Spreading the hosted message

newsmaker He is no military strategist, but Adrian Chamberlain is as likely to delve into the Battle of Waterloo as extol the benefits of hosted offerings.

The London-based senior vice president of Symantec Hosted Services, who professes to being driven by a fear of failure, says the tenets of military warfare are just as useful in the corporate battlefield. A good leader is one who is able to conceive campaigns and execute tactically, while a successful fleet is one that possesses a good strategy and has the commitment of leadership and the lower rungs.

The former CEO of MessageLabs, which was acquired by Symantec in 2008, was on a stopover in Singapore this week. ZDNet Asia managed to catch him for a chat about the integrated business, plans for the hosted services division in 2010 and beyond, as well as opportunities in Asia.

Q: It's been more than a year since Symantec acquired MessageLabs. What has changed since?
Chamberlain: In some ways, what's encouraging is what hasn't changed, actually. One thing that hasn't changed is that there's been a fair continuity in management between the MessageLabs independent company and the organization metamorphosing into Symantec Hosted Services. What Symantec did was it kept the sales and marketing, research and development and operations arms together in a holistic organization that still has profit and loss accountability. Given that it was acquiring a services business which has a very different go-to-market approach to a licensed software business, I think the approach gave the company a great deal of flexibility and ability to maintain momentum in a growth business than had it not done that.

So the first point was the continuity and continued ability to drive growth both within an expanded integral organization. Another was also increasingly leveraging off the rest of Symantec through encouraging and supporting the broader business to identify hosted opportunities and refer them to the hosted organization. Yet another point was selling hosted products through the Symantec organization--putting them in the protection suites that Symantec markets. If you like, think of it as a core business that echoes and magnifies itself to the rest of the company as an agent for change to the whole organization, not just an acquisition in itself--that's the way we've been managed since we were acquired.

And in terms of customers?
Our customer base has increased by about 50 percent since we were acquired. We now have around 30,000 customers--some of them came through the acquisition during the course of the year, but our customer acquisition rate continues to grow very rapidly.

What we're also seeing is a continuing growth in not just the core antivirus, antispam services, but an explosion of growth in new services as first-generation customers are moving more and more of their demand toward hosted products. Our fastest-growing major product line is Web protect services, where we not only protect against e-mail threats but malware coming through the Web and instant messaging. We're also seeing very rapid growth areas in archiving and encryption services.

Apart from our heritage, we're seeing very rapid growth in multi-protocol protection, encryption, retrieval and storage products. And we're seeing a bunch of customers--our favorite customers--buying absolutely everything. We're seeing growth in basic continued penetration and substitution of licensed software within the core market, and seeing continued up-sell opportunities to sell new services to the customer base.

How different would you say the current MessageLabs, or Symantec Hosted Services, is compared with the direction that the company owned by the White brothers was heading before the acquisition?
Lots of the core momentum are the same. Where MessageLabs was really already growing was developing services around multi-protocol protection and through encryption and archiving, and that continues. What's changed and expanded are capabilities and also our ability to work with Symantec expertise in hybrid products, or products that are known to have more endpoint expertise. We spent a lot of work over last year. We incorporated capabilities that Symantec already enjoyed in hosted services through the Symantec Protection Network, in hosted endpoint and online backup to develop services. Over the course of next year, you will see, for example, hosted endpoint products developed and launched.

You'll see increasing synergistic products between Vontu data leakage protection and hosted products come through. You'll see online backup products come through. So that's an area of expertise which has expanded our capabilities, and accelerated growth beyond where we would be as just MessageLabs.

So the heart of the business is still recognizably the same, but the reach has expanded beyond where it would have been under the old MessageLabs.

Symantec Hosted Services is the software-as-a-service arm of Symantec. How important is this business to the overall survival of the company?
It's strategically very important--clearly, Enrique (Salem) is the person most qualified to answer that as he's the chief executive. It's clear there's a shift--an accelerating shift--of our industry away from licensed software into the cloud. Increasingly, products that have conventionally been regarded as licensed software are becoming hosted. Products such as Web-hosted offerings would have been unthinkable being hosted two, three years ago; hosted archiving products that were nearly unthinkable three years ago are almost mainstream now. In terms of where the growth is expected to be in the industry over the next five years, I certainly think it's fair to say Symantec would expect the bulk to come out of the hosted capabilities.

My division just looks at the business end of the market--there's also some great progress going on in the consumer end of the market through Norton. But hosted is the area that is growing most rapidly. We've grown very rapidly over the last year, in terms of the number of people in the division, sales and customers.

So strategically, we're very important, as illustrated by the fact that this division reports directly to Enrique despite that it's obviously much smaller in scale at the moment than the enterprise product group or Norton.

How much does the division contribute to the overall business?
It's a very small percentage. Let's say a very small percentage of the turnover, but it's quite a significant proportion of the growth.

I understand that Symantec Hosted Services is a brand meant to be on par with the established Norton. What does that mean?
That means at the top brand level, that is which brands are developed as recognizable brands to our customers, the two brands which Symantec markets externally are Norton and Symantec Hosted Services. That in itself is a statement of strategic intent--that the brand is that significant.

So is that intent accompanied by resources--marketing and human--similar to that of Norton?
In terms of scale, Norton is a huge brand and it's also a consumer brand, so the degree of marketing and the way it is marketed is very different from a business-to-business brand. But in terms of profile, this is equivalent.

It may make sense for security software to be delivered as a service, but there are many companies resistant to it. What can the industry, and Symantec Hosted Services, do to accelerate adoption?
Companies are a lot less resistant than they were a few years ago. I think in markets such as the U.K., U.S. or Australia, and increasingly some emerging countries, there is no argument about hosted services. In the U.K., something like 50 percent of all business companies now employ hosted services solutions. In the U.S. and Australia, that number's approaching 30 percent. So, it's no longer looked upon as a solution that has to prove itself, and it will almost certainly, globally, become the lead solution in terms of market share within the next three years and overtake licensed software in terms of absolute size.

Where you still find challenges--and this is most relevant to Asia--is where the level of adoption is currently lower. You're still in the early adopter stage where pioneers are doing it. But there are factors in its favor. One is the overwhelming fact that hosted, inherently in many aspects, is a better solution than licensed software. We can generally provide higher levels of accuracy, enable more flexibility and constant updates in the cloud than off the customer premises, and save customers bandwidth cost at a highly predictable cost every month, which are pretty major advantages compared with alternative ways of protecting. After a while, the inherent benefits of the products mean you get over the adoption stage. The other thing we have is very many large fledge-ship customers around the world that have adopted the service, so you can point to reference customers.

I think it's both the reassuring prospects of reference customers and the established nature of the service, and then pointing out the fundamental inherent advantages, and typically what you'd expect is what we're seeing in markets such as Singapore, Hong Kong and Japan. These markets are beginning to hit critical mass of adoption--there are a number of high-profile companies that have already adopted the service, particularly multinationals. There's increasing demand for the services and we've seen tipping points emerge, which is why this region is such an exciting market for us.

How much does Asia contribute to the business?
At the moment, in terms of revenue, it's probably about 13 percent. Europe would be the largest, the U.S. in second place, and Asia, third. In terms of absolute percentage growth, it's the fastest growing of the three regions.

In both Europe and Asia, we're seeing a breakout from markets that have already adopted the service, and we at Symantec Hosted Services are the market leaders in the U.K., Europe, Australia and Asia, with very rapid adoption in Europe, Germany, Scandinavia, Japan, Singapore, Hong Kong. India is obviously a potentially huge market--it has very low adoption at the moment.

How do you expect this region's contribution to change over the next two years?
The objectives that Enrique's publicly announced is that he expects us to be a billion-dollar division in the next five years, and probably worth, say, US$400 to US$500 million in the next three years.

I would say a disproportionate amount of that growth is coming from Asia. This is because what I expect to see are levels of adoption grow disproportionately fast from a lower base, in countries such as Japan, Hong Kong and Singapore, and growth to move into regions that are hardly adopting at all, like India and China. So I'd be extremely disappointed if the percentage of business coming from Asia is still around 15 percent in five years' time.

What will Symantec Hosted Services focus on this year in particular?
What we'll be focused on first is extreme accuracy, stopping more viruses and malware coming through on more protocols than anybody else, and very high levels of customer service. That is, maintaining the high levels of customer service and responsiveness which our customers associate us with.

The second priority will be to continue to support an expanded roadmap, where the first level is core MessageLabs services, and then rolling out a whole new generation of more hybrid services to complement those services. The third priority would be to continue to grow geographically, particularly in Asia outside of Australia, Europe outside of the U.K., and in the U.S.

Where do you think MessageLabs would be now if Symantec had not acquired the company?
We were the market leader, we were profitable, cash-positive and growing. What you would have seen was a company that's still successful and still growing. But you also would have seen a company that's far more constrained and becoming a niche player than it would be under Symantec, and a company that would be struggling to maintain its market leadership in the face of our competitors being acquired. If you think about who our competitors were a few years ago, they were Postini, FrontBridge and MX Logic. Without Symantec, we're now competing with the likes of Microsoft and Google, and that would have been a more challenging world.

The company would still be around, it'd still be successful and growing, but I don't think we would have the confidence or the ability to invest in new products or to leverage the Symantec expertise in endpoint and archiving, etc. that we now do. So the future, I think, is more exciting as part of Symantec. It's obviously very different for a small independent company to be part of a large company, but we've kept a large degree of our autonomy and character. So we got the best of both worlds.