U.S. Patriot Act, Government Data Rules Drive Encryption Adoption

A myriad of compliance mandates and data governance rules is forcing some firms to implement encryption before the data is stored in a remote server, and at least one firm specializing in cloud encryption is finding growth in this emerging space.

Pravin Kothari, founder and CEO of San Jose, Calif.-based CipherCloud said his firm is building a strategy and managing the growth fueled by the need for greater transparency and the desire to maintain control of the data despite it being stored remotely. CipherCloud sells security gateways or a Web proxy that provides encryption and tokenization to data before it is sent to cloud-based applications such as Amazon AWS, Salesforce.com, Google Gmail and Microsoft Office 365.

The U.S. Patriot Act, which gives the U.S. government the ability to obtain data from cloud providers, is driving a lot of interest in data encryption, Kothari said. Other countries have similar rules allowing law enforcement to obtain data, but companies can control investigators' access if the data is encrypted and the firm holds the key.

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"We're seeing a lot of interest outside the United States," Kothari said. "They want the ability and, in some cases, need the ability to maintain a level of control, and encryption helps them do that."

Adoption of cloud services for sensitive data has been slow, but steady growth is anticipated over the next 18 months, said Paula Musich, principal analyst at Sterling, Va.-based Current Analysis. Musich said the challenge for firms like CipherCloud is to maintain growth, because many firms are consolidating systems to reduce the management footprint that exists for point security products. Firms like CipherCloud will be competing with well-established security vendors as the market matures, Musich said. Trend Micro, Symantec and other security firms are providing a variety of security controls, including encryption, for data in the cloud.

"There's been a tremendous amount of hesitation of moving mission critical applications to the cloud because of fear that the security isn't there," Musich said. "Cloud providers are not providing the security and transparency that enterprises are looking for, and enterprises don't have the confidence that it's going to change, but there's still tremendous pressure to move to the cloud."

NEXT: Funding, New Management Evidence Of Growth

CipherCloud's Kothari is eager to point out his company's success. In December, the company raised $30 million from Andreessen Horowitz. It is the second round from Anderson, which previously seeded $1.4 million. The company recently announced the addition of two senior executives, bolstering its global sales initiatives and creating a chief marketing officer position.

Travis Patterson, who served as Marble Cloud's senior vice president of sales and support, has been hired as senior vice president of worldwide sales. Paige Leidig, who was global vice president, office of the CEO at SAP, is joining CipherCloud as its first chief marketing officer. Both executives report directly to Kothari.

The company has customers in eight countries, no small feat for a two-year-old company, Kothari said in an interview with CRN.com. The company is continuing to expand globally, experiencing growth in Brazil and Latin America. It also recently opened a European headquarters in London.

"We were focused on building product and making sure customers successful," Kothari said. "Now a year from our go-to-market we're building out our marketing organization to reach out to existing customers and new ones to expand our reach."

The company has also been aggressively building out its product offering, with the introduction of a database gateway and the addition of content-aware encryption. Kothari said the firm would introduce a new graphical interface to make integrating custom applications into the gateway through an easier point-and-click process.

Newly hired Patterson has two decades of experience in software industry sales. In addition to his previous job a Marble Cloud, formerly IronKey, he led the America's Software & Solutions Strategic Accounts organization at HP, and held senior sales management positions with Opsware and Parametric Technology Corporation.

Leidig has 20 years of experience in developing marketing strategies and leading global growth for technology companies. At SAP he drove the introduction of a portfolio of cloud applications for business users. He also held senior marketing roles at Ariba, Elance and E-Trade.

CipherCloud has a combination of a direct and partner channel, said Dev Ghoshal, senior vice president, strategy, global alliances and customer success. Ghoshal said the company's channel strategy can be broken down into segments: cloud providers, global systems integrators, regional partners that specialize in niche areas and industry verticals, and technology partners. The company has seen success in the financial services, healthcare and government sectors, he said.

The company launched its Technology Partner Program in September to connect with other cloud security technology providers. Ghoshal called the company's channel program flexible, enabling partners to decide whether to sell or engage in co-marketing and lead generation. The company maintains a referral program for partners and a reseller program to support whatever strategy they adopt, Ghoshal said.

PUBLISHED JAN. 7, 2013