The FTC’s recently proposed “Do Not Track” initiative is example of a larger movement within the regulatory space. The increase in regulation – be it the recent push for a web privacy “Bill of Rights”, the FTC becoming every involved in net neutrality, the oversight of the FDA on new mHealth applications, or HIPAA’s increased relevance as we move to universal electronic medical records (EMRs) in the coming years – is being followed by a subsequent explosion in governance, risk, and compliance (GRC) activity.
There are two themes to take away from this:
- The GRC and security sectors will become more popular amongst investors
- The old adage, “knowledge is power” is even more true now that user-centric data is paramount to business analytics, business intelligence, and a key competitive advantage for firms
The effects of these themes are beginning to unfold in the market already, even before some of this potential regulation is signed into law.
User-centric data accumulates quickly and must be stored in large data warehouses. This leads to investors oftentimes branding companies like 3Par (with complex data storage programs) as “marketplace darlings”. Data storage is a building block for cloud computing and vendors offering these solutions will increasingly be seen as valued assets; consider the following:
- Dell just acquired Compellent for $960m or 6.5x revenue, a move that again underscores strong valuations for storage software firms
- A recent PCWorld articled noted that data center server capacity is more than doubling every 24 months
In addition, security is a top concern for user-centric data storage. Market growth and opportunity among security focused vendors is equally robust:
- Intel’s purchase of McAfee for $6.8 billion or 3.4x revenue shows potentially high multiples for security companies
- Social sites like Facebook are increasing security controls for user data in the wake of exposed data leaks
- Because of WikiLeaks, the US Department of Defense banned users from possessing flash drives and CDs while on premise in secured network facilities
The growing emphasis by vendors on verticals solutions makes this an even bigger topic – a single failure point or overlooked compliance metric can lead to massive sector-centric data leaks, as the very recent attack against entertainment website Gawker shows (millions of users personal information was exposed to the web).
Our ongoing research and advisory work across the GRC and data storage spaces allows us to keep abreast of market movements and trends to provide thoughtful insight to our clients. If you’re interested in learning more, or have some perspectives to offer – we’d love to hear from you.
Have a great week.