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The European firewall market is expanding strongly but in transition as sales of appliances eclipse those of software for the first time.

That's the finding of market analyst firm Frost & Sullivan which estimates that software will, by 2005, account for 38.3 per cent of the total European firewall market of $1.25 billion. Sales of firewall appliances are poised to command a 61.7 per cent share in the same year.

According to Jose Lopez, research analyst at Frost & Sullivan, last year saw change in the firewall market product mix, with appliances generating more revenues than software firewalls for the first time. Sales of firewall appliances, particularly to small and medium-sized businesses which are becoming more security aware, are expected to continue growing more quickly than software counterparts.

"Software firewall vendors are under pressure to make their products more competitive and reach OEM agreements with key appliance vendors to embed their software, which will have an adverse effect on growth in this sector," he reports.

To counteract declining revenue growth, enterprise players are seeking stronger brand differentiation by expanding beyond their core competencies into areas such as quality of service (QoS) software and intrusion detection, Frost & Sullivan notes.

The market for enterprise network and data security products is highly competitive and subject to rapid change. Principal competitive factors include level of product security, technical features, ease of use, capabilities, reliability, customer service and support, distribution channels, price and total cost of ownership.

The VPN market is witnessing a number of partnerships between software and hardware developers.

On the strength of the company's partnership in the appliance space with Nokia, Check Point Software emerges as the market leader. Cisco is seen as the other pre-eminent player in the European firewall market.

Users can now purchase integrated firewall products that incorporate most VPN functions; firewalls are often offered with dedicated VPN devices, and router based hardware.

Frost & Sullivan forecasts the convergence of these two technologies will continue to fuel the appliance market through to 2005. ®

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