Hitachi! Who knew?

Blogger: Lori Rowland

Using the 2008 RSA conference as its platform, Hitachi announced the acquisition of majority shares in M-Tech. The new formed company will operate under the name Hitachi ID Systems and be rolled into Hitachi’s information security portfolio. Hitachi ID Systems will operate as a subsidiary of the Hitachi parent company.

M-Tech, headquarter in Calgary, Alberta Canada has been a long standing vendor in the IdM market. The company’s product profile includes provisioning, password management, privileged account user, AD group management, and various other IdM technologies. M-Tech is best known for P-Synch, its password management offering, but has also faired well in the provisioning market.

While Hitachi is well known in North America, it is a powerhouse in Asian markets. Hitachi sells various consumer products (e.g. electronics and power tools), but also offers hardware and software components for enterprise organizations. Hitachi has a heavy presence within Asian enterprise organizations. The Asian market has been slower to adopt IdM technologies, however it is gaining traction primarily because of the enactment of laws and regulations, such as Japan’s Financial Instruments and Exchange Law (J-SOX). Hitachi ID Systems may have “a foot in the door” with Hitachi’s existing customer base.

Another interesting characteristic of the acquisition is that Hitachi ID Systems will operate as a subsidiary. According to M-Tech founders Gideon Shoham, CEO and Idan Shoham, CTO, M-Tech had been approached by other vendors in the market and had turned down acquisition offers. What made the Hitachi offer stand out? As a subsidiary, M-Tech founders will maintain control over technology direction and day-to-day operations, the M-Tech employee base will remain intact, and the impact on M-Tech’s existing customers will be minimal.

M-Tech realized several other benefits to the acquisition. As the IdM market has become increasingly competitive it was difficult for M-Tech to compete against large, major brand vendors. The acquisition gives M-Tech (now Hitachi ID Systems) access to a global sales team and a large information security consulting team which will be trained on the Hitachi ID Systems product family. Most importantly it gives M-Tech global name recognition.

The attitude of this acquisition seems somewhat different than acquisitions we have seen in the past. While the benefits of the acquisition to M-Tech are obvious, Hitachi’s (the parent company) overall vision for the IdM it is not yet clear. The company does offer various security technologies such as RFID and vein pattern recognition biometrics. However, how and if these technologies will be integrated with M-Tech’s product family has not yet been defined.

Hitachi’s acquisition of M-Tech will no doubt leave some in the market scratching their heads in wonderment.  It is too early to tell the full impact of the acquisition. However, one thing is clear, M-Tech needed the backing and sales channel of a larger vendor to progress in the market. However the battle is yet to be won. This is an unpredictable market; customers are concerned with vendor viability and longevity. The long-term relationship between vendor and customer has become a differentiating factor for many IdM purchases. To be successful, Hitachi ID Systems must quickly communicate a clear vision and an aggressive strategy. Although Hitachi is a recognized name – they are competing with large vendors such as IBM, Oracle, and Microsoft all of whom have already established themselves as powerhouses in the IdM market.

This acquisition proves that the IdM market is full of surprises – never a dull moment. There is still ample opportunity for acquisitions. Acquisition activity will likely continue in the role management, entitlement management, and authorization spaces.  However, even the more mature markets like the provisioning market may see continued activity – as evident by the M-Tech acquisition.