Welcome to Runtime! Today: cybersecurity software remains in demand despite tight budgets, HPE jumps into the cloud infrastructure business (sort of), and the latest funding rounds in enterprise tech.
Only the paranoid survive
Almost across the board, enterprise tech companies have had a rough stretch over the last six to eight months as their customers tightened their tech budgets. But cybersecurity companies are bucking that trend, according to new research released Tuesday.
Worldwide spending on cybersecurity grew 12.5% in the first quarter to $18.6 billion, Canalys announced Tuesday. That's the lowest quarterly growth rate in over a year, but security spending is "outpacing the rest of the tech sector despite worsening macroeconomic conditions," the market researcher said.
Cybersecurity software is a broad market with many segments, and lots of different companies compete for enterprise tech budgets.
- Palo Alto Networks is the biggest security vendor by Canalys's figures, with only 8.7% of the market.
- But Palo Alto Networks and Fortinent, the second-place vendor, posted some of the strongest revenue growth numbers during the quarter, at 23.6% and 26.2%, respectively.
- Crowdstrike and Zscaler recorded the strongest growth rates in the first quarter at 39.9% and 42.6%, respectively.
- Among the old guard vendors, IBM was the only company to experience a decline in security revenue during the quarter, while Cisco and Symantec's revenue grew by less than 2% and Microsoft's soared by 32.3%.
The biggest targets are spending the most on new security services, according to the market research.
- Companies with more than 500 employees spent 13.3% more on security services during the first quarter, while companies with 100 to 499 employees spent 13.5% more.
- As long as ransomware continues to be a problem, mid-sized companies could be increasingly attractive targets given how hard it is to hire cybersecurity professionals in a seller's market for talent.
- Small companies remain mostly focused on endpoint security, which could change as identity-management tools — where the big spenders are focused these days — become more affordable and easier to use.
Cybersecurity spending only accounts for 5% of all IT spending, according to Canalys.
- That would imply there's still a lot of room for growth, especially as the growing need to comply with security regulations forces companies to upgrade their older tools.
- However, the results "also showed cybersecurity will not be fully immune to budget cuts in 2023. Competition between vendors will intensify, though most will grow by upselling additional subscriptions to existing accounts," said Matthew Ball, chief analyst at Canalys.
- And given the number of vendors in the market, customers might look to consolidate their spending on bigger companies that can offer volume discounts and a suite of security services, as Gartner predicted last year.
HPE's new AI cloud
It's been almost eight years since the former HP gave up on the public cloud, but its successor is ready to take another stab thanks to the generative AI frenzy.
HPE introduced HPE GreenLake for Large Language Models Tuesday, which it described as "an on-demand, multi-tenant supercomputing cloud service" in a press release. The service will run on the Cray supercomputers that HPE acquired in 2019 for $1.3 billion, which is a different approach than other AI-oriented cloud services built around Nvidia and AMD's GPUs.
AI developers have been scrambling to get their hands on Nvidia's AI chips not just because of their performance, but because they are so familiar with its CUDA programming model. HPE's approach will require those developers to work with a package of Cray's software, which could be a non-starter for many of them but could tempt HPE's large installed base of enterprises that are probably still wading gently into generative AI.
Oso raised $15 million in what it called a Series A-1 round as it tries to get its authorization cloud service that sets access policies across a company into the hands of more customers.
ElevenLabs landed $19 million from Andreessen Horowitz to expand its text-to-speech AI models into new market segments.
Primer Technologies raised $69 million in Series D funding to further its research into generative AI models for corporate data analysis.
Rose Rocket secured $38 million in new Series B funding for its transportation logistics cloud services.
The Runtime roundup
Last week's Azure disruptions were indeed the result of a DDoS attack, Microsoft took the lame step of confirming via a late Friday evening blog post.
OpenAI is thinking about competing with its customers by launching its own enterprise AI app store, which could create a lot of tension given the strategic importance of enterprise software marketplaces to the big platforms.
In today's MOVEit disaster news, Progress Software is really unhappy that a security researcher tweeted his discovery of a new zero-day vulnerability.
Oracle released its take on a "sovereign cloud" service, a data-localization concept that is becoming more important to European customers.
Thanks for reading — see you Thursday!
Correction: Saturday's newsletter misspelled the name of Domain Name Wire's Andrew Allemann.