Watchfire on Tuesday continued an acquisition streak that will see it add an Ottawa-based provider of online quality and privacy compliance software to its arsenal of auditing and risk assessment tools.

Several Coast Software employees have been offered jobs at Watchfire to assist in the transition process, Watchfire said. Financial terms of the deal were not disclosed. Coast is best known for a low-end product, WebMaster, which will be integrated into Watchfire’s WebXM, and an offering for enterprise customers called Coast Quality Central.

Waltham, Mass.-based Watchfire co-founder and chairman Michael Weider said Coast was a frequent competitor and No. 2 player in some of its key business areas. The acquisition is designed to reduce overhead and administration costs for the two firms while gaining some of the features Coast had been building into its products.

“They’ve been doing some interesting things with their U.S. government clients to better track and manage issues that had come up from a compliance standpoint and to assess and certify Web sites for compliance,” he said. “We had been going down similar roads.”

The market for tools that help companies comply with privacy, security and other regulations has heated up considerably in the last two years. Companies that employed chief security officers or chief privacy officers are also appointing chief risk officers as well, Weider said.

“Now that companies are trying to centralize it and bring it together to understand risk exposure across the enterprise,” he said. “Some of the people responsible for certain type of risk may not have enough clout to get things done. They need to coordinate it and make it more strategic.”

IDC Canada does not yet track market share information for risk assessment software or onling auditing and compliance tools, but analyst Joe Greene in Ottawa said companies like Watchfire may still find it a difficult market in which to get noticed by decision-makers. 

“I’d imagine that they will have to work fairly closely with services firms, the big consulting firms, the IBMs of the world, CGI, who are in the top level,” he said. “At this time, compliance is being paid much more attention by the larger enterprises, but it’s only going to get more difficult over time, with the types and number of regulations.”

Watchfire last year purchased Sanctum Inc., a Santa Clara, Calif.-based maker of security auditing tools for software developers. It also bought Gomez Inc.’s Web-based subscription service that ranks financial services firms against their peers for Web site effectiveness. Weider said there may be more acquisitions to complement the company’s organic growth.

“The market is still considerably fragmented. Anything that has to do with online risk management is something that makes sense to us,” he said.

Coast’s customers included the U.S. Department of Defence, while Watchfire has worked with Dell, AXA Financial and Veterans Affairs.

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