When I saw the Wall Street Journal article about Alphabet being in “advanced talks” to buy cybersecurity firm Wiz for an eye-popping $23b, I must confess that – never having previously heard of the company – my thoughts flashed back to the Seinfeld episode (“The Junk Mail”) where Elaine dates a man whose job turns out to be an outlandish mascot for electronics store The Wiz, whose motto he gleefully repeats: “Nobody beats The Wiz!” That firm is long gone but this Wiz is alive and well, enough so that the acquisition would be Alphabet’s largest ever.
Credit: Gizchina
The Wiz
was only founded in 2020, by four ex-Israeli military officers (they reportedly
all originally worked together at Israel’s equivalent of the NSA). They had
previously founded cloud cybersecurity firm Adallom in 2012, which they sold to
Microsoft in 2015 for its Azure cloud computing firm. Wiz also specializes in
cloud cybersecurity, and, according to WSJ, its clients include 40% of the Fortune
500 companies as customers, including Barclay’s, Mars, Morgan Stanley, and
Slack. Other notable customers include BMW, DocuSign, EA, and Salesforce.
Pretty
impressive for a four-year-old start-up.
Credit: Wiz
Alphabet’s
cloud business – Google Cloud Platform (GCP) -- badly
trails leaders AWS (Amazon) and Azure (Microsoft), although last year GCP’s
revenue’s rose 26% and it recorded its first operating profit. It’s Q1 2024
revenue was up 28%. By the way, Wiz lists
both AWS and Azure as partners, along with GCP, Oracle Cloud Infrastructure, VMware,
and Alibaba Cloud.
Alphabet had
bought security company Mandiant two years ago for $5.4b, as well as Siemplify,
another Israeli cloud cybersecurity company, that same year, and evidently sees
these acquisition as a way to bolster its cloud business.
For some
perspective, just this past May Wiz raised
$1b in a funding round that gave it a $12b valuation. Its annual recurring revenues
are estimated at $500 million, so Alphabet’s offer is a 46 multiplier. By
contrast, WSJ notes that competitor CrowdStrike has a market capitalization
that is 25 times annual recurring revenues. “This could be one of the largest and fastest returns ever
for a private security company in tech history,” Alex Clayton, a general
partner at Meritech Capital,
told
WSJ.
“There are
two advantages of Google acquiring Wiz,” Ray Wang, principal analyst and
founder of Constellation Research, told
CSO. “One, cloud security is hot and allows Google to cut into AWS and
Azure clients, and two, having Wiz would give them some consistently large
workloads to monetize.”
If you’re
wondering why cloud security is hot, I need only mention AT&T, which recently
disclosed that the records of “nearly all” of its cellular customers had
been breached. Well, those records came from its cloud provider Snowflake --
and that was not
the first time Snowflake has been attacked and possibly breached. Azure has
also suffered some serious breaches, and has
been accused of “repeated pattern of negligent cybersecurity practices.”
AWS has had
its share of data breaches as well.
So, yeah,
a cloud service better have good cybersecurity.
The
Independent praised Wiz’s “innovative interface,” which
“provided visual displays that use graphs and charts to illustrate a company’s
entire cloud security architecture, making it straightforward to identify
threats and potential weaknesses.” (The Independent also had the
headline I wished I’d thought of: Gee Wiz).
 |
| Display of Wiz Cloud Detection and Response (CDR). Credit: Wiz |
Pareekh
Jain, CEO and lead analyst at Pareekh Consulting told
CSO. “GCP is lagging behind AWS and Microsoft in the cloud and this
acquisition could create a much-needed differentiator for GCP. There have been
many cybersecurity incidents in the recent past and strong cloud security
credentials could be a differentiator and deciding factor for enterprises
considering their movement to cloud.”
“This was
the missing piece in Google’s portfolio and helps them provide cybersecurity as
a service bundled with their cloud offerings,” Neil Shah, VP for research and
partner at Counterpart Research, also
told CSO.
Much has been made of potential antitrust scrutiny of the deal, due
to its size and the fact that Google is already being accused of being a
monopoly. WSJ – which had another headline I wished I’d thought of (Google’s Wiz Deal Won’t Ease on
Down the Road) – but Bank Info Security, for one, called those concerns “overblown”:
Despite
Google being in the crosshairs of regulators on both sides of the Atlantic
Ocean, antitrust probes are unlikely to sink a potential purchase of Wiz.
Neither Google nor Wiz ranked among the seven market share leaders in cloud
workload security in 2022, according to IDC, which said control of the market
was in the hands of Trend Micro, Palo Alto, Microsoft, CrowdStrike, Check
Point, Broadcom and Trellix.
It may
take a while (less if Trump is reelected), but Google is likely to prevail.
That being said, I expect that AWS, Azure, and GCP will end up getting spun-off
or divested eventually, because they’re getting big enough to rival Amazon’s,
Microsoft’s, and Alphabet’s core businesses. So, go ahead, power up the
cybersecurity.
------------
Look, I’m
no cybersecurity expert, and I know even less about the cloud business. But I
am an AT&T customer, not to mention a Ticketmaster
one, and a United
Healthcare one. For heaven’s sake, my local hospital system – which only
serves my community – has
been breached. So if GCP wants to spend $26b strengthening the security of its
cloud business, I say more power to them, and I hope the other cloud companies
follow suit.
Whatever
worrying we’ve been doing about cybersecurity is nothing to how much we should
be worrying about it once
AI gets involved. “AI and Cybersecurity are the two biggest areas customers
are investing their technology dollars,” Mr. Wang told
CSO. “Google seeks to play in both areas.”
We’ve seen
how much attention has been paid to A.I. companies, and how much investment is
going to them, and we better see the same with cybersecurity.
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