Microsoft has agreed to buy cloud security startup Adallom for $320M, source says

Microsoft has signed an agreement to pay $320 million in cash for Adallom, a startup with software for monitoring the use of cloud-based services, a source familiar with the matter told VentureBeat.

All 90 of Adallom’s employees — 30 of them in the U.S. — will function as an independent unit of Microsoft and handle everything related to cybersecurity for Microsoft, including Office 365, the source said.

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Microsoft declined to comment.

Israeli media outlets Calcalist and Globes originally reported on the deal over the weekend, with subsequent reports coming from Reuters and the Wall Street Journal.

Microsoft has been making cloud a top company-wide priority, with chief executive Satya Nadella last month declaring that building “the intelligent cloud platform” was one of three areas of investment going forward. Cloud security is paramount as the company shifts its focus to Internet-based applications. Revenue and usage of Office 365 for consumers were both on the rise in the first quarter of 2015, and surely Microsoft wants to keep that up.

Data security is a sensitive subject for Microsoft, given its reported cooperation with the National Security Agency. Microsoft announced the acquisition of security company Aorato in November.

Adallom’s service monitors usage of cloud applications like Amazon Web Services, Ariba, Box, Dropbox, Google Apps, Office 365, Salesforce, ServiceNow, and Microsoft’s Yammer. After it figures out typical usage, it alerts admins to anomalies that could signal security issues.

Adallom started in 2012. It has offices in Palo Alto, California, and Tel Aviv, Israel. As of April it had raised a total of $49.5 million. Investors include Hewlett Packard Ventures, Rembrandt Venture Partners, Sequoia Capital, and Index Ventures. Customers included HP, Jive, LinkedIn, Netflix, Orange, Safeway, SAP, and TriNet.

Adallom’s competitors include Skyhigh Networks, Elastica, and Netskope.