Yesterday, McAfee announced a definitive agreement to acquire Skyhigh Networks. Although the terms of this deal are still unannounced, Skyhigh Networks CEO Rajiv Gupta will join McAfee CEO Chris Young’s leadership team to run McAfee’s cloud business unit. This deal allows McAfee to build a more comprehensive security portfolio with a full suite of cloud management and security tools. Given recent consolidation in the security market, and especially of large security companies acquiring cloud management companies, Skyhigh Networks’ security analytics capabilities are especially valuable to McAfee.

McAfee makes this move less than eight months since its spinout as a standalone company. Intel originally bought the firewall and endpoint security company in 2010 for $7.7B and maintained it as Intel Security. McAfee went private, with asset management firm TPG taking a 51% stake in the company at a $4.2B valuation and Intel retaining a 49% stake.

Cloud Access Security Brokers (CASBs) such as Skyhigh Networks address the challenges of cloud security and compliance concerns. CASB vendors provide their customers with greater visibility into cloud services accessed on their networks and additional security to authorized third-party cloud services. CASBs first emerged to identify “Shadow IT,” unauthorized cloud services used on corporate networks, before expanding their functionality to mitigate the Shadow IT risk and provide additional protection to cloud services authorized by corporate IT departments. Overall, the core value proposition for CASBs is strong: these services secure any user connecting to any service with any device from anywhere at any time.

The effect of CASB on the larger security market

Because cloud services host corporate information beyond the scope of corporate networks, cloud services have historically been a blind spot to traditional security companies. Because CASBs have already done the legwork of opening this new realm of security coverage, some of the largest security companies have acquired these cloud security companies in an effort to extend their own security to the cloud, McAfee’s acquisition of Skyhigh Networks follows hot off the heels of these other major deals:

CASB Company	Acquirer (Date)	Acquisition Date	Deal Size
Imperva SkyFence	Forcepoint	February 2017	Undisclosed
FireLayers	Proofpoint	October 2016	$55M
Palerra	Oracle	September 2016	Undisclosed
CloudLock	Cisco	August 2016	$293M
Blue Coat	Symantec	June 2016	$4.7B
Soocasa	Barracuda Networks	April 2016	Undisclosed
Adallom	Microsoft	July 2015	$320M
CirroSecure	Palo Alto Networks	May 2015	Undisclosed

The spate of acquisitions over the past two years has compressed the already crowded CASB market, introducing large players and putting pressure on traditional CASBs, and McAfee’s acquisition increases the pressure even further. Although pricing in startup markets is typically at a premium, the heavy competition has driven prices far lower than usual for a market at this level of maturity.

How will the acquisition address today’s cybersecurity requirements?

McAfee’s acquisition of Skyhigh Networks represents the next step in the evolution of the security stack. Cloud usage is ubiquitous within the modern business world, and McAfee’s acquisition of Skyhigh Networks reflects the importance of cloud tools to the security market. Traditional security solutions such as intrusion prevention systems (IPS), next generation firewalls (NGFW), and secure web gateways (SWG) are insufficient given that cloud-based security control points (SCP) exist beyond the security perimeter. New cloud tools are required to address the security challenges that come with relying on third-party computing and applications. McAfee’s acquisition of Skyhigh Networks is a vote of confidence in the transformational capabilities of cloud security, prompting enterprises to include cloud capabilities in their evaluation of security solution providers.

One of the Forbes 2016 World’s Best 100 Cloud Companies, Skyhigh Networks is a traditional CASB whose more than 600 enterprise clients include 40% of the Fortune 100. Covering over 20,000 cloud applications, Skyhigh Networks’ flexible cloud platform provides an additional layer of security and visibility to clients such as Aetna, DIRECTV, HP, General Mills, and Western Union. Skyhigh Networks was founded in 2011 and is based in Cupertino, CA. The company had raised over $106M in funding according to Crunchbase.

In terms of its product, the Skyhigh Networks Platform is able to protect applications with proxy and API approaches, applying controls even to underserved areas such as IaaS and custom applications. Coupled with its robust machine learning-powered cloud discovery system, Skyhigh Networks extended its protection to arguably the most cloud services of any CASB provider.

McAfee’s current cloud offering, McAfee Cloud Threat Detection, is centered on malware detection rather than the many other areas of functionality that CASBs such as Skyhigh Networks provide. Because the company is bringing in Skyhigh Networks’ CEO Rajiv Gupta to run McAfee’s cloud business unit, the company likely sees Skyhigh Networks as central to its cloud strategy going forward.

With this deal, McAfee is poised to make full use of Skyhigh Networks’ capabilities. Because security companies such as McAfee track threats as they travel through different systems, the ability to draw information about different threat vectors and network activity is highly valuable. In particular, Skyhigh Networks brings a robust suite of machine learning-powered analytics to different aspects of cloud security such as user behavior analytics and its cloud discovery system. The resulting ability to understand cloud activity is one of the most important to McAfee as this will tie cloud capabilities to the rest of its product portfolio. Because this acquisition will allow McAfee to track its customers’ cloud activity, the company can monitor and thus counter threats that involve or originate in the cloud. Building on the union of its network defenses, endpoint protection, and newfound cloud capabilities, McAfee will be able to provide its customers with complete visibility into employee activity, track proprietary information into and beyond the cloud, and provide nuanced remediation options based on the broad coverage of the company’s product portfolio.

View the Cloud Access Security Brokers Report to learn more.