginning to build services practices while selling and marketing white-label offerings. McAfee also has relationships with large pure-play MSSPs that he says are leveraging the OpenDXL platform to integrate specialized technologies that they feel are critical to their overall solution sets.

While he wouldn’t speculate on net margin gains for partners since McAfee announced its technology roadmap and strategic direction in 2015, Steranka says the future is clear. 

“Services has always been rich, and I think also a keen way to differentiate yourself,” he said. “When a partner’s involved in a transaction and it’s just sourcing, procurement departments are going to make the decision that’s best for their business — which is, they’re going to buy it at the lowest price because there’s not a lot of value-add that goes with just pure delivery of product.”

One-Stop Security Shop?

At Focus, CEO Young said that by the April spinoff, McAfee would be one of the largest pure-play security companies, employing 7,500 professionals, including 3,000 engineers and hundreds of threat researchers, and spending $500 million in R&D. The company holds more than 800 patents. While traditionally seen as an endpoint security specialist, Young insists he has an expansive vision, including data center and cloud defenses.

“The best is yet to come,” said Young. “Don’t pigeonhole us based on our past.”

That wide-ranging strategy hinges on …

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… a platform approach, under which supplier partners sign on to McAfee’s Security Innovation Alliance, or SIA, program.

The term “platform” is being tossed around in a way that recalls cloud-washing, where suppliers slap an “as a service” sticker on legacy software. Channel Partners defines a “platform” as an open system with rules. Lyft is a platform — anyone can apply to drive, but they must abide by terms of service and can be barred for bad behavior. SIA likewise seems to fit the criteria. It now includes dozens of members, from Aruba to Xerox, and is open to companies with at least one common customer use case that demonstrates innovation and improved threat visibility; after testing, integrated products may receive the “McAfee Compatible” designation.

Parizo sees McAfee’s SIA program and OpenDXL as a competitive advantage.

“What I do really like about the McAfee strategy is the new brand tagline, ‘Together is power,’” says Parizo. “It highlights how the company is not only staking its future success on the strong integration of its own portfolio, but also how it’s using technologies like OpenDXL and Threat Intelligence Exchange to foster integration and data sharing among third-party best-of-breed security products.”{ad}

Keizer says customers know they need a new plan because we are all behind the security curve.

“Even the U.S. government with all its resources is failing,” he said, making customers reluctant to put all their security eggs into one solution provider’s basket. “They want a layered approach now, even including behavioral threat management.”

The amount of M&A activity is also giving his customers pause, said Keizer.

“Clients are getting dizzy with all the mergers and acquisitions that are taking place in the security space,” he said. “At the end of the day, the MSP is better served by having other security options to offer alongside some of the older, more recognized vendors.”

As to M&A, Steranka wouldn’t discuss specific acquisition targets, but he did cite the “Grobman Curve” principle coined by McAfee CTO Steve Grobman. That is, any security technology, once it reaches critical mass, will become a target, and cybercriminals will find gaps.

“That’s why we see this constant revolving door of different vendors coming in, possibly there for two or three years and then they’re the source of a major cyber crack, and they’re out and another vendor is in,” says Steranka. “That’s an awful painful hamster wheel for customers to be on.”

Partners need to provide visibility throughout the network and help spot advanced persistent and multithreaded threats.

“If you’re waiting around for an incident to happen, you’re likely six months too late,” he says. “Our story to the partners is, ‘You have to be proactive.’”

Parizo advises McAfee partners concerned about brand confusion to stress this platform approach.

“My take is that the company’s long-term goal is to tie the McAfee name to themes such as integration and security data-sharing,” he says. “Essentially, take a well-worn brand and undertake a ground-up rebuild of how it’s perceived.”

**Editor’s Note: It can be a struggle to mitigate the very real security risks of an on-the-go workforce without negating the productivity benefits. But the worst thing a customer can do is ignore mobile security. In this free editorial report, we give you some talking points to start the discussion. Download now!**

Follow editor in chief @LornaGarey on Twitter.