In that light, Computer Associates’ decision to acquire identity management software vendor Netegrity is no surprise. But the deal bears closer inspection. By offering $340 million for Netegrity, CA is paying over five times its 2003 revenues. There were other suitors, which may have inflated Netegrity’s price, but it also shows how keen CA was to get its hands on its SiteMinder single sign-on and security policy manager. Based on a growth rate of 34% in the first half of the year, Netegrity was expected to close 2004 with annual revenues of $105 million.

As that suggests, identity management has been generating a lot of heat among IT managers. CA, with its weak track record for innovation and tarnished corporate reputation, could use a hit product. It is looking to its security software wing as the springboard for that. The Netegrity buy-out is its second such purchase in recent months: in August the company bought anti-spyware software vendor PestPatrol for an undisclosed sum.

CA is not alone in wanting to pick up security technologies. Networking systems giant Cisco revealed its intention to buy security gateway vendor Perfigo for $74 million, its third security acquisition of 2004. Founded in May 2002, Perfigo offers CleanMachines, user admission control software that enforces security policies at the point of network logon, providing additional capabilities to those already offered in Cisco’s own Network Admission Control. Cisco earlier acquired desktop security company Twingo and network management service provider Netsolve.

Open source distributor Red Hat also bolstered its security portfolio by acquiring the software assets of Netscape Security Solutions from America Online. Red Hat will gain directory service and certificate management technology, which it intends to ‘open source’ by October 2005. Open source versions of these tools remain scarce; Red Hat hopes to stimulate development, enabling it to compete with proprietary alternatives.

But being swallowed up by the big fish is not the only option for smaller vendors. Enterprise IT security consultants TruSecure and BeTrusted have agreed to merge, forming a new company, CyberTrust. The deal is intended to give them the scale to compete with the likes of Symantec, VeriSign and McAfee in the burgeoning market for managed security services.