In contrast, corporate customers are used to buying software directly from the manufacturer. Entry in this marketplace pitted Symantec against the well-trained sales forces of companies like IBM and Cisco Systems Inc., both of which are significant players in the enterprise security business. These companies also field armies of consultants and engineers, who generate additional revenues by aiding in the implementation of the programs they sell.
Symantec gained some of those capabilities, 750 people, and vital products and technology in the December 2000 acquisition of Axent Technologies Inc. for $990 million in stock. Axent’s Enterprise Security Manager and Prowler series were the industry’s leading vulnerability-assessment and intrusion-detection products, used by 45 of the Fortune 50. Axent also had the global reach of a network of qualified value-added resellers (VARs), as well as its own enterprise sales force.
For Symantec management, the deal was part of a logical transition. Initially, the company had focused on buying technology assets and engineering talent. With Axent, it was adding to its technology base yet again, and it was also moving into a new phase, by acquiring marketing and sales capabilities aimed directly at enterprise customers. “Early on we bought technical talent, not sales talent. In the second phase, the last two-and-a-half years, we’ve started to bring into the company people with strong direct-relationship sales capabilities,” says Symantec CFO Greg Myers.
But, following the series of smaller acquisitions, the Axent deal took Wall Street by surprise. Symantec’s market cap dropped by 28 percent the day after the announcement. “They didn’t expect me to do one that big,” Mr. Thompson says. “Also, there was a strong belief that Axent was damaged goods. They had a tough 1999, and appeared to be struggling against the competition. The reality was that Axent had some terrific technology and people who knew what we needed to get done. It was in my mind a transformational transaction, and it really did catapult our company’s enterprise strategy more profoundly than anything we had done.”
Nevertheless, Symantec could never acquire its way to sales or support parity with established enterprise software players. Instead, the company adopted a new distribution channel, which included creating a network of some 14,000 partners and introducing its first partner certification program. These partners, from large accounting firms and IBM itself to VARs, supplement Symantec’s small sales force and add their own implementation services.
The Axent acquisition was also the catalyst for changing Symantec processes to support an enterprise business. Axent had systems in place for serving major corporate customers, and just as important, its senior executives had an understanding of the service and support needs of that market. As the former Axent executives assumed leadership roles at Symantec, they helped guide the company’s investment in and deployment of new systems to undergird the new enterprise thrust.
As a global enterprise, for example, Symantec needed to become euro-compliant. It needed better overall enterprise resource planning (ERP) to make sure management was in control of critical processes. Because Symantec’s customer relationships had historically been with the distribution channel, not the end-user, it now needed end-user–centered systems to track problems and make sure they got solved, and to track relationships on a global basis.
Not every executive bought into Symantec’s rapid change scenario, and those who did not were politely but rapidly moved out of the company. The leadership team welcomed it. Mr. Thompson says that increased turnover is actually desirable in a company undergoing a transformation. “Of the nine people who are on the senior management team, only two are left from the day when I arrived,” he says. “Today, we are just shy of 4,000 people; we had a little over 2,000 when I arrived. Of those 4,000 people, more than half have less than two years of service in our company. So, as we have retooled our strategy, we have completely retooled the team as well to work that strategy, because those two things in my mind truly go hand-in-glove.”