Server equipment belonging to US-headquartered cloud security company Zscaler was seized by sheriffs of the court from NTT Data and Teraco data centres in Johannesburg and Cape Town between September and November of 2024, TechCentral has learnt.

Court papers filed at the high court in Johannesburg confirm that the asset seizures relate to an ongoing dispute between Zscaler and Accelerate Networks International, a former distributor of Zscaler’s services in Southern Africa. Accelerate initiated the legal action against Zscaler.

According to the documents, seen by TechCentral, Accelerate Networks claims Zscaler breached a distributor agreement between the two parties prior to requesting a termination of said agreement.

Accelerate Networks alleges that in deal negotiations involving the sale of software services to Absa in 2023, a Zscaler representative agreed to give Accelerate Networks, as the incumbent service provider, 10% price protection on a portion of the services outlined in the agreement. This meant Accelerate Networks would be able to supply the services for 10% cheaper than any other supplier offering the same service and bidding for the contract.

According to Accelerate Networks, the would-be deal was valued at US$6-million/year over three years, totalling $18-million. Accelerate was allegedly poised to make $700 000 in profit from the agreement.

However, Accelerate Networks has alleged that Zscaler then went on to bypass the established channel – Accelerate Networks as the official distributor and tender-approved resellers – by selling the software to Absa directly via the Amazon Web Services platform.

Damages

This allegedly undercut Accelerate Networks’ bid, leading to it losing the Absa contract. Accelerate is claiming damages of just over $700 000 for the first claim.

In a second claim, Accelerate has alleged that a second Zscaler representative deliberately defamed Accelerate Networks to one of its customers, NTT Data (then Dimension Data). This allegedly took place in 2022. The Zscaler representative is alleged to have convinced Dimension Data to stop purchasing Accelerate’s software services, urging them to purchase either from NTT Global or Westcon-Comstor instead. Although NTT Global had a relationship with Zscaler internationally, there was none in South Africa, leading Dimension Data to establish the relationship with Accelarate Networks. Westcon-Comstor also has an agreement to distribute Zscaler software in South Africa.

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Accelerate Networks said it eventually lost the business it previously had with NTT Data, a relationship it said began in 2012 and would have “continued indefinitely” had it not been for Zscaler’s alleged interference. Accelerate estimated lost profits “on a conservative basis” for five years since September 2023 to be to the tune of just over R19-million. The claim lodged against Zscaler is for R11.4-million, according to court documents. The total for both claims is R22-million.

Documents seen by TechCentral show that multiple racks belonging to Zscaler were seized from multiple data centres by sheriffs of the court. It is as yet unclear if this was all of Zscaler’s hardware at each site or only a portion of it.

A Teraco data centre east of Johannesburg

TechCentral has attempted repeatedly to contact Zscaler to ascertain the voracity of the claims against it and the extent to which its operations in South Africa, and regionally, have been affected by the asset seizure. No response has been forthcoming.

Headquartered in San Jose, California, Zscaler was one of the first companies to shift away from virtual private network-centred security towards using a cloud-based exchange and the idea of security as a service.

The company operates in more than 185 countries with over 30 regional offices in key markets such as India, London and Paris. Its cloud-based security services are distributed using a hub-and-spoke model through 160 data centre nodes at various locations around the world.

According to its website, Zscaler has a total of seven points of presence in Africa. Three of these are in Lagos, Nigeria. The other four are at the aforementioned NTT Data and Teraco facilities in Johannesburg and Cape Town.