The Doyle Report: Standing with the Rebel
Kicked to the curb by the federal government. Banished from the shelves of Best Buy. Prohibited from advertising on Twitter.
Could any tech company have had a rougher go of it in 2018 than Kaspersky Lab, which has been accused of getting too cozy with Russian intelligence and other government officials?
Yes, actually. Take Huawei. The Chinese telecommunications manufacturer has been vilified in Washington by members of Congress and effectively locked out of much of the U.S. market. Ditto for rival Chinese phone maker ZTE.
“Unsafe at any speed,” regulators, competitors, politicians and intelligence officials have essentially claimed. To some, these companies are too close to foreign intelligence communities, too eager to abscond with industrial secrets.
Despite claims that their products pose risks and their business practices violate laws, Kaspersky, Huawei, ZTE and others have many supporters. Within the channel. Among customer accounts. And in local communities, too.
What it’s like “standing with the rebel?” As you can imagine, it isn’t always easy. Some supporters have had their patriotism questioned while others have put their careers in jeopardy. Still more have put their businesses at risk.
They do so for various reasons, though. Many seek monetary gain or competitive advantage. Others hope to prevent an injustice. Some simply do not like being told what they can and cannot do. For these reasons and more, they are standing pat.
“Guilty ‘til proven innocent”
The above line is something Eugene Kaspersky tweeted after the Trump administration ordered a purge of his company’s software from U.S. government offices in September 2017. Kaspersky, of course, is the co-founder and current CEO of the company that bears his name. He founded Kaspersky Lab in 1997 along with his former wife after a successful career with Russia’s Ministry of Defense.
Although Kaspersky has often called for greater regulation and protection of key parts of the internet, his military past is often used as the foundation for raising suspicions about the multibillion-dollar company that helps more than 400 million users and 270,000 corporate customers worldwide. “As a private company, Kaspersky Lab does not have inappropriate ties to any government, including Russia, and the only conclusion seems to be that Kaspersky Lab is caught in the middle of a geopolitical fight,” the company said in October 2017.
While the scrutiny of Kaspersky’s business worries some in the IT world, others remain loyal. One of those is Sam Reynolds, CEO of Network Technology Solutions or NTS, a Thomasville, Georgia, technology services provider that has been in business since 1999. Although NTS provides network management, website design and security services like many others, Reynolds prides himself in doing things differently. For example, NTS employs no dedicated salespeople. Every customer-facing person, in other words, is an engineer by training. And every one has up-to-date vendor certifications under his or her belt.
Standing with Kaspersky is another way Reynolds goes his own way. While NTS sell goods and services from Cisco and Palo Alto Networks, Kaspersky is the company’s largest provider of end-point security software. Why stand with the company, despite all the drama around it? Simple, Reynolds says, “The technology is simply better.”
Reynolds especially likes the integration, encryption and management capabilities of Kaspersky’s products. “No one company is 100 percent effective at protecting everyone and all of their needs. But Kaspersky helps us satisfy nearly all,” he says.
Certain government customers, he adds, won’t bring Kaspersky products into their IT departments. But the majority of customers that have put their faith in NTS don’t bat an eye when the company recommends Kaspersky. One big reason, Reynolds says, is the software developer’s decision to move a significant portion of its business, including its core infrastructure, to Switzerland from Russia. That plan was unveiled in May, along with several other big changes that Kaspersky hopes will allay customer and partner concerns.
As part of a broader “Global Transparency Initiative” launched in October 2017, Kaspersky announced in May that it would build a data center in Zurich and process all information for users in Europe, North America, Singapore, Australia, Japan and South Korea there. In addition, the company said software “assembly” would move to Switzerland. Kaspersky also said that it would make the source code of its products and updates available for review. Finally, it announced that it will help create and support an independent entity tasked with the review and examination of security software products going forward.
The announcements came with some caveats. Source code, the company said, would be made available to for review by “responsible stakeholders,” whatever that means. Anti-virus databases, meantime, would be “assembled and signed with a digital signature in Switzerland, before being distributed to the endpoints of customers worldwide.” Ambiguities aside, Reynolds said the messaging turned the tide for Kaspersky in the U.S.
“With its transparency initiative and decision to establish a data center in Switzerland, Kaspersky took a very big step forward,” says Reynolds.
Figures from the company seem to back that up. Take the channel. In February, the company signed up its 1,000th MSP channel partner. That’s quite a bit when you consider that the Kaspersky Lab MSP partner program was only launched in April 2017 and that Kaspersky operated under a cloud during much of that time.
While Kaspersky’s most active MSP partners (95 percent, according to the company) are located in Europe, it continues making inroads here in the U.S., where it now has more than 400 partners. New companies are joining its partner program every week. And many old partners are standing firm. This includes large and influential companies such as Calance, which told Channel Partners in May that negative press about Kaspersky didn’t dampen its trust in the company.
When asked for comment for this feature, Kaspersky Lab provided the following statement to Channel Futures:
“For over 20 years, Kaspersky Lab has focused on protecting people and organizations from cyber threats, and the challenges that the company has faced do not change that mission. The company is unfortunately caught in a geopolitical fight and has been unfairly targeted without any meaningful fact finding. Therefore, Kaspersky Lab continues to challenge the validity of the accusations in federal court and keeps its partners updated on the latest developments. Kaspersky Lab always keeps an open line of communication with partners to support them and address their business and customer needs.”
Right Place, Wrong Time
When Huawei established its first office in the U.S., in Plano, Texas, the U.S. tech economy was in the midst of a full-on dot com implosion. With major telecom and network equipment makers slashing prices to make ends meet, Huawei struggled to gain much in the way of market share. For three whole years, Huawei didn’t sign one customer, Fortune reported in 2011.
Over time, however, Huawei built a following. Today, the company does business in more than 170 countries and employs more than 180,000 people. Its global revenue is north of $90 billion, which is nearly twice the sales generated by rival Cisco.
For all its success in handsets, global networks and more, Huawei has struggled here in the U.S. Here it is a pariah in some circles. Among other things, the company has been accused of stealing trade secrets and creating back doors in its networking products that Chinese agents could exploit for military and industrial gain.
Depending on whom you talk to, Huawei has all but given up in the U.S.or hunkered down for a prolonged ground war to rebuild its reputation. (The company has yet to confirm which and did not respond to a request for comment.) No matter how you see it, Huawei has weathered a difficult storm in the U.S. in 2018. In January alone, House Republican Michael Conaway (Texas) introduced a bill that would effectively prevent government agencies and contractors from buying Huawei products. That same month, AT&T ditched plans to sell the Chinese company’s latest device, the Mate 10.
Since then, things have not improved. In April, the U.S. Federal Communications Commission (FCC) voted to proceed with a new rule that The New York Times said would “effectively kill off what little business the company has in the United States.”
Huawei has lost customers and talent, including Bill Plummer, who, as vice president of external affairs, served as the company’s top champion in Washington.
In June, Huawei’s name was further sullied when Facebook acknowledged that the company was one of four Chinese electronics firms with which it had a “data sharing” relationship. (Facebook has since said it will wind down these relationships.)
One former Huawei sales chief I spoke with said he was disappointed how things turned out. He came out of retirement to work with Huawei. And, he says, he achieved significant success, at least at first.
“We were doubling the business every year and signing new customers,” he recalls. “We also were providing significant value for less than what other companies charged.”
Standing up for the rebel took courage with certain accounts, he recalls. Some customers, especially those in conservative parts of the country, went so far as to question his patriotism. But he would have none of that. With several family members in the U.S. military, he would tell Huawei detractors, “don’t go there.”
“If Huawei technology was so dangerous, then why did our troops rely on Huawei wireless products in Afghanistan?” he would ask. Besides, he adds, how different is Huawei gear from that of other companies who also manufacture their products in China?
“My goal was to provide high-speed internet to underserved areas of America. You do that best with world-class products priced for less,” he says.
Make that world-class products priced-for-less and sold by an aggressive and loyal channel. For several years, Huawei tried to recruit U.S. channel companies. The work was hard, says one former channel manager. Other vendors had deeper ties to the channel, and better name brand-recognition. They also did not have government agencies spreading negative stories about their companies.
Despite its struggles, Huawei signed up a number of partners in the West, including the U.K. where you can find pure technology group. In May 2018, pure was named Huawei “IT Reseller of the Year”at the company’s 2018 Partner Summit in London. Collecting the award on behalf of pure technology, Simeon Banks said, “Huawei has been one of three big bets for us in the last 12 months and we’ve achieved some great things together. The relationship goes from strength to strength and we look forward to more customers seeing the huge benefits that the pure technology group and Huawei partnership can bring.”
Although no U.S. partner would make such a claim, several still stand by Huawei to this day.
San Francisco Bay Area solutions provider FusionStorm still represents Huawei in the States, according to the company. Same with Fremont, California-based electronics and networking gear distributor ASI Corp.
Said a former Huawei channel sales manager, “Without proof, partners aren’t eager to give up on a company they like based on rumor and innuendo.”
Given the precarious position Huawei finds itself in the U.S. today, they may not have to. Instead, it may turn out that Huawei is the one forced to give up. The same is true of Chinese phone giant ZTE. Despite U.S. President Donald Trump’s vow to help save ZTE after it was accused of misdeeds by the U.S. Commerce Department and U.S. intelligence officials, the U.S. Senate voted to block ZTE from buying American-made parts on June 19. The legislative action sent shares of ZTE stock traded in Hong Kong tumbling almost 25 percent, and dimmed the company’s future prospects in the U.S.
Whether you consider them to be outlaws, underdogs or upstart disruptors, the tech industry’s rebels offer tantalizing opportunities for the right partner. But if you decide to jump on one of their bandwagons, brace yourself for a bumpy ride.