An Oct. 7 Business article incorrectly said that Greylock Partners of San Mateo, Calif., invested in Columbia-based Sourcefire Inc. Sourcefire's venture capital investors include Sierra Ventures of Menlo Park, Calif.; New Enterprise Associates of Baltimore; Sequoia Capital of Menlo Park; Inflection Point Ventures of Newark, Del.; Core Capital Partners of the District; and the Maryland Department of Business and Economic Development. (Published 10/8/2005)
Sourcefire Inc., a Columbia software firm that began as a pet project of computer-coding hobbyists, is being bought by Israeli security giant Check Point Software Technologies Ltd. for $225 million, marking one of the area's most prominent recent start-up successes and a victory for the open-source software movement.
Check Point, which sells firewall software to nearly 80,000 customers worldwide, will pay cash.
Sourcefire's roots go back to 1998, when software programmer Martin Roesch sat in his Carroll County apartment and wrote a few lines of code he thought might help detect a computer virus or hacking attempt.
Over the years, Roesch's online friends and fans added to the code -- which he has kept out in the open on the Internet for all to see -- to create an advanced network security system that has been downloaded by more than 2 million people.
"This was a little weekend and rainy day project that kind of ran amok," said Roesch, 35, who will work for Check Point after the acquisition. "It's incredible."
The technology, called Snort, has developed a following of loyalists who watch for new versions and spend hours discussing how to advance the software. Like most intrusion detection systems, Snort patrols computer networks looking for worms, viruses and other potential threats, and alerts security personnel when it finds one.
The basic version of Snort remains free, but Sourcefire has attracted about 800 paying customers by packaging it into a more user-friendly product that includes reporting capabilities, analysis technology and customer support features. Sourcefire executives compare the arrangement to giving away an engine, but offering a whole car for sale.
That and similar methods of marketing around open source software are changing the dynamics of an industry that traditionally guarded its trade secrets closely, lowering prices and increasing competition in a way that has forced even technology giants like Microsoft to pay attention.
"It is probably the biggest movement and impact on software since what happened with the Internet in the 1990s," said Gary Hein, a senior analyst at the Burton Group who has studied the open-source movement.
Companies such as International Business Machines Corp., Apple Computer Inc. and Hewlett-Packard Co. have developed strategies to adopt open-source technologies. Microsoft Corp., long seen as the chief rival of the open source community, has established a lab at its Redmond, Wash., headquarters to study Linux, the most widely used open-source operating system.
By 2008 the impact of open-source technologies -- including sales of open-source-based products and money lost by traditional vendors -- will exceed $5 billion, according to Garner Inc., and analysts say that is just the beginning.
Roesch turned Snort from a hobby into a company in 2001. At the time, he recalled, he had "heard of business models, but never seen one."
With $100,000 in angel funding, Sourcefire began selling a more polished version of Snort that came with service guarantees and help with installation. After Sourcefire landed some major clients it was able to raise $33.65 million in three rounds of venture funding. Its investors include Greylock Partners of San Mateo, Calif.; Sierra Ventures of Menlo Park, Calif.; and New Enterprise Associates of Baltimore.
Wayne Jackson, a seasoned technology entrepreneur, joined Sourcefire in 2002 to steer the company toward fast growth.
"When I first heard it I thought it was a crazy idea," said Jackson, the chief executive. "The notion of taking something that was otherwise free and commercializing it wasn't intuitive."
Licenses for Sourcefire's products, some of which have been developed on a proprietary basis, start around $4,000 and go as high as $120,000, depending on the complexity of the product.
Check Point's chief executive, Gil Shwed, said Sourcefire's technology will eventually be embedded in all its products. The Israeli firm's firewall systems work to block the same attacks that Sourcefire's software detects.
The market for computer security systems has boomed in recent years. But analysts caution that the market for firewalls is now largely saturated, forcing Check Point to branch into new lines of business. In 2004, Check Point earned $248.4 million, up only slightly from the $243.9 million profit it recorded the previous year.
"The firewall market isn't going anywhere," said William R. Becklean, an analyst with Oppenheimer & Co. The Sourcefire purchase is a way for Check Point "to try and maintain the growth of the company," Becklean said.
Some investors balked at the price of the acquisition, sending shares of Check Point down $2.20, to $21.50. Under the terms of the deal, which is expected to close in the first quarter of next year, Check Point will also assume Sourcefire's stock option plan. No layoffs are expected among Sourcefire's 150 employees.