I was reading this article about Symantec and how they are going to increase the focus they put on lab research vs M&A. I was surprised that more people haven’t commented on this piece. The basic gist of the article is that Symantec is going to put more focus on internal innovation as opposed to M&A for new product introductions.
The “internal start-up” is an attractive concept but difficult to execute in practice. Symantec has one of the world’s largest indirect salesforce and touches customers in all geographies and all customer sizes. How will these lab projects get the type of market feedback required to compete with start-ups? One of the things that makes start-ups successful is the ability to have a small team of engineers focus on building a sound product with lots of feedback from sales/product management. One concern has to be the rate at which these research ideas will get market feedback/validation. Projects like this have failed before when research delivers a “perfect” product after the market opportunity has been captured by someone else.
Symantec reducing its role as aggregator will impact start-up exits in a major way. Security is already a market in consolidation. There have not been any meaningful IPOs since NetScreen and most of the other promising companies have found an acquisition by a large player (Juniper, Symantec, etc) to be the other viable exit. If Symantec were to scale back its efforts, start-ups will have a tougher time delivering returns to their investors. Symantec, Cisco, and Juniper have done the lion share of interesting deals — if Symantec reduces its appetite for deals, the networking guys will become the most attractive buyers.
I am cautious to read too much into this piece, but I have to believe that some of this is motivated by the post-merger performance of some of the company’s acquisitions. Perhaps integrated these discrete security components and finding deep markets for the acquired products has been tougher than expected.