PGP the product has had a long and interesting past. It began as a piece of shareware written by Phil Zimmerman in the early 1990s called Pretty Good Privacy, a DOS-based command-line encryption utility that was used by uber-hackers to keep their emails from prying eyes and keyboards. Back then the Internet was young, the Web was still to come, and to make matters worse, the US Government quickly banned the nascent software utility, claiming that email encryption was a national security threat.
Well, eventually the government came to its senses and PGP became the gold standard for keeping emails private. A software company grew around the utility and became successful enough that the conglomerate called Network Associates bought PGP in 1997. After several releases, including support for Windows and Unix, a group of investors were formed in 2002 and purchased the assets and intellectual property back from Network Associates (which is now called McAfee) to have a successful life as PGP Corp.
The company is run by Phil Dunkelberger, who was at the helm in the days before Network Associates era in the mid 1990s. The president and CEO is a soft-spoken but very intense man that is very focused on the task at hand, making PGP into the best encryption software provider bar none. Dunkelberger has a long heritage with his technology chops, going back to Xerox’s Palo Alto Research Labs in the late 1970s when they introduced the Star workstation, the precursor of the modern PC. He runs both Mac and Windows PCs today. We caught up with him recently in San Francisco, where he spoke to us about how the company was formed, where it is going, and how its channel and products have evolved.
Q. How easy was it to take PGP’s assets out of Network Associates (NAI)?
A: It was actually fairly easy for us. NAI had told the world that they were going to discontinue innovating PGP and that they weren’t going to support the products. So the end of life notice was already given when we picked up the assets from NAI.
I have seen more and more resurrected companies since we did our deal. There are a number of small and big opportunities and the traditional venture mode is changing. You can get a head start by acquiring these assets. My advice to entrepreneurs is instead of build it yourself to begin with look for proven, standards-based technology or a vertical market, and then pursue this because in our case it certainly gave us a running start.
Building a real business these days requires a lot deeper and broader set of skills than what was required five or seven years ago: your management team has to be deeper, your VCs have to be more patient. People aren’t as quick to bet on innovative companies these days. If you are entrepreneur, I would recommend that you buy an existing customer base.
Q: Do you ever use a public kiosk or public wifi network to get your own email?
A: I am pretty good about using our own security products. I don’t ever roam freely around those networks without any protection, and there are certain things that I won’t do on a public network. And if you are in a hotel in Europe if you aren’t protected you will likely get some form of malware on your machine from their networks.
Most of the time when I travel I use TMobile’s service, although I have used many others. On a recent trip to Europe I was on Vodaphone’s network at the Munich airport and Swisscom in Switzerland. I also use our own products extensively, including our own disk encryption and firewalls. Although right now I am testing Symantec’s Norton desktop firewall and several VPN clients as part of our internal quality assurance tests. All of us, and especially the executives at PGP, run a lot of different things to test our software against. It was a lucky thing that I had more than one VPN client installed, as one worked on the Lufthansa flight back from Europe and one didn’t. That was very fortuitous.
Q: How important to you personally is hard disk encryption?
A: I have had my laptop taken away from me briefly at airports for security screenings, and have the screeners pick it off the belt where I can’t see it, and that motivates me to make sure that everything on it is encrypted. Our product really is a godsend, and all my files on my laptop are encrypted. These days securing your data and not just encapsulation of the pipe is becoming more and more important, and an absolute business requirement.
Q: How does a corporation get started on setting up email security policy options?
A: We have seen this happen in variety of different ways: channel, reach, compliance and remediation, and industry-specific situations. First, it helps by having a robust channel with some focus on vertical markets where a company is under some kind of compliance and has some kind of external force pushing them to encrypt and protect their email traffic. Second, we have also seen many small businesses that are in business servicing someone big, and that big company mandates their suppliers and customers send email using PGP. We have a large auto manufacturer in Germany that has 5,000 suppliers and that mandated all of those small businesses to send email with PGP. Both are easier entries than just going in there cold and trying to get people to realize that file attachments are an issue.
As we look at the overall trends in business, there is more awareness about security in general and encryption. For example, in California there are small real estate companies and banks that are very aware of what they have to do to secure their data.
Q: You got your start with selling command-line encryption tools. How is that market doing?
A: We re-introduced the command line encryption products the middle of last year, and the business has grown 100% a quarter for the past three quarters. It has been a very pleasant surprise. We have had days where people order $50,000 off our Web site with their own credit cards. We have everything from a large aircraft manufacturer that takes all of the manuals to banks on Wall Street using the command line product. Some of our customers are encrypting their backup files and then storing them on tapes.
Q: Who of the surviving email security vendors is your competition these days?
A: We usually have two kinds of competitors now. First are the PKI infrastructure vendors, including Microsoft, Entrust, Cisco, Juniper, Aventail and those kinds of solutions. We usually win based on usability and reliability. Then we also have traditional email vendors that are selling into particular vertical markets such as Tumbleweed and Sigaba, and we win when the solution involves more than just selling email as part of the entire solution. We tend to be a suite vendor rather than selling a single product.
Q: Your PGP Universal product is supposedly very easy to deploy. Can you give me an example?
A: Universal is ready to run on a number of platforms, you just add hardware, and it works. Our biggest solution to date was with one of the top pharmaceutical firms and we had it running in less than 30 days for over 70,000 users. One of the very valuable features of the product is something we call “learn mode” which means the product just observes the traffic but doesn’t interfere with the mail stream and is very useful to help our installers as they tune the system to a particular customer’s needs.
Q: What do you think of the Microsoft/Groove announcement?
A: I think this validates the whole idea of peer-to-peer security that we have been talking about for many years and we welcome what they are doing.
Q: Tell me more about how you have developed your channel program and how it evolved.
A: We have three tiers of resellers. The top tier has the same training that our own system engineers have, and have to be able to install all the products and understand their interaction with our various partner products as well. The next tier has specific service contracts typically for larger corporate customers and they only need to know a couple of our products. The last tier are not very solutions oriented, just sell in quantity one to five units, typically only deal with our desktop products and specialize with one or two products and not sell enterprise-level products.
Our channel has evolved over the past several years. We now have 300 resellers in 91 countries and have added 30,000 new customers in the less than three years since we began our company and taken it out of NAI. In fact, our sales now are better than any of the years when we were part of NAI.
When I was in charge of sales at Symantec, we found that you couldn’t rely on the channels to create demand for new products like PGP Universal. The channel makes money on support, service, hardware management, off-site monitoring and so forth. But we had to go out and find the market segment, recruit the resellers, and do things like build hands-on labs to train our VARs and find other partnerships that would work for us.
For example we just put on a four-day training session in Singapore, for our local partners. We get everyone involved in installing the software and understanding how the products work in a very hands-on session.
But we also established a series of technology partnerships with vendors that have major email solutions such as IronPort, SendMail and MailFrontier. These vendors all offer things like anti-spam and content filtering solutions. First they wanted to cross-train their sales teams to resell our products and as their gained experience with PGP they became OEMs and wanted to bundle their software with ours on a single box. Now they are an active channel for us and we have consolidated reporting. They sell a single solution and everyone gets a better margin and the customer gets one vendor to buy all of it from and fewer vendors to deal with for front line support.
Q: So any final thoughts?
A: We have become successful because of several things. First, encryption is just becoming a standard feature for more and more people. It operates down at the transport layer and is just like a network dial tone, what I call “encryption tone” these days. Second, we got a great start by being established and not having to recreate everything from scratch when we came out of NAI. Third, it helps that we are an open standards vendor and we publish our source code. We wish more companies would publish their code as well. Finally, we have a very good product road map and we spend a lot of time listening to our customers, asking them what they want in the next two versions of the products and so forth.