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Internet & Network Security Solution Provider Business Plan
SAFETY NET CANADA, INC.
8789 Elk Avenue
Vancouver, British Columbia V3N 4E9
Safety Net Canada wants to become the dominant provider of a reliable, impervious, easy-to-use Internet and network security solution to corporate and retail customers worldwide. This plan raised over $5 million (U.S.) for the company and was written by Concord Business Development Inc. of Vancouver, British Columbia.
- EXECUTIVE SUMMARY
- COMPANY OVERVIEW
- MARKET ANALYSIS
- MARKETING PLAN
Safety Net Canada will be the dominant provider of a reliable, impervious, easy-to-use, and cost-effective hardware- and software-based, Internet and network security solution to corporate and retail customers worldwide.
Industry: Technology—Internet and network security.
Safety Net Canada will be the first network security company to introduce an information security solution that meets all criteria for reliability, compatibility, ease-of-use and scalability.
Safety Net Canada identifies four target market segments for its Security™ line of network security products: large organizations, small and medium enterprises, and individual consumers.
Safety Net Canada will build its market share by gradually entering all major international markets by the end of the planning period subject to this plan.
The revenue model of Safety Net Canada comprises a primary and a secondary revenue category, with each category containing multiple revenue streams derived from the different Security™ models.
Capital Requirements: US $5 million.
Use of Proceeds
To complete product development and pre-launch testing, build and launch the website, launch marketing and promotion programs, build an administrative infrastructure, and acquire human resources.
Safety Net Canada is based on the philosophy of growth. The company is dedicated to continuously innovating and expanding its line of security products in order to meet the needs of a dynamic and rapidly growing networked population. The management's vision for long-term sustainable growth incorporates the creation of a stimulating and creative corporate environment. Within such an environment, the members of Safety Net's talented team have the opportunity to continually enhance their individuality and creativity while contributing to the growth and long-term success of the company.
Safety Net Canada will be the first network security company to introduce an information security solution that meets all criteria for reliability, compatibility, ease-of-use, and scalability. The flagship product line is comprised of two components: the Security™, a hardware device that protects computers from intruders, and the Security Guard™, complementary firewall and anti-virus software to protect the operating system and applications. By working in compliance and complementing each other, these two products amalgamate into a bulletproof network security solution that is resistant to currently known loopholes in security hardware appliances and software.
The Internet and network security industry is a rapidly growing segment of the high-tech business sector, as businesses and individual consumers become more aware of the security threats caused by conducting transactions and exchanging information in a networked environment. Internet and network security is currently a US $5 billion business, growing two-fold from its 1998 level of US $2.3 billion. North America and Western Europe account for 84 percent of all 1999 network security sales, with North America at more than two thirds of total sales worldwide. Network security sales revenue is expected to grow even faster over the next three years, as Internet and broadband adoption, as well as e-commerce, continue expanding worldwide.
Security is not just for insurance purposes anymore but is an important part of corporate policy and strategy. The Internet is a source for increased profitability, and companies need sophisticated security solutions to expand trusted relationships with their customers, partners, suppliers, and channels. This need is the vehicle of the network security market. According to IDC, its worldwide revenue will jump from less than $4 billion in 1999 to more than $11 billion in 2004.
Safety Net Canada will take advantage of the vast profit and market share potential in the industry by being the first-to-market supplier of a complete network and Internet security solution, targeted at both organizational and individual clients.
Building a strong corporate and retail customer base and developing a high industry image and profile are corporate-level objectives subject to the company's marketing and promotional efforts. Each of these goals will be pursued and achieved through the implementation of an array of marketing and promotional actions geared towards fulfilling the directives of Safety Net Canada's marketing plan.
The Security™ product line will be rolled out into all four target market segments simultaneously. Different blends of distribution channels and marketing techniques will be used to reach the various market segments.
Safety Net will build its market share by gradually entering all major international markets by the end of the planning period subject to this plan.
Safety Net plans to form strategic alliances with large hardware equipment manufacturers and anti-virus software companies as part of its plan to pursue an expansionary corporate level strategy through vertical integration.
As the Internet and network security industry is projected to grow, the competitive environment will become more heated. Competition will ensue from both incumbent companies and new entrants. Established technologies, such as firewall software, will be subject to downward price pressure and low-cost competition. The competitive rules for newer information security technologies, such as Gap Technology appliances, will continue to be derived from product innovation rivalry and differentiation.
Safety Net Canada has no direct and two close indirect competitors for its complete Security™ solution. None of the company's other industry rivals offer a software and hardware-integrated, off-the-shelf, and easy-to-use security product.
Safety Net Canada's competitive advantage is two-dimensional. One aspect of it is the company's ability to differentiate its products based on core competencies—innovation in product development and superior customer service. The second source of competitive advantage is cost-efficiency, with Safety Net Canada being the sole player in the Internet and network industry able to deliver a multi-faceted, reliable security solution at nominal cost. Long-term sustainability will be achieved through continuous innovation and customer service improvement.
Safety Net Canada's management team is composed of skilled executives and Information Technology experts with previous experience in the Internet and network security industry. Other areas of expertise include market assessment, hi-tech research and development, as well as business venture formation and development. These individuals possess the superior determination, clear vision, and exceptional experience key to the success of the company.
The revenue model of Safety Net Canada comprises a primary and a secondary revenue category, with each category containing multiple revenue streams derived from the different Security™ models:
- Sales through Distributors—Revenues derived from distribution network sales contributes up to 70% of total revenue.
- Direct Sales—Revenues derived through the direct sales channel comprises approximately 30% of total revenue.
To deliver on its business proposition and take advantage of the existing opportunities in the marketplace, Safety Net Canada is seeking to raise US $5 million. Proceeds will be used to complete flagship product line development and pre-launch testing, build and launch the website, launch preliminary marketing and promotion programs, build an administrative infrastructure, and acquire human resources.
Today, the increasing volume and speed of information exchange is accompanied by an increased potential for data to be manipulated in various ways including illegal tampering, altering, theft, or destruction. Safety Net Canada has been created out of the vital need of consumers and business users to have complete and reliable protection of information exchanged via public and private networks. The company is dedicated to continuously innovate and expand its line of security products in order to meet the needs of a dynamic and rapidly growing networked population.
Safety Net Canada is based on the philosophy of growth. The management's vision for long-term, sustainable growth incorporates the creation of a stimulating and creative corporate environment. Within such an environment, the members of Safety Net Canada's talent team have the opportunity to continually enhance their individuality and creativity while contributing to the growth and long-term success of the company.
Safety Net Canada resolves to treat customers, stakeholders, and the community with fairness and respect. These groups see the company as providing a sound financial return on investment, a robust, state-of-the-art Internet and network security solution, customer service and support, and a commitment to economic growth within the community.
Management believes that following a preset strategic course, leading to a clearly defined set of enterprise-wide objectives, will result in increased shareholder and stakeholder value and foster revenue and organizational growth. In line with its corporate mission, vision, and long-term growth strategy, Safety Net Canada will pursue the following fundamental corporate objectives:
- To position Safety Net Canada as a predominant leader in the Internet and network security industry
- To maximize shareholder and stakeholder value by growing the company and its revenue
- To keep innovating and testing new technologies in order to keep pace with the global demand for security
Short-Term Functional Objectives
Successful implementation of the company's business model requires accomplishment of the following short-term functional-level goals:
- Creation and maintenance of an effective distribution system with sales of up to 70% of total revenue
- Successful launch of the Security™ flagship product line by the end of Q1 2001
- Initial design of fingerprint authentication technology and prototype development of the 1020 Security™ scrambler by the end of year 2001
Marketing and Sales
- To dominate the North American market, develop the Asian market, and penetrate the European and South American market by the end of year 2003
- To grow sales revenue from US $5.4 million in year 1 to US $62.5 million in year 3
- To develop a worldwide brand name by the end of year 3
- To secure corporate allies for the manufacturing and distribution of the Security™ by mid-Q1 2001
- To utilize and sustain long-term competitive advantage based on differentiation through product and service innovation
To accomplish the objectives of its short-term and long-term planning periods, Safety Net Canada will follow a predetermined set of strategies at the corporate and business levels.
Safety Net Canada will pursue an expansionary enterprise strategy, based on vertical integration through strategic partnerships with large hardware OEMs and leading security software companies. Through these partnerships, the company has the opportunity to explore the profit potential of its trademarked technology while limiting competitors' access to international distribution networks.
With its patent-pending status, Safety Net Canada's competitive advantage is rooted in differentiation through innovation. The patent pending allows the company to harvest profits from commercializing the technology. To sustain its competitive edge in the long run, Safety Net Canada will continue investing in new product development. To lock out competitors, the company will trademark all new and unique technologies developed in the future.
|Date of Incorporation
||June 16, 2000
|Name of Incorporation
||Safety Net Canada Incorporated
|State of Incorporation
|Principal Place of Business
||8789 Elk Avenue
|Fiscal Year End
||Jensen Devil Barristers and Solicitors
The company has a granted patent pending in North America and has applied to trademark its Security™ technology under the Patent Co-operation Treaty (PCT). Under this treaty, Safety Net Canada maintains exclusive rights to sell manufacturing rights for profit in North America and more than 90 other countries worldwide.
Safety Net Canada's management team is composed of skilled executives and information technology experts with previous experience in the Internet and network security industry. Other areas of expertise include market assessment, hi-tech research and development, as well as business venture formation and development. These individuals possess the superior determination, clear vision, and exceptional experience key to the success of the company.
Safety Net Canada will continue acquiring new and creative individuals in order to complete the personnel requirements of its managerial and corporate structure. The company's management team will be gradually completed as new executives are interviewed and appointed to fitting positions, according to the company's hiring procedures.
Vicki Smith—President and CEO
Ms. Smith has extensive experience in business development in the Internet and network security industry. Before coming on board with Safety Net Canada, she was the active leader of New Wave Technologies—a network administration and support consulting company. During her four years of involvement with New Wave Technologies, Ms. Smith managed to build a substantial client base composed of small, medium, and large corporate customers throughout North America.
Ms. Smith wrote her first computer program at the age of 14, has a B.Sc. degree in Computer Science, and possesses in-depth knowledge and understanding of network security violations (hacking). She is an expert of network security and has an in-depth understanding of the information security industry dynamics.
As President and Chief Executive Officer of Safety Net Canada, Ms. Smith brings the essential technical and business expertise, as well as the advanced people and managerial skills critical for the company's success. Furthermore, she has the vision and technological and business insight to lead the company to success.
Kathy Bronco—Vice President Corporate Development
As a co-founder of Safety Net Canada, Ms. Bronco brings superior skills and experience in customer service management and client relations. Ms. Bronco's background is in marketing and promotional initiatives. Safety Net Canada benefits highly from Ms. Bronco's superior organizational and people management skills.
Ms. Bronco has successfully planned and implemented advertising and media buying campaigns for a number of businesses in the British Columbia hospitality industry. Hotel Vancouver and the Executive Plaza Hotel are among the client accounts under her management and supervision.
As a Vice President of Corporate Development for Safety Net Canada, Ms. Bronco is responsible for managing and co-ordinating all advertising, promotional, and public relations activities. Her outstanding dedication, energy, and personal drive guarantee flawless execution of her role in the organization and make an excellent addition to the Safety Net Canada team.
Michael Adams—Vice President Business Development
Mr. Adams brings to Safety Net Canada more than 10 years of experience in the information technology and business development fields. He is an accomplished Senior Consultant and, for the past four years, has been the project manager for the implementation of an array of IT applications such as mySAP.com, SAP, BAAN, and DDC. Through these and other technology development and project management assignments, Mr. Adams has acquired valuable knowledge and experience in business process re-engineering and customer relationship management.
Before mySAP.com, Mr. Adams spent six years with Dynapro in the capacity of Senior Product Consultant. During his contract with Dynapro, Mr. Adams implemented an ERP system, was responsible for product materials management, and consulted senior management, vendors, and external stakeholders on business processes and project management deliverables.
Mr. Adams has an extensive technical and business education background. As the Vice President of Business Development for Safety Net Canada, he brings to the company exceptional organizational, logistics, and people skills essential to establishing a flawless and efficient business entity.
Shannon Aims—Vice President Distribution
Ms. Aims brings to the Safety Net Canada talent pool 10 years of experience in senior-level marketing and sales. She has worked as a Senior Account Manager for renowned Canadian and Australian corporations, including Honeywell International, BGE Service & Supply Ltd., and Nuchem Australia.
Ms. Aims is a multi-talented Sales and Marketing professional with a solid background of training and experience to support solution-based, business-to-business projects. She is highly skilled in evaluating operations and introducing efficiencies, as well as assessing the feasibility of product line innovations in relation to client-specific needs.
Ms. Aims' strengths are deeply rooted in efficient project management and superior service delivery, communication, and client relations (including management of high-profile accounts), innovation, and problem solving, as well as technology and business operations. She brings to Safety Net Canada the confidence, know-how, and determination necessary to successfully establish and manage client and partner relations.
Dean Martin—Investor Relations
Mr. Martin has more than 15 years of experience in the real estate industry and with global corporate and project financing. As a Vice President to Codwell Banker Commercial, he has been involved in corporate real estate investment projects valued in the tens of millions of dollars. Mr. Martin's affiliation with the real estate investment firm Century 21 has resulted in the successful completion of multiple company mergers and joint ventures in the area of commercial real estate acquisitions.
Mr. Martin has been actively involved in the funding and financial management of a variety of large real estate investment projects, including fundraising for an investment project in the cemetery industry—which raised $6 million dollars investment capital—and participation in "Burns Bog"—a project valued at $2 billion. Currently, Mr. Martin is actively working on several joint venture opportunities in the entertainment, recreation, and hospitality industry. His background is in business administration, marketing, and sales, and he is a member of the Master Medallion Club (top 1% of industry professionals).
Mr. Martin is a significant addition to the Safety Net Canada's management team, as his business development expertise and years of investment experience are invaluable assets to the company's financial division.
Safety Net Canada is planning to rapidly build its management team and functional divisions to reflect revenue and organizational growth. The increase in staff will correspond to revenue growth.
Safety Net Canada, Inc. Organizational Chart
Safety Net Canada plans to form strategic alliances with large hardware equipment manufacturers and software companies as part of its plan to pursue an expansionary corporate level strategy through vertical integration.
Safety Net Canada will seek to enter into licensed manufacturing agreements with hardware equipment manufacturers for the production and bundling of security products. Large computer hardware and network equipment makers, such as IBM and Hewlett Packard, will be considered as potential strategic alliance targets. Under these licensing agreements, the company will benefit from expedited market penetration and access to a large and committed installed base.
Forming an alliance with leading software companies will benefit Safety Net Canada in two directions. Potential exchange of technological know-how will provide the company with the product and technology infrastructure to deliver the finest Internet and network security solutions. Moreover, through this strategic alliance, Safety Net Canada will seek access to a robust and ubiquitous distribution system to reach retail customers. Safety Net Canada is currently in the process of evaluating potential strategic partnership opportunities with leaders in the anti-virus and firewall segment of the Internet and network security industry.
Safety Net Canada is a research and development company. Manufacturing, marketing, and other functions will be outsourced to third parties. The rationale behind the outsourcing decision is to focus on the company's core competencies—innovation and product development. Management considers that Safety Net Canada will benefit from outsourcing the following functions:
Advertising and Promotion
Safety Net Canada will examine prospective advertising agencies to outsource its marketing and promotion functions. Criteria in choosing a suitable advertising partner include:
- Global reach and resource sharing
- Client base and successful brands
- Experience managing hi-tech accounts
A complete e-commerce enabled website is an integral part of Safety Net Canada's sales strategy through the direct channel. The company will contract out a web development team to build, implement, and maintain the e-commerce website. Key factors of choosing a web development outsourcing partner include uniqueness and functionality of the e-commerce technology and cost of development and maintenance.
Through its development of superior technology over existing network security solutions and by being first-to-market with a complete, off-the-shelf network security product, Safety Net Canada will explore the revenue potential to its full potential. If, as the company grows, a suitable bidder emerges, Safety Net Canada will consider the possibility of being acquired by a larger Internet and network security company.
Overview of Security Products
Network security is a multi-faceted technology field incorporating four different aspects of information security: Authentication, Administration and Audit, Access Control, and Encryption. The first two building blocks of information security—Authentication, Administration and Audit—are commonly conceptualized and referred to as the 3As of information security. Most companies involved in the network security industry manufacture products applicable to one of these four information security fields. Some of the currently available product groups and technologies, as well as their underlying functionalities are listed below. A more detailed description of these technologies is provided in the Exhibits section.
Available Technologies and Products
Authentication tools manage user, host, and message verification. Primary authentication technologies include:
- Smart Cards
Administration and Audit Products
Security administration and audit tools allow network managers to control and document which users get access to which resources. Principal components of security administration and audit are:
- Policy Management Services
- Database/File Management
- Auditing Software
- Virtual Private Networks (VPNs)
Access Control Product Group
Access control tools enable network managers to restrict access and filter the data traveling across the network. Chief data access technologies include:
- Firewalls (hardware appliances and software applications)
- Proxy servers
- Security Monitoring and Intrusion Detection Tools
- Gap Technology Devices
Encryption Product Group
Encryption and decryption technologies, such as Public/Private Key Infrastructure (PKI) and digital signatures, are used to guard data transmitted over the network. Within this product group, VPN, encryption enablers, and e-mail encryption are the key areas of product development.
Most off-the-shelf security products address a single aspect of network security, which allows for vulnerabilities at one or more of the remaining three levels of information security. The trend toward increasing frequency and damage of security attacks has boosted demand for complete and bulletproof information security solutions. A number of industry players and individual security consultants have taken advantage of this opportunity by offering customized security solutions, addressing all four aspects of network security, at premium prices.
Stateful multilayer inspection firewalls filter packets at the network layer, determine whether session packets are legitimate and evaluate contents of packets at the application layer. They allow direct connection between client and host, alleviating the problem caused by the lack of transparency of application level gateways. They rely on algorithms to recognize and process application layer data instead of running application-specific proxies. Stateful multilayer inspection firewalls offer a high level of security, good performance, and transparency to end-users. They are expensive, however, and due to their complexity are potentially less secure than simpler types of firewalls if not administered by highly competent personnel.
Safety Net Security Solutions
Dial-up Internet accounts, even with their changing IP (Internet Protocol) address are easy targets for hackers, especially with security breaches in browsers and operating systems being discovered all the time. Network access via an "always on" connection, such as cable modem or xDSL, is particularly vulnerable to malicious and unauthorized intrusion due to its static IP address. Safety Net Canada will be the first network security company to introduce an information security solution that meets all criteria for reliability, compatibility, ease-of-use, and scalability. The flagship product line is comprised of two components: the Security™, a hardware appliance that protects hardware from intruders, and the Security Guard™, complementary firewall and anti-virus software applications to protect the operating system and applications. By working in compliance and complementing each other, these two products amalgamate into a bulletproof network security solution that is resistant to currently known loopholes in security hardware appliances and software. Safety Net Canada is dedicated to continue innovating its products by incorporating new research and technology in information security into its existing and future products.
The Safety Net Canada proprietary Security™ is a hardware security device, based on the Gap Technology principle (see Exhibits for detailed explanation of gap technology), that resides on the connection between a computer and a modem. It monitors the inbound and outbound transmission pattern between these two devices to determine activity levels. If the device detects inactivity or idle connection for a pre-set amount of time (set by the user), it physically disconnects the computer from the network. Once the user resumes networking (i.e., requests a page on the Internet by following a link on their currently open browser), the Security™ detects the user input and re-establishes the network connection through the modem to the networked server in order to fulfill the request. Since the Security™ is placed in front of previously installed firewalls, the physical disconnection prevents outside access to the firewall itself (and anything behind it). If an intruder cannot access the firewall, he/she cannot break it.
The Security™ provides complete protection to hardware unsecured by firewall. Moreover, it closes the hardware vulnerability gap of existing firewalls by breaking the network connection physically and seamlessly to the user.
The Security™ is a hardware security device—a micro gateway component on the network connection. It consists of:
- AC Power Supply
- Circuit Board
- Activation Switch
- Input and Output (for data transfer wiring)
The Security™ provides the following functions and customizable options:
- Automatic Activation
- Artificial Intelligence Infrastructure
- Adjustable Re-connection Timer
- Signal Recognition
- Stand Alone Micro Gateway
- Category 5, Modular and 75-ohm coaxial cable compatibility
- Fingerprint Technology Option
- Remote Access Option
The above Security™ specifications and functionality encompass a number of considerable features:
- Security™ will protect:
- Privacy of personal information and correspondence
- Financial information
- Medical records
- Proprietary business information
- All levels of users
- Security™ is compatible with all existing firewalls
- Security™ gives the user complete control of their networking (LAN) and Internet use
- Security™ provides the user with bulletproof privacy
- Security™ prevents unauthorized server access and information transfer without interfering with e-mail
- Security™ supports multiple connectivity infrastructures, including "always on" broadband, dial-up, wireless, and satellite-connected computers
- Artificial Intelligence Infrastructure provides for background functioning and seamlessness for the user. It notifies the user of browser inactivity and enables Automatic Activation within an adjustable time frame
- Security™ stops intruders from accessing the computer system, including hardware, software, and data
- Optional Fingerprint Technology protects the computer/network from local unauthorized access
- Easily customizable interface puts the user in control of activated security level
- Security™ monitors all inbound and outbound traffic to detect unauthorized intruders
- Optional Remote Access provides Security™ security functionality from virtually anywhere
Security™ Product Line
The Security™ product line supports both high-speed and dial-up connections, as well as wireless access. The different models comprising the company's Security™ product line are distinguished based on type of connectivity they support. Safety Net Canada will support every type of Internet and network connectivity—dial-up access and "always on" high-speed connections through high-speed modems, cable, and Ethernet cards, as well as wireless access. (The Security™ product mix is broken down by type of connectivity later on in the plan.)
|Security™ 1000 (External)
||High technology security device designed for dial-up connections.
|Security™ 2000 (External)
||High technology security device designed for "always on" connection such as RHDSL, SDSL, DSL, ADSL, Cable Modem, and Fiber Optic.
|Security™ 3000 (Internal—self-installation)
||High technology security device designed for "always on" connection such as ADSL, Cable Modem, and Fiber Optic. This self-installation device takes a 5.25 slot in front and a regular slot at the back of your computer.
|Security™ 4000 (Internal—built-in)
||This specific product will be licensed out to different computer manufacturers such as Compaq, Gateway, Hewlett Packard, IBM, etc. This model will be licensed out to Cable and ADSL Modem Manufacturers and also to Ethernet Networking Card Manufacturers.
|Security™ 5000 (Internal)
||Designed for USB Modems. Meets and exceeds 300bits per second.
The Security Guard™ is an anti-virus and firewall software program that complements the Security™ to create a comprehensive and unbreakable security solution for corporate networks and the home computer. The Security Guard™ will be bundled with Security™ devices that are sold through the industry distribution and re-seller networks. With the addition of these software applications, Safety Net Canada's Security™ becomes a reliable and seamless solution to the end-user security problem.
Accomplishments to Date
Initial design, prototype development, and testing of all hardware and software products in the Safety Net Canada flagship product line (Security™ 1000, 2000, 3000, and Security Guard™) have been completed. The company is currently involved in the final phase of design and testing of the final Security™ and Security Guard™ products. The projected release date for the Security™ line of products, including the Security Guard™ firewall and anti-virus software components, is scheduled to be available for distribution and sale by the end of Q1 2001. The e-commerce website and other marketing and sales strategies are under development and negotiations are underway to secure strategic partnerships with manufacturers and distributors.
To maintain its leadership in the Internet and network security market, Safety Net Canada will continually improve its products and services in order to reflect and meet the needs of the dynamic and constantly changing hi-tech industry. Safety Net Canada's product mix will be an area of continuous multi-dimensional expansion, with new products developed in all four areas of network security and new technologies integrated into the existing product line.
Safety Net Canada has finished preliminary conceptualization of a wireless accessory to the Security™ device. Users of any Security™ desktop model will have the ability to communicate to their desktop (or corporate LAN) via a wireless access device. The wireless accessory will incorporate into a wireless access device (such as a cell phone or a handheld) seamlessly to the user.
Encryption and Access Control
Currently, research and development is focused on technologies in all four areas of network security, which can be successfully integrated with Safety Net Canada's existing product mix. Fingerprint authentication and encryption protection, as well as optical scanning technology are the fields of future development and product integration with Safety Net Canada's existing product line. Safety Net Canada is currently evaluating potential partnerships and product development opportunities with existing anti-virus software companies to expand the Security Guard™ component of its existing product line.
Satellite Scrambler Shield
Safety Net Canada plans to expand its Security™ product line to include a satellite scrambler shield device that protects satellite-connected computers from security vulnerabilities. Preliminary conceptual designs for the satellite scrambler shield are currently being generated.
The manufacturing cost associated with producing the Security™ product line is competitive and low. This cost structure combined with the ownership of an exclusive patent-pending status provides for an optimal profit maximization environment for an extended period of time (14 years under the technology patent). Safety Net Canada is currently investigating potential manufacturers for the company's Security™ hardware devices. Criteria in selecting a suitable manufacturer include:
- Access to inputs at competitive prices
- Manufacturing capacity
- Delivery network
- Production time
Service and Support
Safety Net Canada will outsource the development of a highly secure, scalable, database-driven e-commerce website as part of its high-quality, streamlined Customer Relationship Management (CRM) program. The site will be capable of supporting high-volume sales and will provide 24/7/365 support for a worldwide customer base. All online sales will be fully integrated with the manufacturing and fulfillment processes for seamless sales processing and inventory management.
Direct credit card sales of the complete Security™ line of products (bundled with the Security Guard™ firewall and anti-virus software) will be available to retail customers. Customers will have a choice of delivery options, such as delivery times and shipping methods. An international and reliable shipping company (such as FedEx) will be chosen to deliver Safety Net Canada's products to customers worldwide.
Through the website, customers will be able to register Safety Net Canada products upon purchase. Product registration will be the basis for customer tracking, support, and warranty service, as well as marketing.
Safety Net Canada Technology and Customer Support Center
This area of the website will be the central gateway for technical support to all customers of Safety Net Canada. It will provide account management support to corporate and retail customers. Implementation of single customer touch points will provide for superior long-term customer service. Unique customer IDs will be assigned to customers with registered Safety Net Canada products. The company will provide lifetime technical support to registered customers, with unique customers instantly identified through querying the customer database and seamless support provided via all means of communication (e.g. phone, e-mail, etc.).
This area will contain a product knowledge library, including FAQ, technical documentation and security issues and resolutions. In addition, the company's sales and support staff will receive general enquiries about Safety Net Canada products and additional product information (i.e., brochures). These requests will be processed via e-mail and potential clients recorded in the database. This area will also feature firmware configuration and installation instructions, as well as product updates and upgrades.
A warranty service link will provide initiation of warranty service, generation of warranty tracking, and shipping instructions.
The company's Security™ technology process is protected by an exclusive patent-pending status that gives Safety Net Canada a worldwide advantage. The Security™ has an approved methodology patent pending in North America and a Patent Co-operation Treaty (PCT) applied. The PCT approval will provide the company with exclusive proprietary rights to the Security™ technology in more than 90 countries. Under these intellectual property agreements, no other business or entity can legally create or imitate the Security™ security device. Safety Net Canada maintains the privilege and power to sell manufacturing rights for a profit.
Global Need for Security
Vulnerability Factors and Risks
The Computer Industry Almanac predicts that the number of Internet users worldwide will grow to 766 million in 2005, more than double the online population in 2000. Internet adoption is largely saturated in North America, with the user base approaching 42% of the total North American population and 43% of the total online population worldwide. Most of the future growth of the Internet is predicted to take place overseas, with European users accounting for 30% and Asia-Pacific representing 25% of total worldwide users.
Increasing use of the Internet is beneficial to e-commerce and more businesses are migrating online to boost revenues and lower costs. While Internet adoption will grow overseas, e-commerce revenues will remain largely within the United States and amount to more than US $1.3 trillion worldwide by 2003. The business-to-business (B2B) sector is expected to contribute more than 85 percent of total global e-commerce revenue and add up to US $1.1 trillion in 2003. The business-to-consumer (B2C) sector will more than double and total US $178 billion in 2003.
In their Global Security Survey for 1999, PriceWaterhouseCoopers and Information Week report that e-commerce companies are one of the most vulnerable targets for security breaches. Compared to businesses that do not sell over the Internet, e-commerce companies are more pre-disposed to information and revenue loss as a result of security intrusions.
E-Commerce Firms at Higher Risk
|Result of Security Breach
||Firm Sells Online
||No Online Sales
|Theft of data/trade secrets
Broadband access is expected to become one of the most explosive segments of the online economy as Internet users are starting to prefer the faster and reliable cable and DSL services to the slower and inconsistent dial-up connections. Worldwide broadband access will grow to 70 million high-speed Internet subscribers by the end of 2003. Broadband access is expected to grow from 14 percent to 40 percent of total Internet connections.
Broadband connections not only provide increased bandwidth to users but also establish a 24-hour-a-day connection to the Internet. A Forrester Research survey of high-speed Internet subscribers confirms that constant connectivity and faster download are the top reasons for choosing broadband access. However, these two features of high-speed Internet access expose users to the serious threat of security attacks. Constant connection and broader bandwidth increase the idle time for which a computer is connected to the Internet and, thus, open the door to intruder attacks.
Escalating Security Concerns
Explosive adoption of the Internet and e-commerce, as well as rapid commercialization of faster access technologies worldwide, have resulted in increased awareness of the importance of information security tools. Numerous instances of corporate security breaches have not only resulted in vulnerability to security attacks but also caused large monetary and reputation damages to renowned online businesses. As the frequency and magnitude of security attacks climbs, consumers become more concerned about invasion of their privacy and grow averse to shopping and conducting other transactions over the Internet.
Globally, the number of companies reporting security breaches has surged from 53 percent in 1998 to 64 percent in 1999 (Source: Information Week Global Security Survey). Among the 2,700 executives and corporate security managers polled by the survey, 48 percent report hackers and terrorists as the probable cause of the breach (up from 14 percent in 1998) and 41 percent name authorized employees as the likely intruder.
Security Intrusion Costs
The fifth annual survey of computer crime and security, conducted by the FBI and the San Francisco-based Computer Security Institute, polled 640 corporations, banks, and government organizations about the state of their computer systems. Of the 90 percent reporting a security breach, only 42 percent could quantify the damage from the attacks. Nonetheless, the dollar figure losses as a result of security intrusion in 1999 are more than double the average annual total over the previous two years.
While information theft and financial fraud are causing the most severe financial losses, US $60 million and $58 million respectively, denial of service or server downtime, such as the ones that temporarily paralyzed Yahoo!, eBay, Buy.com, and several other websites in February 2000, are also a growing problem. The survey, which reports on numbers taken before the high-profile February strikes, quantifies the losses from denial of service attacks climbing from only US $77,000 in 1998 to US $8.2 million by the end of 1999. Loss of customers and public relations damage control are some of the intangible costs companies incur in association with security breaches.
According to the 2000 American Express Global Internet Survey, which polled 11,410 Internet users and non-users across ten countries, four out of five people (79% of respondents) cited security and privacy issues as a concern when purchasing or making financial transactions online. A poll from Gallup and @Plan, taken shortly after the February denial of service attacks on major websites, reports that over 70 percent of online shoppers are concerned about privacy on the Internet in light of the attacks. The survey reveals that over 30 percent of online shoppers will be less likely to buy from e-commerce sites in the future and 85 percent of the respondents have privacy as their main concern regarding the Internet.
Security Market Overview
Industry Description and Size
The Internet and network security industry is a rapidly growing segment of the high-tech business sector, as businesses and individual consumers become more aware of the security threats caused by conducting transaction and exchanging information in a networked environment. Internet and network security is currently a US $5 billion business, growing two-fold from its 1998 level of US $2.3 billion. North America and Western Europe account for 84 percent of all 1999 network security sales, with North America at more than two thirds of total sales worldwide. Network security sales revenue is expected to grow even faster over the next three years, as Internet and broadband adoption, as well as e-commerce, continue expanding worldwide.
Security is not just for insurance purposes anymore but is an important part of corporate policy and strategy. The Internet is a source for increased profitability and companies need sophisticated security solutions to expand trusted relationships with their customers, partners, suppliers, and channels. This need is the vehicle of the network security market. According to IDC, its worldwide revenue will jump from less than $4 billion in 1999 to more than $11 billion in 2004.
IDC predicts that Authentication, Authorization, and Administration (3A) technology will be the leading sub-segments behind this industry growth. 3A technology is the largest segment of the network security industry and accounts for US $2.1 billion of total 1999 market revenues. IDC estimates that it will also be the fastest growing segment, at a compound annual growth rate (CAGR) of 28 percent from 1999 to 2004. The next nearest segments—firewall and anti-virus technologies—will each increase at CAGRs of 17 percent.
Safety Net Canada will take advantage of the vast profit and market share potential in the industry by being the first-to-market supplier of a complete network and Internet security solution to corporate and individual clients.
There are more than 50 public companies operating in the network security industry. A growing industry and a large revenue potential indicate the presence of hundreds of other industry players—private companies involved in the development of new security technologies and products.
The industry is relatively fragmented and moving toward consolidation, as major players in the market are expanding into niche markets of the network security industry and rapidly gaining market share. Consolidation is expected to take two forms: research and development purchases for faster access to niche markets and diversification of revenue streams, and vertical integration through partnerships with software vendors (e.g., bundling with browsers and other software packages).
Regardless of consolidation trends, the network security industry will continue growing and attracting new participants within the next few years. The high revenue potential will provide for a competitive climate without an indication of market saturation in the short- to medium-term.
The network security industry has an established distribution network incorporating three main channels: distributors and re-sellers, licensing, and direct sales. Network security product manufacturers use these channels individually or in a combination depending on the product. Safety Net Canada intends to use an applicable combination of distribution channels for its network security products in order to reach a larger customer base and build market share.
Distributors and Re-sellers
Large computer components wholesalers, such as TechData (NASD:TECD) and Ingram Micro (NYSE:IM) are major distributors of network security hardware appliances and software products. These specific distributors deliver products to hundreds of thousands of resellers and reach customers in more than fifty countries worldwide. Safety Net Canada will investigate potential opportunities with a major computer components distributor in order to rapidly and efficiently rollout its products worldwide. Re-seller connectivity, global outreach and wholesale price will be among the top considerations in choosing a distributor.
Licensing through Original Equipment Manufacturer (OEM) partnerships is a premiere distribution channel for security software products. Some hardware appliances are also licensed out and sold through network equipment manufacturers. Safety Net Canada will license its line of network security solutions to hardware and software manufacturers in order to reach the small business and home user market segments.
Most manufacturers of network security products employ a full-service direct sales and support force to distribute their products, since a large portion of their revenue streams (in some cases up to 70%) is captured via support services. Direct sales channels usually comprise both an offline and an online channel, with most companies in the industry offering real-time 24/7/365 support and fully functional e-commerce websites.
Safety Net Canada will build an aggressive direct sales force in order to secure the enterprise target segment. The company will implement a complete total quality Customer Relationship Management (CRM) technical support program in order to build a loyal enterprise client base.
Safety Net Canada identifies the following four target market segments for its Security™ line of network security products.
1. Government and Non-Profit Organizations
Government agencies are a particularly lucrative market for the information security industry since they are major directories of highly sensitive information from personal data to military technology. A congressional subcommittee investigating the ability of federal agencies to protect computer systems from terrorists and hackers recently released a report card on government information security practices. Not one federal agency received an A, and the overall grade for the largest federal agencies and departments was D-minus. In response to these facts, the current administration is seeking $2 billion for information security in next year's budget, a 15 percent increase.
The Government is one of the largest spenders in the economy and Safety Net Canada will take advantage of the opportunity presented by detected vulnerabilities of government information systems. The company will aggressively market its budget-conscious Security™ security solution to all levels of government administration and non-profit organizations in order to capitalize on this vast revenue opportunity.
2. Large Corporations
Enterprise customers are a high priority target market for the network security industry since a substantial volume of sensitive information and e-commerce transactions is exchanged over corporate networks and the Internet daily. Large corporations over 10,000 employees are expected to be top network security spenders, with security budgets increasing proportionately to company sizes.
Safety Net Canada will respond to the growing needs for security of larger corporations by providing a complete security solution, resistant to hacker attacks and internal security breaches.
3. Small and Medium Enterprises (SMEs)
SMEs are the primary market for cost-efficient high-speed Internet access. Growing broadband adoption among SMEs indicates increased vulnerability to security attacks of this market segment. As businesses become more exposed to networking and the Internet, they become a substantial target market for the network and Internet security industry.
U.S. Business Broadband Users 1999-2003 (Millions)
Safety Net Canada will target SMEs by offering "easy to install and use" and complete network security products at reasonable prices.
4. Individual Home Computing
Broadband adoption among home users will grow even faster than business users, with residential subscribers reaching 20.73 million across all broadband channels.
U.S. Residential Broadband Users 1999-2003 (Millions)
Another trend in residential Internet access is the development and commercialization of home-based local area networks (LANs). The growth of home LANs is being driven both by multi-PC households and by high-speed Internet access. By 2004, 67.7 million American homes (63.4%) will have PCs, with 30.4 million of these housing more than one. Of the multi-PC households, 58 percent will be networking their devices by 2004.
Increased residential broadband access and a growing number of home-based LANs create a substantial security threat to home users. Safety Net Canada intends to aggressively target this segment in order to secure market share and realize the revenue potential offered by the home user market.
International Broadband Adoption
Western Europe will mirror the U.S. broadband industry development, with European high-speed Internet subscribers reaching 18 percent of households (or 27 million) from a minute 0.2 percent of households in 1999. Scandinavia and the Netherlands, with their traditionally high penetration rates, will take the lead with Germany and the United Kingdom following closely.
Another booming region for the broadband industry is Asia-Pacific. The number of broadband subscribers in the Asia-Pacific region is predicted to surge from 452,900 at year-end 1999 to 11.3 million by the end of 2003. Cable modem and ASDL will be the most popular forms of access, taking 46 percent and 42 percent of the market respectively by year-end 2003. Competing broadband providers across the region are focusing on SMEs and home offices as an entry strategy into this market. Further commercialization of broadband services will lead to increased competition, as international companies, such as Global Crossing and Level 3, have launched their services into the market.
Preferences for Security Solutions
Corporations would like to have one network security package that solves all of their security needs including:
Products that employ all 4 areas of network security:
- User ID/Authentication
- Access Control and Privilege Management
- Administration and Audit
Products that meet the following criteria:
- Ease of administration
- Integration with existing customer applications
- System reliability and availability
The complexity of competing information and network solutions—both software and hardware-based—provides a significant opportunity to the company in marketing its complete, off-the-shelf, user-friendly network security solution. Safety Net Canada's Security™/Security Guard™ product line provides a high-level of reliability and matches client requirements for compatibility and ease-of-use.
Safety Net Canada will be the first mover in providing an all-inclusive security solution, incorporating all four segments of the network and Internet security industry. The current level of dial-up accessibility (more than 80% of Internet subscribers in 2000) will allow for quick market penetration of the Security™ 1000 model and rapidly growing market share and revenue for Safety Net Canada. Beneficial broadband adoption trends will ensure success for the company'