security

Enterprise security spending per user increased by more than 40 percent between 2019 and 2020 (see Data Watch) – and is likely to increase again in 2021. Nearly three quarters of ISG advisors said their clients plan to increase their security spend this year – and this was before the unprecedented SolarWinds and Exchange breaches in the first quarter.
 
It’s not just external threats that are driving increased demand for security solutions and services. The combination of legacy technology and an explosion of internet-facing devices and services is generating technical complexity, which leads to configuration errors. Configuration errors caused by humans - which is now one of the leading causes for breaches.
 
The IT services market is responding – some by organically building next-generation cyber services, and some by acquiring it. Just in the first quarter, Atos acquired Motiv ICT and In Fidem, Deloitte acquired R9B, and Wipro acquired Ampion. Expect to see a lot more M&A in this space this quarter.
 

Data watch

microsoft

Microsoft announced its second-largest acquisition ever this week. Here’s my colleague Blair Hanley Frank on the news:
 
Microsoft announced this week its plans to acquire Nuance, a pioneer in voice recognition and natural language understanding. A press release from Microsoft made clear the $19.7 billion acquisition was to bolster its ambitions in the healthcare market, but it falls short of giving a satisfying explanation for the hefty purchase price.
 
Nuance’s expertise in machine learning means it is a natural fit for the tech giant’s expansive research organization. Microsoft also will likely leverage Nuance’s existing suite of machine learning products and treasure trove of training data to enhance its language-understanding product portfolio.
 
Since several Nuance services already use Azure as their underlying cloud platform, Microsoft may be able to encourage customers of those services to use more of its cloud services as a result of the deal. Microsoft’s sales organization will almost certainly drive additional adoption of Nuance’s existing services, beyond what the company was capable of independently.
 
It will likely take months, if not years, after the close of the acquisition for these benefits to manifest in Microsoft’s overall product portfolio. In the near term, the deal will likely help Microsoft pitch enterprise customers on its forthcoming healthcare-focused public cloud offering.
 
Finish reading Blair’s POV here.

deal activity

M&A

noteworthy

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Have a great weekend!

isg insiders

Stanton Jones, Alex Bakker, Cynthia Batty, Dr. Daniel Gerster, Steve Hall, Mrinal Rai, Ron Exler, Sashidharan Balasundaram, Troy Williams

Contributing this Week

Blair Hanley Frank, Chris Karalis