The Accenture / Dragos / runZero / NetRise deal may be the most significant single event in the OT Security Community & Market since Colonial Pipeline. I tackle this in 3 parts over the next 3 days.
- Part 1 – Accenture & Dragos
- Part 2 – The Dragos Product
- Part 3 – The Impact On The OT Security Product & Services Market
Accenture & Dragos
Dragos’ Independence
I have been skeptical when both the acquired and acquirer make statements that the acquired company will continue to run independently, the customers will only be affected positively, or the product will remain the same. Most recently with Mitsubishi Electric’s acquisition of Nozomi (this link analyzes independence / no change statements and realities in recent OT security acquisitions) and ServiceNow’s acquisition of Armis.
The Accenture press release states Dragos “will continue to function as an independent business.” Rob Lee wrote “the deal also contained specially crafted terms focused on giving Dragos autonomy and permanence as a standalone entity focused on the OT cybersecurity mission.” Is this more credible or the same old thing we hear at every acquisition?
My answer is … more credible. The Dragos team will make the key decisions and have more independence for three reasons.
- Accenture bought a majority stake in Dragos, not the entire company. Rob is positioning this as a change in investors from the VC’s to Accenture. VC’s, and now Accenture, do have influence. They can force the issue if things are looking grim or they believe a change is needed. Unless …
- There are terms in place that provide one or more minority owners with more control. Dual-class shares in public companies provide this. It was rare decades ago (Ford, NYTimes) and now is increasingly common in public tech companies (Meta, Alphabet, Airbnb). The same can be true for private companies. It all depends on the terms of the deal. The terms are not public beyond some very brought statements from Accenture and only slightly more detailed pledges from Rob in his blog article. Knowing Rob a bit, I believe this independence to continue the company with his approach and vision would be non-negotiable given the strong position Dragos is in. While no terms are bulletproof when things are going very bad, I’m guessing the terms are as close to bulletproof as you can get.
- Rob. Right now a lot of Dragos’ value is based on Rob as the leader. If Accenture found a way around the terms and tried to push Dragos in a way Rob doesn’t like, or push him out, they would be hurting their investment. This should decrease over time for the good of Dragos, but today Dragos’ customers and market would react quite negatively without a fully invested and optimistic Rob Lee at the helm.
Accenture
Accenture has sponsored S4 occasionally, and is a sponsor of S4x27. Years ago I asked a friend at Accenture what they are trying to accomplish with their S4 sponsorship and why they don’t sponsor every year. The answer surprised and stuck with me. They said the people they market and sell to don’t come to S4. Their contacts, customers and prospects are at a much higher level in large to very large organizations than the S4 attendee.
It made sense. I rarely heard of Accenture as a competitor in OT security services when I was consulting or from other OT security companies. And yet they have a $10B cybersecurity business with (my wild guess) $1B in OT. A $200K OT consulting project isn’t their target, and would be a nice win for most of the S4 sponsors. Accenture plays in at a different level in a different world, and I don’t have a visibility or understanding of that world.
The question is why would Accenture what to purchase a majority stake in Dragos? Why would Accenture want to acquire 100% of runZero and NetRise? Accenture’s Chair and CEO Julie Sweet answered it this way.
our cybersecurity practice is growing by double-digits and has a strong track record of leveraging inorganic opportunity to fuel organic growth.
The Dragos Platform and other solutions in and out of security that Accenture is acquiring are what she is referring to as “inorganic opportunity”. The acquisitions have the goal of building SaaS revenue with rapid deployment to their existing and new customers.
While this is the primary and stated reason, the existing and future Dragos data is likely another reason. Today Dragos announced their EmberAI. Given Dragos’ threat intel and incident response expertise and focus, vis-a-vis the competition, this could be the best in world OT security dataset. Vendors and the community are at the early stages of learning how to leverage and monetize this data.
Of course Accenture would get their apportionment of any Dragos profits, and if it doesn’t work out they can sell their majority stake to another investor. This is a potential upside and downside limit, but not the reason for the purchase.
Dragos, runZero, and NetRise are inorganic opportunities, but not a proprietary opportunities. Dragos can partner with others, even direct competitors with Accenture. Can, but will Accenture direct competitors want to do this unless forced by the asset owner customer?
Accenture As A Dragos Channel
The best case for Dragos is Accenture’s high level contacts leads to large accounts with ARR. The second best case is Accenture doesn’t invest in selling projects with or prioritize the Dragos Platform. They ignore Dragos and are happy with some reasonable ROI on their investment.
The worst case is Accenture takes a lot of Dragos time without resulting in commensurate profitable sales. Ask any channel manager and they will tell you this is the most likely case when a large product or service vendor becomes a channel for a smaller product or service company. In our OT security space most of the partnerships and deals with an OT security company and large automation company or integrator are net negatives. They get a bit of buzz at the announcement, take a lot of time to set up the channel, and result in minimal sales.
The channel will sell a) what is easiest to sell and b) what they are incentivized to sell (as long as it isn’t too hard). Security has been a tough channel sale because the product/service/solutions tend to be complex sales at low size relative to other offerings.
Cisco’s security acquisitions are a great example of this. I’ve been in the room with a Cisco reseller who is being actively asked to pitch their Cyber Vision offering to an asset owner that has a ton of Cisco. A good pitch would win the deal. Nope. The reseller knows little about the offering because it is a small, near zero percentage of their revenue.
A key for Dragos will be limiting the time they allocate to Accenture over the next 1 to 3 years, whether Accenture is successful or not with the Dragos platform. The mismatch in size could swamp Dragos.
Tomorrow: The Dragos Product