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New day. New owner. Same consistent focus on the channel. That sums up the mood inside Sophos, the endpoint security software company that was acquired by a private equity firm this week. Earlier today, The VAR Guy sat down with Sophos Channel Chief Chris Doggett, VP of Corporate Strategy Arabella Hallawell and Global Director of Strategic Marketing Mike Haro.

The VAR Guy

May 6, 2010

4 Min Read
Sophos: New Owner, Same Channel Partner Focus

sophos endpoint security

New day. New owner. Same consistent focus on the channel. That sums up the mood inside Sophos, the endpoint security software company that was acquired by a private equity firm this week. Earlier today, The VAR Guy sat down with Sophos Channel Chief Chris Doggett, VP of Corporate Strategy Arabella Hallawell and Global Director of Strategic Marketing Mike Haro. Here’s a recap of the conversation, and the implications for channel partners.

First, let The VAR Guy set the stage. Apax Partners, a private equity firm, acquired 70% of Sophos earlier this week. The overall deal values Sophos at $830 million, or more than 3 times annual revenues.

Admittedly, private equity deals sometimes can be difficult for software companies to navigate — since the owner eventually will want to (A) sell off the company or (B) IPO the company.

Still, Doggett is quick to point out that Sophos has a predictable, consistent, established track record with partners and customers. And the Sophos team says that won’t change under Apax Partners’ ownership. While giants like Symantec and McAfee have flip-flopped from time to time on the channel, Sophos is all channel, all the time, notes Doggett.

“Judge us like you would judge a politician’s voting record,” said Doggett. “Look at our track record. We have a track record of consistency with the channel.” When you sift through all the security vendor noise right now, Sophos is different from rivals because the company hasn’t suffered from trust and confidence issues in the channel, Doggett added.

Next Moves and Numbers

Backed by Apax Partners, Sophos plans to accelerate its channel partner programs and R&D efforts, added Haro. But even before Apax opened its wallet to gain a majority interest in Sophos, the security software provider had an R&D edge, Hallawell asserted.

Instead of buying up niche security technologies that were designed for Fortune 100 IT budgets and big support teams, Sophos continues to promote a “one agent, one engine” model. In other words, the company’s endpoint security software is tightly written, Sophos asserts, to ensure minimal footprint and ease of installation.

Apparently, that strategy has been treating Sophos well. The company has generated a 27 percent compound annual growth rate (CAGR) over the past three years, Hallawell said. And in the most recent fiscal year, roughly 46 percent of Sophos revenue came from partners that identified new customer opportunities for the software company, Doggett added. In other words: Partners are pushing beyond their established customer bases to pull new customers into the Sophos ecosystem.

But how do partners actually view Sophos? Doggett came prepared with stats. He said 93% percent of partners view their relationship with Sophos in a very positive light, according to an annual survey of 11,000 Sophos partners. Also, two-thirds of the partners rated Sophos “excellent” or “very good” in areas like trust and ease of doing business, Doggett added. Sophos funds the survey, but it’s conducted by an independent third-party organization each year, Doggett said.

Time for an Upsell

To build on that momentum, Sophos is promoting Endpoint Security, Data Loss Prevention (DLP) and Encryption software into smaller and midsize businesses.

Doggett noted that Encryption software has penetrated under 20 percent of companies that have 1,000 or fewer seats, so the technology has tremendous upside potential, he asserted.

Also of note: Sophos has publicly stated multiple times that the company is working on an MSP-related partner program and … yada, yada, yada … stay tuned just a little while longer.

Reality Check

Generally speaking, it’s hard to punch holes in the Sophos growth story. The company remains channel centric. And a 27 percent CAGR over the past three years is impressive, especially considering the recent recession.

Still, part of the Sophos strategy hinges on past channel errors at McAfee and Symantec. Doggett and team are betting that VARs have really long memories, and still won’t forgive McAfee and Symantec for inconsistent channel strategies over the past decade.

More recently, McAfee has taken steps to reengage the channel by hiring Cisco channel veteran Alex Thurber and launching a new partner program. And Symantec Channel Chief Randy Cochran has provided some stability since CEO Enrique Salem allegedly made some controversial channel comments in mid-2008. Salem has also been highly visible at Symantec-related partner conferences in recent months, including the 2009 Symantec Partner Engage event. And earlier today, Symantec reported strong quarterly financial results.

All that said, Sophos thinks its message of channel consistency will continue to resonate with partners. The VAR Guy will continue to touch base with partners for ongoing reality checks.

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