McAfee Associates, Inc.

Competitive Strategies for the

Computer AntiVirus Industry

by Jeffrey S. Kline

Copyright: MediaNet Solutions, Inc. - June 1998

Running head: MCAFEE ASSOCIATES, INC. COMPETITIVE STRATEGIES

Abstract

Computer virus attacks are not rare. They have been occurring for a number of years and their occurrences are increasing. A niche field within the computer industry has emerged to deal with the threat of viruses known as the computer AntiVirus field or Virus Prevention field. To date, the most common service/product of this industry has been the development and distribution of AntiVirus software products which allows the detection and removal of viruses from computer systems. The leading company in the AntiVirus industry (in regards to software products) is McAfee Associates, Inc. McAfee currently owns approximately 76 percent of the AntiVirus software product market. McAfee’s primary competitors include Symantec, Inc., IBM, S&S Software, and TCT-Thunderbyte Corporation. Industry trade journal articles and selected text books were reviewed to investigate the Computer AntiVirus Industry and McAfee Associates, Inc.’s role within this industry. The results of these reviews were utilized to identify industry characteristics, industry trends, and to discuss strategies and practices which McAfee can utilize to better compete in the industry’s international markets.

I. Introduction

Computer Viruses are a deliberately created set of instructions which are able to propagate themselves through a computer systems. Besides the ability to replicate, many viruses are able to do other things, mostly harmful. Some viruses display messages, some slow down the operation of a computer system, and some cause large-scale loss of data and programs.

Computer virus attacks are not rare. They have been occurring for a number of years and their occurrences are increasing. The US-based Computer Virus Industry Association documented virus attacks on nearly 90,000 personal computers during 1988, and a 1991 Gallop survey revealed that 24 percent of the UKs 500 largest companies had suffered a computer virus attack in the preceding three years. In 1989, a new virus appeared every week. Its was estimated that by 1990, that rate rose to one every two days. Currently, there are 7,400 known viruses and new viruses are being discovered at a rate of between 150 and 200 per month (see figure 1.0). Ninety percent of corporations were affected by viruses last year according to the National Computer Security Association. According to IBM's High Integrity Computing Laboratory, corporations with 1,000 PCs or more now experience a virus attack every two or three months. Though viruses have traditionally been thought to affect PC-based systems, large computer systems are not immune to virus attacks. For example, a virus on the Arpanet network in the US caused over 6,000 computers to crash, necessitating an estimated 50,000 hours of programming time to restore (Louw & Duffy, 1992).

 (Figure 1.0 - Growth of Viruses Since 1989)

An example of the negative effects of computer virus attacks is the ‘Trojan horse' computer virus that recently attacked one of the largest BBS systems in Canada. CBS Online, with more than 10,000 subscribers, says an undisclosed number of its subscribers unwittingly downloaded the Big Caibua program, which passes itself off as a screensaver. Running Big Caibua displays an obscene graphic while the virus begins infecting the host system in the background. The virus formats track zero on the hard disk, deletes the first file in a directory, creates obscenely named subdirectories and randomly corrupts data. Big Caibua infects only COM files and is expected to spread, although experts do not know how widely (Burger, 1996, p. 21).

Computer AntiVirus Industry

A niche field within the computer industry has emerged to deal with the threat of viruses known as the computer AntiVirus field or Virus Prevention field. To date, the most common service/product of this industry has been the development and distribution of AntiVirus software products which allows the detection and removal of viruses from computer systems. These products are software-based and run on the workstation, server, and network interface levels. However, these products have been complemented by companies beginning to provide virus analysis services which look at providing customers with virus free environments by scanning, detecting, removing, and providing virus prevention methods, procedures, and training. Also, some companies have developed hardware based AntiVirus solutions.

Virus Proliferation

The threat of computer virus infection has dramatically increased recently due to three primary reasons: (1) the increase use of the Internet, (2) increase use of e-mail amongst the academic and business world, and (3) the growing number of viruses being created. According to Bill Larson, CEO of McAfee (leader in AntiVirus industry), "what the jet airplane was for the biological virus, the Internet is for the computer virus. Its very easy to build a virus. There are all kinds of virus construction kits, and 12-year-olds all over the world have access to them. The problem has been how to propagate your virus. The Internet is the Wild West, an unregulated environment where the virus writer can try to infect people" (McMullen, 1996, p.41) According to the National Computer Security Association (1996), macro viruses (virus affecting documents) are now the single largest type of virus infection reported, and electronic mail is one of the most common methods of infecting computer systems (S&S Press Release, 1996). As mentioned, there are 7,400 known viruses and new viruses are being discovered at an alarming rate of between 150 and 200 per month. The rate of discovery is continuing to increase. If this rate continues, traditional methods of virus prevention will not be adequate to stop virus infections from occurring.

The leading company in the AntiVirus Industry (in regards to software products) is McAfee Associates, Inc. McAfee currently owns approximately 76 percent of the AntiVirus software product market. McAfee’s primary competitors include Symantec, Inc., IBM, S&S Software, and TCT-Thunderbyte Corporation.

II. Methods

Industry trade journal articles and selected text books were reviewed to investigate the Computer AntiVirus Industry and McAfee Associates, Inc. role within this industry. The results of these reviews were utilized to identify industry characteristics, industry trends, and to develop strategies and practices which McAfee can utilize to better compete in the industry’s international markets.

III. Results

Industry Structure

McAfee Associates, Inc.

McAfee Associates, Inc. has been the pioneer in leading the industry in developing AntiVirus software products. Currently, 80 percent of Fortune 100 companies use McAfee AntiVirus products and McAfee has 76 percent of the overall AntiVirus product market. Additionally, McAfee has 41 percent of the integrated network market within the US. McAfee started out distributing software as shareware, distributing it free on a bulletin board and asking those who used it to send in payment. Bill Larson, McAfee’s President and CEO, states that "electronic software distribution greatly reduces McAfee products' cost structure. The company has always gone outside of traditional business models to differentiate itself and this has contributed to its success. The unique business model has made McAfee the most profitable company in the industry" (McMullen, 1996, p.41).

Business Structure - Competitive Advantage

One of the more notable aspects of McAfee is its structure. McAfee has been a pioneer in reinventing the software business model, and people are starting to imitate their technique and their method of electronic software distribution. All of their products are available through their Website. They are all fully functional and unencrypted with no time usage limitations and they have full documentation for free evaluation (McMullen, 1996, p.41).

Electronic software distribution reduces McAfee’s cost structure across every functional area. The cost of their products are close to zero. The presale cycle is accelerated because people experience the product before they talk to a salesperson. More than 85 percent of McAfee’s downloads are from guest users, and many of them redistribute the product. They put it on their Website, and others download it. These people become McAfee’s product champions. They introduce the product to corporate America by telling their friends. They become technically literate opinion leaders and individuals. In contrast, approximately 15 percent of the company’s revenue is through indirect distribution. McAfee is looking to increase that number by aggressively pursuing resellers. Their recent acquisition of Saber Software is one way the company is attempting to rapidly build a significant channel presence among network VARs (McMullen, 1996, p.41).

Organizational Structure

Currently, McAfee is about 50 percent dedicated to network management and 50 percent dedicated to AntiVirus products and services. But, the heritage of the company, and certainly John McAfee's background (the founder) is in the AntiVirus market. John McAfee wrote the first AntiVirus program in the industry. McAfee can be thought of as the Centers for Disease Control because their software products actually detect the most number of viruses and they sell the greatest number of AntiVirus software resulting in the largest customer base in the industry. Due to this customer base, McAfee is generally first to receive the newest virus samples found. They call that their success flywheel, and its impossible for somebody to crack the flywheel (McMullen, 1996, p.41).

McAfee receives over 1,000 suspect infections per week from more than 10 million users. Though there are all kinds of purist technologies that try to preclude virus infections, McAfee implement cures the "old-fashioned " way, you give them a virus, and they give you a cure. The WinWord.concept virus sample was sent to McAfee within 24 hours of its outbreak and within the following 24 hours, they sent an e-mail with a cure back to the original site. McAfee then posted the standalone string, or cure, for the virus on their BBS and their Web site. They also incorporated the cure into their monthly release of VirusScan, which is e-mailed to their users and distributed on their Website (McMullen, 1996, p. 40).

Growth Through Acquisition

McAfee leveraged its position in the AntiVirus niche to enter the LAN-administration market about two years ago by acquiring Brithworks Development, Inc. and the products of Automated Design Systems, Inc. Currently, 50 percent of McAfee’s revenues are generated by sales of LAN-administration software (Graziano, 1995, p. 15).

In July of 1995, McAfee acquired Saber Software Corporation in a stock trade which was valued at $ 40.6 million. This move further consolidated the LAN-administration software market and increased McAfee’s position within this niche of the industry (Davis, 1995, p. 4). According to an International Data Corp. study, McAfee controlled 10.3 percent of the integrated PC network management suite market prior to the acquisition. After the acquisition, they now control 40 percent, giving McAfee the largest slice of the network management suite market in the United States (Metz, 1995, p. 36).

More recently, McAfee acquired Vycor Corporation for $ 9 million and plans to integrate Vycor’s enterprise-level help-desk software into its own management products. The acquisition is part of McAfee’s strategy to beef up its product line by creating integrated management solutions that span from the LAN to the WAN. The Vycor Enterprise line of help-desk products are designed to provide proactive problem-prevention capabilities as well as problem management and resolution (McGraw-Hill, 1996, p. 51).

Strategic Alliances

Early this year, McAfee Associates and Tivoli Systems made an equity investment in net.Genesis as the three companies agreed to work together to make products for managing Internet infrastructures and services. The agreement indicates McAfee’s emphasis on the increasing importance of the Internet and the fact that the participants believe that it will one day become part of mission-critical processes. Net.Genesis will use the money from its partners along with additional financing to increase its research and development efforts, to search for other potential sources of revenue and to speed products in development. The agreement between the company also calls for joint marketing efforts, although no specifics on strategies or products were released (Davis, 1996, p. 35).

International Expansion

McAfee is expanding its reach and markets by quickly entering and expanding its international initiatives. In October of 1995, McAfee acquired three of its distributors in Europe which included IPE of London, Assurdata of Paris, and Kirschbaum Software of Munich, Germany. These acquisitions were in an attempt to expand their sales, marketing, and customer support operations in Europe (Newsbyte, 1995). Additionally, McAfee has used its recent acquisitions to expand its international reach. For example, Saber Software Inc. has strengths in international direct sales, VARs, and corporate resellers.

McAfee’s AntiVirus Industry Competitors

The major competitors within the AntiVirus niche of the computer industry which compete with McAfee are Symantec, Inc., IBM, S&S Software, and TCT-Thunderbyte Corporation. As mentioned, McAfee is the largest competitor in the AntiVirus industry, however, they are not necessarily the largest company in terms of revenues and net assets of the companies mentioned above. Because some of these companies are also involved in other horizontal and vertical markets, they may be larger. There are other competitors in the industry, but the above mentioned ones represent the major (largest) competitors. Most of these companies (major competitors) are computer systems integrators, as well as, developers of AntiVirus software. Each of the companies develop AntiVirus software applications which can run on individual PCs and/or network servers.

The AntiVirus products developed by these companies use basic heuristic analysis and standard signature scanning and checksums in detecting and removing viruses. Heuristic analysis uses expert system logic to detect viruses by looking for common characteristics of viruses such as position in memory, signature patterns, etc. Signature scanning and checksums detects viruses by known/discovered signatures of viruses. The former allows the detection of newly developed viruses and is more proactive and the latter detects those viruses which have already been discovered and is more reactive.

Symantec Brief Overview

Symantec markets products for businesses in key areas: utilities, development tools, AntiVirus applications, and productivity applications. The company recently acquired Delrina Corporation and now offers a collection of powerful communications software and electronic forms solutions. The company's products help customers build, manage and use software on desktop PCs as well as across heterogeneous networks of computers. In development tools, Symantec provides both 3GL (3rd-generation) and 4GL (4th-generation) tools for building software applications. In utilities, the company makes the products to manage a distributed computing environment protecting against data loss, recovering from disaster, and improving system performance. In AntiVirus, Symantec offers PC and network-based AntiVirus software products. Symantec also offers targeted vertical market applications, with an emphasis on solutions such as contact management (Moltzen, 1995, p. 33).

Symantec - Core Growth Strategy

Symantec Corp. is considered one of the computer industry’s most takeover-hungry companies. It has had its market value jump by more than $250 million in a little more than a year to $900 million. The company has taken almost a year to start realizing revenue from one of its more recent acquisitions, Central Point Software Inc., and Symantec's revenue during its last fiscal year grew by two percent-a slower pace than much of the high tech world. Symantec just recently closed a deal on a $415 million deal to buy Delrina Corp., Toronto, and appears to be trying to update products in connection with the release of Microsoft Corp.'s vaunted Windows 95 OS. "As a general statement, they do a pretty good job of taking acquisitions and stripping out duplicated costs and making product lines profitable and generating growth," said analyst John Powers of Robertson Stephens & Co., San Francisco (Moltzen, 1995, p. 33).

The company turned in $328 million in revenue for fiscal 1995. Strategically, the company is putting weight on Windows 95 and continued growth via takeover. It has bought 13 other companies, not including Delrina, since 1990 (Moltzen, 1995, p. 33).

This strategy is carried over into their AntiVirus business component. One of the companies it bought last year, the AntiVirus application maker Central Point Software, caused Symantec difficulties in estimating return rates for the company's product and the company had "high levels of inventory" already in the channel, Symantec reported in its annual report to the US Securities and Exchange Commission. Revenue for Central Point's products was deferred until they could be sold by resellers or distributors (Moltzen, 1995, p. 33).

"This revenue, and cost of revenue deferral, resulted in a decrease in domestic net revenue of approximately $5 million and international net revenue of approximately $10 million" during fiscal 1994 before income taxes of about $12.3 million were provided for, Symantec said in its June 10-K report. Now, the unit appears to be bringing in money. Once all that revenue was deferred, and Central Point products were in the channel, Symantec reported it was able to collect $3 million in domestic net revenue that had been deferred (Moltzen, 1995, p. 33).

"Good acquisitions complement ongoing internal product development," Bailey wrote. "They allow for rapid entry into high-growth markets and for a company to instantaneously acquire people, market presence, expertise, products [and] brands. "Acquisitions generate instant revenue against which to fund expenses" (Moltzen, 1995, p. 33).

S&S International

S&S International, (often referred to as Dr. Solomon's) was founded in 1984 as a technically advanced software house specializing in security and network-related issues. The company is recognized for its AntiVirus products which, along with its other software products, are sold under the "Dr. Solomon's" brand. The company’s success and professionalism was recognized in the UK with a 1993 Queen’s Award for Technological Achievement for the development of its key product, Dr. Solomon’s AntiVirus Toolkit and the techniques inherent in that development (S&S Press Release, 1996).

In July 1995, the company received an award for being one of the fastest growing independent companies in the UK. Figures were compiled by Price Waterhouse for the Independent 100 and Middle Market 50 listings. Appearing for the first time in the Top 100 listing, S&S International has been placed fifth in the national listing, with a compound sales growth of 78.5%. The company currently has over 240 staff world-wide, with offices in the UK, Boston, USA and Hamburg, Germany. Additionally, the company has 32 international distribution partner organizations around the world providing software and services to 70 countries. World-wide revenues exceed $ 38 million (S&S Press Release, 1996).

S&S Strategic Partnership - Market Share Capture Strategy

S&S and Integralis Limited, supplier of an electronic mail scanning product called MIMEsweeper, formed a strategic partnership which will allow S&S to license e-mail unpacking and scanning technology, developed by Integralis, to provide a product that will provide high-speed, real time virus scanning for email servers of all kinds. This partnership will allow S&S to target the highest incident component of the virus market.

S&S - Other Business Areas

In addition to AntiVirus software products, S&S publishes Dr. Solomon’s Audit for software and hardware auditing, Dr. Solomon’s Support Software, a helpdesk management system, and Dr. Solomon’s Ringfence, which provides multi-level PC protection.

Thunderbyte

Thunderbyte was created in Europe to combat the growing threat of intelligent and sophisticated viruses around the world, ThunderBYTE AntiVirus Utilities have been one of the leaders in the AntiVirus computer software field for several years, boasting the world's fastest scanner. Using a combination of traditional and proprietary heuristic "seek-and-destroy" techniques to seek out the stealthiest viruses, Trojans, and logic bombs, these utilities offer an enhanced level of AntiVirus protection at speeds that are unsurpassed in the PC arena (Thunderbyte Press Release, 1996).

Thunderbyte - Strategic Partnership and Reseller Agreement

Caravelle and Thunderbyte jointly formed a strategic partnership in June of 1996 to form an advanced virus monitoring and alerting software system which is a real time defense against viruses in any network. According to Howard Thaw, president of TCT Thunderbyte, "We have linked our Thunderbyte AntiVirus product together with Caravelle’s WATCHER product so customers know instantly when and where a virus is detected in any Intranet/Internet network. With this offering, our customers can rest assured that they are receiving the best possible protection recovery strategy against infection from viruses." (Thunderbyte Press Release, June 3, 1996).

Additionally, Thunderbyte and Digital Equipment of Canada Limited signed an agreement appointing Digital as a key reseller of Thunderbyte AntiVirus utilities for standalones and networked PCs (Thunderbyte Press Release).

IBM - AntiVirus Focus

IBM is a very large company with concentration in many computer-related horizontal and vertical markets. One of their product and service areas is the AntiVirus arena. IBM’s AntiVirus product is an advanced AntiVirus technology. It is developed and maintained at IBM's High Integrity Computing Laboratory, where many of the world's most respected AntiVirus researchers have applied their expertise to the development of the technology for more than seven years. IBM AntiVirus is a comprehensive solution to the virus problem today," said Steve White, senior manager of the lab at the Watson Research Center. "Here at IBM Research, we're creating technology that will provide solutions to the problems we see well into the next century. IBM AntiVirus will evolve into a worldwide immune system, for computer viruses that will protect users on a global scale." (IBM Press Release, 1995)

IBM AntiVirus customers have available to them a broad range of expert services, including technical support with rapid technical assistance, virus signature updates and Bulletin Board support and quarterly software upgrades.

IBM - Investing in New AntiVirus Technology

IBM is attempting to obtain a competitive advantage by investing in the development of a new AntiVirus technology which will emulate a biological immune system which will be ready for release within two years. They system will automatically forward files to an AntiVirus administrator’s PC within a company and then over the Internet to a secure computer back at IBM’s lab. There, computers will reproduce the virus, analyze it, figure out how to detect and remove it, and send that information back to the administrator’s computer and on to your desktop. IBM’s philosophy is that as it becomes obvious that viruses could spread more quickly than humans can craft cures, conventional methods of coping with viruses may no longer be adequate (Edge Publishing, 1995, p. 11).

Competition Within the Industry

The AntiVirus industry is an emerging industry. The competitors are strong and are aggressively pursuing positions within the industry. However, the industry is vast and the opportunities are just being discovered, thus, current competition is not a significant threat to McAfee. There are no established ground rules. The best rules to date are those that have been established by McAfee. McAfee is clearly the industry leader particularly in terms of growth-oriented acquisitions, strategic partnerships, and technology innovations.

(Figure 2.0 - Strategic MAP of AntiVirus Industry)

Looking at the strategic map in figure 2.0, the strategic characteristics of the industry are illustrated. Potential market share in terms of current corporate strategic planning is focused in growth via acquisition, partnerships, and innovations. McAfee is the leader in all three of these areas and is successfully implementing each of these effectively. Symantec has chosen to focus more heavily on acquisitions to acquire market share, whereas, IBM is relying more on innovations. S&S International and Thunderbyte have chosen to partner with distributors and VARs to enhance their market position. Based on McAfee’s example, having strategies to move forward in all three areas seems to be the key to obtaining maximum market share within the AntiVirus industry.

Five Forces Model Applied to Industry

Applying the Porter five forces model to the AntiVirus computer industry, the threats to entry, bargaining power of suppliers, bargaining powers of buyers, pressure from substitutes, and industry competition can be evaluated.

Threat of entry

The cost of entering the AntiVirus market is relatively low. Looking at the McAfee model, the company entered with a BBS, a telephone line, and a few key staff personnel. Additionally, threats come from other lesser known competitors which poses competitive advantage in others areas, such as access to international markets. One example is company called ALWIL Software, which is a Czechoslovakian company which has over 60,000 legal installations of their AntiVirus product (called AVAST) and is looking to enter the US and West European markets. This company has established competitive advantage in the Eastern block International markets, a market hardly looked at by US and other western countries. AVAST won third and second place in DOS-based Virus Scanner Review published by the Virus Bulletin (Oxfordshire, England) in January and July of 1995 (Newsbyte, 1995). ALWIL has been in negotiations with several US software companies and expects to enter into a licensing agreement with one soon. ALWIL possesses competitive advantage over other industry players because it has access to strategic international markets, has brand name recognition, and has the distribution channels to move AntiVirus products.

Bargaining Power of Suppliers

The bargaining power of suppliers is not a major factor because most AntiVirus organizations develop their own products and provide their own set of services.

Bargaining Power of Buyers

The buyers of the AntiVirus industry, thus AntiVirus software, are large corporations, small businesses, state and federal governments, local governments, educational institutions, and individuals. Some buyers have a larger impact than others. For instance, the federal government is a much larger buyer than most business, so their choice of AntiVirus software vendor has a greater impact on the industry and the strength of its players.

Pressure from substitutes

There are not many substitutes for AntiVirus software on the market currently. IBM’s work in developing new technologies to use more expert system technology in solving the problems may be viewed as a substitute, however, this work is more likely an advancement of the current technologies and thereby is more likely a trend in future software development tools.

Major Industry Trends

Four major industry trends which will have the greatest impact on the AntiVirus Industry are (1) the growth of the Internet, (2) the continued proliferation of viruses, and (3) the move towards heuristic-based products, and (4) international expansions of the AntiVirus markets.

Growth of the Internet

More and more international and domestic business are beginning to rely on the Internet as a means of communications in terms e-mail, advertisement, and Internetworking. The trend is becoming more and more likely that companies have the Internet somewhere in their strategic plans. The use of the Internet is increasing at a rate of 10 to 20 percent a month. As this trend continues, the proliferation of viruses will subsequently increase.

Continued Proliferation of Viruses

As mentioned, there are 7,400 known viruses and new viruses are being discovered at a rate of between 150 and 200 per month with the discovery rate increasing over time. A major factor contributing to this trend is the inability to deter virus writers from creating new viruses. International law is not adequate to deter the creation of new viruses. An example of one of the harshest penalties levied thus far was the recent sentencing of virus writer Christopher Pile. He was sentenced to 18 months in prison in November of 1995, but industry experts doubt whether the sentence will deter other virus writers. Pile was the first to be sentenced under the Computer Misuse Act of 1990, but many believe the Act is simply not strong enough. One problem noted by New Scotland Yard is that only 5% of virus attacks are reported to police and there currently is no National Police unit to address the international crime activity of computer viruses. Many experts would like to see the Act strengthened and to see those in possession of a virus or a virus engine be charged with a criminal offense. The Act originally was created to stop hackers not virus writers, so there are weaknesses in the Act as it is written. It was not possible in 1990 to predict how prevalent viruses would become (Boyle, 1995, p. 16). The ease in which viruses can be proliferated will only increase the demand for the products and services of the computer AntiVirus industry.

Moving Toward Heuristic Logic Products

Currently, most AntiVirus products rely primarily on the identification of known virus signatures and allow for elimination of these with specific disaffection routines. This approach is for the most part, reactive, in that antidotes are written for viruses as they are discovered. However, as the creation and proliferation of viruses continues to grow at exponential rates, this approach will become obsolete because reacting to viruses will not be adequate to protect resources from virus’s delicious effects, i.e. new viruses will appear faster than antidotes can be written and placed into production. New technologies are currently in use and being refined which rely on heuristic expert system logic that recognize virus patterns and automatically develop antidotes for the disinfecting of these viruses. Leaders in developing these technologies are IBM (example above) and NetZ Computing LTD which currently markets a pure heuristic product called "Invircible". These new technologies will be required to fend off the voluminous numbers and types of viruses which are being proliferated by the Internet and unhindered virus writers.

International Competition

The arena of competition is quickly changing. Since 1989 and McAfee’s introduction into this arena, the competitors in the AntiVirus industry have been US and UK corporations. However, new firms from the Asian markets and the eastern block (Czech example above) are entering the market and competing for international markets and overall market share. This trend will continue. Acquisition and partnering with foreign corporations which is consistent with each corporations philosophy will assist industry players in taking advantage of the opportunities afforded by this trend.

Strategy Formulation - McAfee Associates, Inc.

McAfee should focus on four primary strategies in maintaining and achieving competitive advantage in the AntiVirus industry which include: (1) shift product development emphasis towards heuristic/expert system-based products, (2) shift 25 percent of business resources towards virus prevention service provision (rather than product development, distribution, etc.), (3) place a heavy emphasis on Internet-based Anti-Viral products and services, and (4) continue to expand their international markets. McAfee should conduct these activities without jeopardizing their current strategic objectives of growth via acquisition, market strength via partnerships, and market leadership via technological innovation.

As discussed, the trend is that the number and variety of viruses will continue to increase and this trend will eventually make current virus analysis procedures obsolete and ineffective. McAfee needs to reengineer its products to allow them to heuristically detect and remove viruses. Competitors have already begun to develop products which use this technology and have products on the market. McAfee product reengineering should occur within the next 12 to 24 months or they run a great risk of losing their competitive advantage and position within the industry.

The need for virus prevention services such as virus risk assessments, virus analysis, virus removal, training etc. in which consultants are deployed to conduct aforementioned activities is growing and their are no large players currently specialized in providing these types of services. McAfee has an opportunity to capitalize on this growing opportunity by leveraging their name recognition, corporate technology, and overall core competencies to enter this field. Over the next 36 months, McAfee should begin investing in the virus prevention service area with a goal of 25% percent of corporate investment being placed in this area. This area is growing and its growth will be greatly fueled by the opening up of international markets.

As discussed, the Internet’s growth is tremendous and its future growth will be greater than its past growth. This growth itself necessitates that McAfee continue to invest in Internet-base anti-viral products in order to remain competitive and maintain their market share. However, the Internet is critical for another equally important reason. The Internet is an international phenomenon and thus opens opportunities in the international arena. Therefore, McAfee’s strategic focus should emphasize the Internet and Internet-based products.

Lastly, McAfee should continue to expand its international markets. The European and Asian markets offer great possibilities for McAfee. They are still relatively unsaturated and have the potential to be lucrative to McAfee and its ventures. Additionally, less traditional markets need to be explored and captured. As economies such as the eastern block nations become more westernized and they begin to rely more heavily on computer systems, opportunities in the AntiVirus area will explode. An example of opportunities which McAfee should explore is pursuing a joint venture or acquisition of ALWIL, the Czechoslovakian firm discussed previously. This would provide McAfee with access to the Czech markets and provide them with a segue into neighboring country markets.

Practical Vision

McAfee’s practical vision should include (within 10 years) (1) capturing over 50 percent of the emerging AntiVirus services market, (2) maintaining its 76 percent market share of the AntiVirus software product markets both in the US and International markets, (3) expanding its international market reach by establishing distributors in the European, Asian, Eastern block, and emerging third world markets, (4) maintaining its leadership position in AntiVirus technologies, products, and services, and (5) leveraging its position in the AntiVirus arena to expand its operations vertically and horizontally.

Core Competencies

McAfee’s core competencies will need to remain consistent with its current core competence structure. McAfee will need to ensure that the organization is committed to adjust its product development based on the industry trends as discussed in the recommended strategies (ex. moving toward heuristic-based products). Most notably, McAfee will also need to increase its core competence in the Internet arena both in terms of their use of it, but also in terms of products brought to market that are Internet specific.

Constraints

McAfee should not experience many constraints in achieving its objectives because the field is still emerging, they are the leaders, and the rules in the field are still being established. However, an indirect potential constraints which may be faced by McAfee is their potential failure to continue to innovate new and leading edge technologies. This could be the greatest way for McAfee to loose its position in the marketplace. Emphasizing technological innovations and pursing the strategies outlined above should preserve McAfee as the industry leader over the next 10 years.

IV. Conclusions

The proliferation of computer viruses is here to stay. The AntiVirus Industry is emerging and McAfee has clearly established itself as the industry leader. McAfee can maintain it’s position and establish the same position within the International arena by maintaining it’s strategic objectives of acquisition, partnerships, and innovation and implementing the strategies as discussed above. In doing so, McAfee should realize their practical vision and dominate the industry for years to come.

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