Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


05:41 PM
George V. Hulme, Informationweek
George V. Hulme, Informationweek
Connect Directly

Security Handoff

More large companies are turning to service providers to handle their security.

A financial-services firm might be the last company you'd expect to entrust its network security to an outsider. But in late May, Merrill Lynch & Co. did just that, signing a global multiyear contract for VeriSign Inc. to monitor and manage more than 300 network-security devices, primarily firewalls and intrusion-detection systems. The implementation is underway and will continue through the fall, says David Bauer, Merrill's chief information security and privacy officer.

Merrill Lynch decided to outsource network security because managed security-service providers (MSSPs) have substantially improved their offerings in the last couple of years. Their toolsets are robust enough to support large companies, and they can do a better job of understanding how serious a threat is because they're monitoring scores of networks. "We can get analysis of events going on with us in context as to what's going on in the rest of the world," Bauer says. "That allows us to make better decisions. It also gives us early warning."

Rather than worrying about constantly monitoring the network for signs of attack and checking out every system alarm, Merrill Lynch can focus on evaluating data and taking action, if necessary. "We can focus on the brain work, the bigger risk-management picture," Bauer says. "And that's where you want to be, instead of chewing up resources on the operations."

Such a move is still uncommon today. Only 24 percent of 286 companies surveyed by Forrester Research in October said they were likely or somewhat likely to outsource security monitoring. Nearly twice as many, 44 percent, said they were very unlikely to turn to other companies for such services. "It comes down to trust. It's an awfully big decision to hand this over to someone else," says Jeff Nigriny, chief security officer for Exostar LLC, an online exchange for the aerospace and defense industry. Exostar outsources most of its network monitoring, firewalls, and incident response to TruSecure Corp.

But businesses may become more receptive to the idea of contracting with companies such as Counterpane Internet Security, Guardent, Internet Security Systems, RedSiren, Symantec, TruSecure, Ubizen, Unisys, and VeriSign as the challenge of managing security becomes increasingly complex. That's what happened at Allegheny Energy Inc. Paul Castellano, information services general manager, security and disaster recovery, did all the right things to protect his network and computer systems from attacks. He deployed intrusion-detection systems everywhere. He assembled a staff of security pros to closely monitor the systems. And his staff built a database of attack "signatures" to spot threats.

The result of this costly and intensive effort? "We fell flat on our face," Castellano says. The security system was reporting 15,000 to 20,000 problems a day. "We were getting alarms if someone fat-fingered their password during a log on," he says. "We didn't need to know all of that stuff."

Castellano wanted alerts on the one or two serious attacks launched against the network each week. So Allegheny, which has $10.37 billion in annual sales, turned to managed security-services provider RedSiren Inc. two years ago to monitor its network for intrusions. "Now we're seeing what we need to see," he says. Allegheny had spent seven months developing its own security system. RedSiren had a better system deployed and operating in six weeks, Castellano says.

Financial-services firm Raymond James Financial is another believer in managed security services. It's been using Guardent Inc. for the past 18 months to augment the internal intrusion-protection systems that monitor its network and to conduct periodic security scans to identify potential problems. "I always find issues," says Gene Fredrickson, vice president of information security. "It's not that your internal people aren't doing a good job, it's you just need good external eyes."

Such results help to explain why analyst firm Gartner calls managed security services the fastest-growing IT services sector. It predicts growth of more than 19 percent a year, with sales increasing from $547.8 million last year to $1.2 billion in 2006.

Another factor that could propel the market's growth is the increasing number of federal and state laws and regulations that require companies to limit access to, and keep confidential, information on customers and patients, as well as provide an audit trail for investigators. For example, a law in California that takes effect in July requires state agencies and companies with customers in the state to report all security breaches that may reveal personally identifiable information.

But business-technology managers still need to be cautious when placing the security of their company in the hands of service providers. Many security service providers have gone out of business in the past few years, including Pilot Networks and Salinas Group, and others are in a weak financial position.

There are many issues to consider before handing off security, such as how soon in-house personnel need to be called when there's a problem and what actions the service provider can and cannot take so that your business processes aren't affected. When Exostar contracted with TruSecure, Nigriny says he wrote a service-level agreement stating that TruSecure's response time to a problem can't exceed 15 minutes and that any configuration changes must be made within 30 minutes.

And there still are risks involved. A large East Coast manufacturing company saw parts of its network go dark when a provider took "corrective" action on a problem, says the company's chief security officer, who declined to be named. "We lost access to good chunks of our network," he says. "It wasn't a great situation until we figured out what they shut down."

But once proper procedures are in place, customers say MSSPs have helped them improve security as well as reduce costs. Service providers charge $200 to $500 a month to monitor and manage a firewall and $500 to $1,200 a month to monitor and manage an intrusion-detection system, analysts say. MSSPs say they can provide security services for about half of what it would cost a company to do it in-house.

Times have changed, says Fredrickson at Raymond James Financial, and so should a business' approach to handling security. "There was a time we believed we had to do all of our security ourselves: Build it ourselves, control it ourselves, and not let anything out," he says. That's no longer necessary, or even smart, if a company is to meet its security goals in the most cost-effective and efficient way. "Security is no longer a black art. It's central to business."

Register for Wall Street & Technology Newsletters