Thoughts on the ArcSight IPO

Kudos to ArcSight for having the chutzpah to go public rather than wait around to get acquired. What does the company's IPO mean to the market? Three things.

1. The space is on fire. ArcSight revenue was up about 75 percent year over year--from just under $40 million to just under $70 million. A testament to ArcSight? Absolutely, but the whole log management space (along with its security and compliance analysis aspects) are as hot as can be. ArcSight is one of the boats in this rising tide.

2. ArcSight makes the short list. Yes, the competition is steep. Look for IBM to really jump into this market with both feet in 2008, along with HP and partner SenSage. Nevertheless, ArcSight has established itself as a market leader, and its IPO bolsters this position with financial transparency. ArcSight should get into every enterprise bake-off.

3. The next battle is down market. OK, so ArcSight will fight with EMC, HP, and IBM in the enterprise, but who will win in the globally rich SMB space? This market will be dominated by turnkey appliances and managed services. ArcSight may want to use some of the $51 million it garnered through its IPO to build products and channels for the mid-market.