What is Bitdefender's competitive advantage and what are the market mechanics that would prove or disprove that advantage?

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What is Bitdefender's competitive advantage and what are the market mechanics that would prove or disprove that advantage?

Hello, and thank you for your request for insights on Bitdefender's competitive advantages and the underlying market mechanics supporting those advantages. The short version is that we have identified two major competitors for Bitdefender, based on Gartner's 2016 and 2017 Magic Quadrant for Endpoint Protection Platforms reports, as well as additional reports and research into each company's respective market share in the cybersecurity market: ESET and F-Secure. Bitdefender offers two major products in the antivirus and endpoint protection markets, GravityZone and Bitdefender BOX, and we have provided a discussion of comparable products from ESET and F-Secure in this brief. Competitive advantages for Bitdefender's products are conferred, in part, by the company's location in an innovative emerging market, its expansion into the lucrative enterprise sector of the industry, and its ability to respond to the increasing global emphasis on cybersecurity vulnerabilities related to the Internet of Things. Below you will find a deep dive of our findings.

METHODOLOGY

In order to gain a broad overview of the cybersecurity solutions industry, and at your suggestion, my colleagues and I first reviewed Gartner's 2017 Magic Quadrant for Endpoint Protection Platforms (EPP) report to ensure that we were correctly identifying Bitdefender's closest competitors for purposes of identifying competitive advantage(s) in this analysis. Next, we reviewed academic databases, corporate websites, industry reports, and trusted media sites to establish specific products and/or services offered by Bitdefender that offer unique competitive advantages against the previously identified competitors. We considered Bitdefender's activity in both the B2C (antivirus) and B2B (endpoint protection) industries, at your request. Finally, we evaluated current market mechanics that have motivated Bitdefender's release and/or refinement of specific product offerings, in order to provide insights about how these products and/or services provide Bitdefender with competitive advantage(s) over competitors.

OVERVIEW OF BITDEFENDER

Founded in 2001, Bitdefender has corporate headquarters in Bucaresti, Romania. The company's 1,500 employees collaborate with over 500 researchers and engineers to serve a wide variety of clients, ranging from large governmental organizations to private citizens, in over 150 countries. Bitdefender boasts that its products offer cybersecurity for over 500 million users globally, and the company's corporate website lists an array of awards, accolades, and certifications in the cybersecurity industry. Although Bitdefender has not publicly released financial data since 2014, when the company boasted revenues of $62 million, our findings indicate Bitdefender continues to be major player in the industry, having been rated the 17th in emerging market software companies globally for revenue in 2016.

INDUSTRY COMPETITORS

According to Garner's 2017 Magic Quadrant for Endpoint Protection Platforms (EPP), there are four quadrants among the 22 vendors considered "most significant" in the EPP market, "based on their ability to execute and their completeness of vision." These quadrants consist of niche players, challengers, visionaries, and leaders. For 2017, these vendors were identified as (in alphabetical order) 360 Enterprise Security Group, AhnLab, Bitdefender, Carbon Black, Comodo, CrowdStrike, Cylance, ESET, F-Secure, G Data Software, Intel Security, Invincea, Kaspersky Lab, Malwarebytes, Microsoft, Palo Alto Networks, Panda Security, SentinelOne, Sophos, Symantec, Trend Micro, and Webroot.

Although Gartner's complete release of the 2017 Magic Quadrant is available as paid content only, Gartner did identify the vendors of the 2017 leader quadrant: Trend Micro, Symantec, Sophos, and Kaspersky Lab, so we determined these companies were not considered direct competitors for Bitdefender. Unfortunately, Gartner did not publicly identify Bitdefender's placement in the 2017 report, but based on Gartner's 2016 Magic Quadrant results, our findings revealed that Bitdefender was first listed as a niche challenge in 2014 before being advanced to the visionaries quadrant in 2016. In 2016, Bitdefender's competitors in the visionaries quadrant were identified as F-Secure and ESET, according to Gartner.

Based on these findings, we have focused our research on Bitdefender's competitive advantage(s) relative to these two competitors, as it would not appear useful to compare Bitdefender to industry leaders of substantially larger size and/or market share. For example, a comparison to Microsoft would not be productive, with Microsoft garnering nearly 20% of the endpoint security management industry in 2015. By comparison, our research indicates Bitdefender, ESET, and F-Secure are matched reasonably fairly. In 2015, Bitdefender's market share for endpoint security management was 1.8%, while ESET's market share was 4.2%. F-Secure's market share is estimated at 1.2%.

SIGNIFICANT PRODUCT OFFERINGS

According to Gartner, Bitdefender's elevation to the EPP visionary quadrant in 2016 was based on the strength of GravityZone, which is described as the company's flagship enterprise EPP. Bitdefender boasts that GravityZone is the first security solution specifically designed to address scalability and performance concerns among enterprise clients. In addition to being the first of its class, GravityZone offers security solutions for physical, mobile, and virtual environments, and in 2016, Gartner specifically noted Bitdefender's improved analysis of malware, applications, and advanced threats in each of these areas.

Outside of business solutions, Bitdefender's key consumer offering appears to be Bitdefender BOX, also billed as the first of its kind. This product is described as a breakthrough cybersecurity device that connects and protects all smart devices utilized by the consumer. Whereas antivirus and endpoint protection have been available for laptops and/or desktop computers for many years, Bitdefender BOX capitalized on increasing consumer interest in cybersecurity for the Internet of Things in 2015 by providing hardware, software, and cloud-based protection. Smart devices protected may include mobile phones, smart televisions, gaming consoles, and even baby monitors. Additionally, Bitdefender BOX offers privacy and security on the go, whether the consumer is utilizing WiFi or a mobile network. Finally, Bitdefender BOX also offers in-house security software, Total Security, and the ability to deploy the antivirus software on an unlimited number of devices.

COMPETITIVE ADVANTAGES AND MARKET MECHANICS

B2B Market

In comparison to Bitdefender's enterprise solution, GravityZone, F-Serve offers a number of complete portfolio of B2B products, including cloud, endpoint, network, and email protection, as well as specialty offerings. Radar and Software Updater manage vulnerability, while Riddler offers attack surface enumeration. Unfortunately, it does not appear from F-Secure's product offerings that there is any one product that compares in scope to GravityZone, nor in applicability for enterprise EPP, specifically.

ESET offers a free business trial for its EPP products, and there is a substantial menu of offerings available for enterprise clients. ESET addresses performance impact directly, noting that its B2B products have the lowest impact on system speed in the industry, even among leaders in the field, such as Microsoft and TrendMicro. ESET boasts over 100 million enterprise users in 200 countries worldwide, and based on the company's larger market share compared to both Bitdefender and F-Secure, it appears that ESET is a more substantial competitor for Bitdefender than F-Secure for B2B products.

B2C Market

In comparison to Bitdefender BOX in the B2C market, F-Secure offers a number of consumer products, including F-Secure TOTAL, SAFE, Internet Security, FREEDOME VPN, KEY, Anti-Virus, and SENSE, as well as two free products, F-Secure Online Scanner and AdBlocker. Each product offers varying levels of protection, and the closest comparable product to Bitdefender BOX appears to be F-Secure TOTAL, which includes a subscription to F-Secure SAFE and FREEDOME VPN. There are two major drawbacks to F-Secure's product offerings in comparison. First, the sheer number of consumer products available could be, at times, overwhelming to the average customer without technical cybersecurity knowledge. Second, unlike Bitdefender BOX, which provides security for an unlimited number of smart devices, F-Secure TOTAL's price scheme varies based on connecting three, five, or up to seven devices.

ESET's B2C offerings are similarly diverse, with nine products offered based on the type of operating system (Windows, Mac, Android, Linux, and Multiple OS), as well as the number of devices connected and the number of years of subscription services purchased. Options include all-in-one internet security, basic antivirus, premium internet security, parental controls, and USB drive protection, all based on different operating systems. Overall, while the array of products is more basic, and therefore less overwhelming than F-Serve's portfolio, there does not appear to be a comparable option to Bitdefender BOX, either in the scope of services provided or availability of unlimited devices connected.

MARKET MECHANICS AFFECTING BITFENDER'S COMPETITIVE ADVANTAGES

It is notable that of the 30 companies highlighted by PwC for its Top 30 Emerging Markets Software Companies, almost one-third are based in Eastern Europe, a reflection of this region's strong emphasis on information technology education and expertise. While all three of the competitors surveyed in this analysis have headquarters in Eastern Europe, yielding no advantage on this point for any one company, it is noted there is significant potential in Romania, where Bitdefender is headquartered. Bitdefender has already demonstrated its ability to compete globally in terms of innovation, and there are advantages to operating from an emerging market while competing in more established markets, such as the United States and Japan. However, by virtue of location, there remain funding and other financial considerations that may hinder Bitdefender's overall ability to increase its market share in this industry.

Bitdefender's competitor, F-Serve, acknowledges the importance of the growing global trend towards increased corporate cybersecurity product offerings, noting that corporate security services are expected to top nearly $80 million in revenues by 2020. These findings are supported by Gartner's research, which indicates that there are increased opportunities for information technology startups to tap into the expanding B2B market. Bitdefender's inclusion in Gartner's 2016 Magic Quadrants report as a visionary company, specifically as a result of its flagship enterprise product, GravityZone, indicates Bitdefender has already capitalized on this market trend. Despite F-Secure's commitment to pursue this avenue in the future, Bitdefender has a significant head start and industry-wide recognition. Indeed, Bitdefender's 2017 acquisition of Profil Technology rapidly increased Bitdefender's enterprise revenue as well as its global presence in this sector of the market.

Finally, while we addressed B2C and B2B products separately in this analysis, per your request, our findings indicated that Bitdefender's operational strategy with respect to product offerings may also confer competitive advantages. Overall, Bitdefender's portfolio consists of 60% antivirus products and 40% endpoint protection products. As increasing cybersecurity breaches gain international attention, and with increasing numbers of consumers having smart connected home devices, this market is rapidly expanding. In 2016, over 51% of Americans had smart connected home devices, suggesting Bitdefender BOX has substantial potential in this market. In 2017, increasing consumer awareness of the Internet of Things, and its accompanying cybersecurity vulnerabilities, are expected to continue to drive revenues in this sector of the market.

CONCLUSION

In summary, we have identified two major competitors for Bitdefender, based on Gartner's 2016 and 2017 Magic Quadrants reports and research into each company's respective market share in the cybersecurity market: ESET and F-Secure. Bitdefender offers two major products in the antivirus and endpoint protection markets, GravityZone and Bitdefender BOX. Competitive advantages for Bitdefender's products are conferred, in part, by the company's location in an innovative emerging market, its expansion in the enterprise sector of the industry, and the increasing global emphasis on cybersecurity vulnerabilities related to the Internet of Things.

Thank you for your request, and if you would like additional information about this or another topic, please do not hesitate to ask Wonder!
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