Xenophobia’s bad for security business

Sen. Joseph McCarthy died in 1957, but clearly his spirit lives on. Since the Communist witch hunts of the ’50s there have been a number of waves of xenophobia, protectionism and isolationism. Buckle up – here comes another wave.

This time the driver is the control of security technology used by the federal government. For some reason there is an irrational fear that foreign-owned security intellectual property puts the United States at risk.

First case is the demise of the Check Point-Sourcefire merger. The United States made the approval process so miserable for both parties that they threw in the towel. Evidently the FBI and the Department of Defense expressed concern that having Check Point, an Israeli company, control Sourcefire’s intrusion-prevention software puts their networks at risk.

Riddle me this, Batman. There is a lot more Check Point than Sourcefire software used in U.S. government networks. Also, a decent part of Sourcefire’s technology is open source (the Snort intrusion-detection system engine), so it’s available to anyone with an Internet connection. So the fear is what? That’s right, irrational.

It will be interesting to see how the political tides turn relative to the Alcatel-Lucent deal. Given the stink put up about Check Point-Sourcefire, a foreign acquisition of Lucent – which provides a decent part of the voice backbone of the United States and also runs Bell Labs – would seem about as likely as Vice President Dick Cheney going on another hunting trip.

The paranoia does not stop at the infrastructure. A contract Lenovo (the former IBM PC company acquired by a Chinese firm) won to supply PCs to the State Department is being investigated because of fears the Chinese will install a back door in those machines. Never mind that the PC would be built in North Carolina. Score one more for xenophobia.

It’s not restricted to the United States. U.K. regulatory entities now have an issue with U.S. company SafeNet buying nCipher, a U.K. encryption vendor.

I was under the impression that the United Kingdom and the United States are allies, but I guess all bets are off relative to source code.

This is poised to be a big problem for the networking economy. Putting the kibosh on crossborder mergers restricts technology companies from acquiring the global reach and broad product lines that meet the needs of enterprise customers. Play the situation out a bit and non-U.S. technology companies are forced to invest their money elsewhere, which provides fewer exits for innovative start-ups. Venture capitalists have less money to invest in these companies, so innovation slows. And so the cycle goes.

Foreign technology companies doing business in the United States should be worried. Clearly they can’t acquire U.S.-based companies to gain a foothold in the United States. They’ll also have problems selling products to the U.S. government (just ask Lenovo). How long before the tables turn and it becomes a lot harder for U.S. technology companies to do business abroad?

What was poised to be a global economy looks very regional now. I try to stay away from political opinion, but I believe the current administration has a pretty serious choice to make. It is not acting like a friend of business, and the tech ecosystem encompasses a lot of voters. If this xenophobia continues, it certainly doesn’t bode well for the incumbents in an election year.