The combined revenues of 22 of the largest publicly listed pure play IT security vendors in 2003 were up 14 percent against those of 2002 according to independent market analyst Datamonitor's 'Enterprise Security Q1 2004 Quarterly Briefing.'

In 2003, the largest publicly listed security vendors generated revenues of $5.33bn compared to $4.67bn in 2002. Quarter 4 (Q4) 2003 revenues were 22 percent higher than in the same quarter in 2002 compared to an industry average of 6 percent.

Ian Williams, managing analyst of Datamonitor's enterprise security program said, 'A steady rise in security revenues in 2003 indicates that corporate budgets are becoming less constrained and that security remains top of CIOs' agenda. This indicates strong growth in the overall security market. As viruses and worms continue their rampage, more weight is added to the arguments for vulnerability management and more proactive security solutions."

Q4 2003 a good quarter with revenues up 15% on Q3
According to the reports Q4 turned out to be a good quarter for most vendors with none of them recording revenues lower than Q3 2003. (though Trend Micro's revenues were flat). Overall, revenues were 15 percent higher than in Q3 2003.

Whilst the biggest deal of the quarter was NetScreen's acquisition by Juniper, Datamonitor says the ISS/Cobion, HP/TruLogica and SafeNet/Rainbow deals are also highly significant and the expects more acquisitions just round the corner as vendors look to create meaningful portfolios to address emerging security models.

The anti-virus (AV) market continued to benefit from the latest worms and viruses with revenues of the three leading AV vendors rising by an average of 13 percent in 2003. Another area of sustained growth was in the firewall and virtual private network (VPN) market, which continued to defy predictions that it has reached saturation. Revenues of the seven largest stand-alone vendors in this market grew by 20 percent in 2003 and Q4 revenues were 22 percent higher than in Q4 2002.

SafeNet outperformed overall market
The agency says that SafeNet out performed the overall market with revenues of 2003 an amazing 134 percent higher than in 2002, (although growing from a small base). NetScreen also continued to grow at an impressive rate, recording 71 percent growth in 2003. Both companies were the subject of M&A activity in recent months with Juniper Networks announcing the acquisition of NetScreen in February and the merger between SafeNet and Rainbow being completed in March.

The overall performance of the identity management (IDM) space was greatly influenced by a superb quarter from Certicom, which realised $27.6m in Q4 2003 compared to just $2.2m in Q3 2003. Overall the revenues of 7 of the leading pure play IDM vendors grew by 12 percent in 2003, with Q4 revenues 33 percent higher than the same period in 2002.

As identity management hots-up and opportunities emerge, the authentication space has become particularly tense as other vendors look to take RSA's token crown, by far the market leader with SecurID. Struggling rival ActivCard Corp puts RSA's market share outside of financial services at about 80%. VeriSign, however, aims to erode this share by introducing the Open uthentication Reference Architecture (OATH), and by selling authentication tokens later this year to drive adoption of the architecture.

ActivCard is also looking to break RSA's stranglehold on the market with a dramatic reduction in the price of its solutions. ActivCard tokens will retail at $15 per token compared to the $85 charged by RSA.

Meanwhile, RSA looks to break into the enterprise access market in a tie up with Microsoft, allowing SecurID token users to replace the PC Windows login with SecurID logins, further reducing the need for passwords. While this almost certainly gives RSA an edge over the competition this will almost certainly be eroded if competitors also do deals with Microsoft and if price competition heats up.

Ian Williams concluding words are, "While 2003 was better for technology vendors compared to previous years, the spending habits of CIOs have permanently changed. Organizations now require a much clearer explanation of the benefits a solution can bring to their productivity and cost-base than ever before. The relatively strong growth in the security space shows that many vendors have been successful in this regard and that security remains a priority for many organisations."