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Présentation : Sales of security hardware and appliances fell more than 16 percent in the first quarter of the year, which is pretty steep but not nearly as bad as the 20-plus percent decline in sales of core networking gear. While market research firm Infonetics believes security appliances?firewall/VPNs, unified threat management devices, etc.?will rebound before year's end, many vendors are now pursuing a strategy of ?hardware+services,? in which the user still buys an on-premises appliance but also subscribes to an ongoing service. This hybrid schema is an approach long championed by Microsoft, which coined the awkward term ?software plus services? as means to recognize consumers' desire to buy applications as a service but also the necessity to continue purchasing and hosting on-site and client-side applications. It's really not a bad idea from an architecture and operational perspective. But Microsoft still hasn't unlocked the secret to making ?software plus services? a profitable venture for its throng of solution providers (by the way, don't expect too many answers on that front at Microsoft's Worldwide Partner Conference in two weeks?more on that later). Earlier this week, Cisco's CTO Padmasree Warrior declared that the networking giant will not get into the infrastructure as a service business. Rather, Cisco intends to stay on the periphery enabling cloud and managed services, and delivering applications and platforms through the cloud (think Webex). Cisco goes to great lengths to inject itself into the cloud conversation, stating repeatedly that there is no collaboration unless the network (i.e., it's gear) is providing the pipes both in the cloud and on-premises. And managing those devices and providing subscription-based services (e-mail security, for one) are a grand part of its strategy. Many other security hardware vendors?SonicWall, WatchGuard, Fortinet and, more recently, Websense?have long supported the managed services movement by providing technologies and products that enable the delivery of managed services, as well as providing managed service providers with special discounting to acquire equipment to fill their data centers. What's coming is the melding of these hardware assets with security application services?such as anti-spam filtering, Web filtering, anti-virus scanning, e-mail security?with the on-premises appliances. On the surface, it appears as a natural bridge between the traditional model of on-premises network security to the era of cloud-based security services. What remains to be seen is if this hybrid model will have any more success than the Microsoft experiment. Again, back to Microsoft: Under ?software-plus-services,? Microsoft is paying its SAAS resellers 12 percent on the initial sale plus an additional 6 percent commission for the first year's subscription. Each additional year, Microsoft will pay the partner 6 percent. Microsoft resellers have complained loudly that these margins are not fair or good for their business; Microsoft's retort is often that the profit opportunity is value-added services that solution providers bring in the form of migration, integration and customization. Few solution providers have reported finding green fields in after-market sales opportunities. At least software still retains relatively high margins for both vendors and solution providers. Hardware, though, has long lost the fat margins of its glory days. Hardware plus services will have to overcome the challenges of low-margin hardware. As more hardware-plus-services offerings come to market, security solution providers should study the go-to-market equation and ask a few critical questions: * What are the initial and recurring commission/margins? * How are services delivered and supported? * Are there additional discounts/rebates for hardware attached to the sale? * Who's responsible for selling subscription renewals and what's the commission plan? * What are the integration and customization opportunities, and what are the recommended pricing structures? * And, of course, who ultimately owns the customer relationship? (Important point because, historically, hardware resellers have held near-exclusive control over the relationship with their customers; in a subscription program, the vendor has direct touch on the customer.) Providing integrated cloud-based services with on-premises offerings is not a bad idea. But security solution providers should perform their due diligence before rushing into a hybrid relationship and make sure there's enough profitability for both you and the vendor.

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