Cybersecurity Ventures projects $1 trillion will be spent globally on cybersecurity from 2017 to 2021.

Cybersecurity Ventures projects $1 trillion will be spent globally on cybersecurity from 2017 to 2021.

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• “We expect worldwide spending on cybersecurity products and services to eclipse $1 trillion for the five-year period from 2017 to 2021” (1) says Steve Morgan, founder and Editor-In-Chief at Cybersecurity Ventures. “IT analyst forecasts are unable to keep pace with the dramatic rise in cybercrime, the ransonware epidemic, the refocusing of malware from PCs and laptops to smartphones and mobile devices, the deployment of billions of under-protected Internet of Things (IoT) devices, the legions of hackers-for-hire, and the more sophisticated cyber-attacks launching at businesses, governments, educational institutions, and consumers globally.”

• “We anticipate 12-15 percent year-over-year growth through 2021, compared to the 8-10 percent projected over the next five years by several industry analysts” adds Morgan. “It is likely that analyst firms will catch up during the second half of 2016 and update the disproportionately low share of total IT spending which security is expected to account for (over the next 5 years) in their current reports. Many corporations are hesitant to announce breaches they’ve suffered — and the amounts of their increased security budgets — for fears of reputational damage and of antagonizing cybercriminals. By 2020, we expect IT analysts covering cybersecurity will be predicting five-year spending forecasts (to 2025) at well over $1 trillion.”

• “There are some corporations who have come forward with increased cybersecurity budgets” says Morgan. “J.P. Morgan Chase & Co. doubled its annual cybersecurity budget from $250 million to $500 million. Bank of America has gone on the record stating it has an unlimited budget when it comes to combating cybercrime. The U.S. government has increased its annual cybersecurity budget by 35%, going from $14 billion budgeted in 2016 to $19 billion in 2017. This is a sign of the times and there’s no end in sight. Incremental increases in cybersecurity spending are not enough. We expect businesses of all sizes and types, and governments globally, to double down on cyber protection.”

• “Historic analyst reports are rooted in ‘IT security’ (servers, networking gear, data centers and IT infrastructure, PCs, laptops, tablets, and smartphones) and not fully evolved to ‘cybersecurity’ which includes non-computer devices and non-IT centric platforms and environments — which covers entire sub-markets i.e. aviation security, automotive security, IoT security, and IIoT (Industrial Internet of Things) security” continues Morgan. All of those market segments combined make up the cybersecurity market.

• “Even IT security services are difficult to fully size” shares Morgan. “Tech is a cottage industry which includes tens of thousands of VARs (value-added-resellers), IT solution providers, and SIs (systems integrators) who wrap IT security services around the IT infrastructures they implement and support — but (most of) these firms don’t break out and report cybersecurity revenues as a separate bucket. Big branded tech companies with sizable professional services organizations providing cybersecurity services have yet to set up specific divisions or revenue reporting which analysts need in order to capture accurate market figures. There’s also many new players getting into cybersecurity. CPAs and attorneys who used to answer their clients’ what-if and what-now questions around data breaches — are now starting up lucrative cyber consulting divisions.”

• “On the consumer side of the market, there’s also non-covered spending — for instance personal identity theft protection services, computer and mobile phone repair services specific to malware and virus removal, installation of anti-virus and malware protection software, post-breach services including data recovery and user education on best practices for personal cyber defense” says Morgan. “The consumer cybersecurity market is much bigger than just the anti-virus and malware defense apps that are purchased or come pre-installed. Much like corporations, consumers are spending time and money as a result of cyber-attacks.”

• “Cybercrime costs were widely reported in 2015 as costing businesses globally between $400 and $500 billion annually” notes Morgan. “In 2016 the newer estimates have moved the needle on cybercrime costs to $2-$3 trillion. Clearly that is going to trigger more cybersecurity spending. As cybercrime rises, so does cyber defense spending — it’s the nature of the beast.” Juniper Research predicted last year that the rapid digitization of consumers’ lives and enterprise records will increase the cost of data breaches to $2.1 trillion globally by 2019, increasing to almost four times the estimated cost of breaches in 2015. A Smart Company story reports Microsoft CEO Satya Nadella said cybercrime costs totaled $3 trillion last year.

• “Some public cybersecurity companies have seen their stocks take a hit in the first half of 2016” says Morgan. “We don’t think that has much to do with a slowdown in cybersecurity spending. Rather, we believe there’s substantially more competition going after cyber defense business at Fortune 500, Global 2000 and mid-sized corporations, plus governments globally. IBM and Cisco have $2 billion and $1.75 billion cybersecurity businesses respectively, and both are growing steadily and making strategic acquisitions in the space. IBM Security grew by 20% in Q1 2016. Some of the larger pure-play cyber companies may not have anticipated this competition, along with many startups chewing at their heels. 2014 and 2015 saw record VC funding and corporate investments into cybersecurity companies who are taking a hard run at the market now.”

• Rob Owens, Senior Research Analyst for Security and Infrastructure Software at Pacific Crest Securities, recently told Investor’s Business Daily that he sees pent-up demand for cybersecurity spending. He says companies still aren’t spending enough on security. “I think security has been an under-spend area for decades. You’re spending about 3% of your capex (capital expenditures) that’s focused on IT on security. That’s relatively low.”

(1)

The $1 trillion forecast is total spending for the five-year period, not an annual projection by year five. Some current IT analyst forecasts range from $500-$700 billion in cybersecurity spending over a five year period. Others offer a single last or current year, or one to two years out in cybersecurity spending at $75-120 billion (a rough estimate with those numbers would also range from $500-$700 billion).

ANALYST & MEDIA FORECASTS

Worldwide cybersecurity market grew from $3.5 billion in 2004 to $75 billion in 2015, forecasted to reach $170 billion by 2020.

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• Market researcher Gartner states worldwide IT spending for 2016 is projected to be $2.77 trillion, worldwide IT security spending for 2015 reached $75.4 billion — and the information security market is estimated to havegrown 13.9 percent in revenue in 2015, with the IT security outsourcing segment recording the fastest growth (25 percent). Gartner projects the overall security market will grow at a 7.8 percent CAGR (compound annual growth rate) through 2019. “Gartner’s numbers suggest that IT security spending will account for considerably less than 5% of worldwide IT spending through 2019” says Steve Morgan, founder and Editor-In-Chief at Cybersecurity Ventures. “We believe the actual numbers will be much higher than 5% in 2016, and al the way through 2021. Security is the only IT category which is inextricably linked to all others… and thus to all IT spending.”

• In 2004, the global cybersecurity market was worth $3.5 billion — and by 2017 it will be worth $120 billion. “The cybersecurity market grew by roughly 35X over 13 years” says Morgan. “Cybersecurity is the fastest growing tech sector. While all other sectors are driven by reducing Inefficiencies and increasing productivity, cybersecurity spending is driven by cybercrime. The unprecedented cybercriminal activity we are witnessing is initiating so much cyber spending, it’s become nearly impossible for the analysts to accurately track.”

• The cyber security market is estimated to grow to $170 billion (USD) annually by 2020, at a Compound Annual Growth Rate (CAGR) of 9.8 percent from 2015 to 2020, according to a report from Markets and Markets. The aerospace, defense, and intelligence vertical continues to be the largest contributor to cybersecurity solutions.

• A new report from BI Intelligence — Business Insider’s research service — estimates $655 billion will be spent on cybersecurity initiatives to protect PCs, mobile devices, and Internet of Things (IoT) devices between 2015 and 2020. BI breaks down the forecasted spending as follows: $386 billion spent on securing PCs; $172 billion spent on securing IoT devices; and $113 billion spent on securing mobile devices.

• The IT Security Spending Survey — published by SANS Institute in February 2016 — states “Tracking security-related budget and cost line items to justify expenditures or document trends can be difficult because security activities cut across many business areas, including human resources, training and help desk. Most organizations fold their security budgets and spending into another cost center, whether IT (48%), general operations (19%) or compliance (4%), where security budget and cost line items are combined with other related factors. Only 23% track security budgets and costs as its own cost center.” SANS makes an astute observation which may account for the shortfall in IT spending projections by some researchers and analysts.

• North America and Europe are the leading cybersecurity revenue contributors, according to a report from TechSci Research. Asia-Pacific is rapidly emerging as a potential market for cyber security solution providers, driven by emerging economies such as China, India and South-East Asian countries, wherein, rising cyber espionage by foreign countries is inducing the need for safeguarding cyber space.

• According to IDC, the hot areas for growth are security analytics / SIEM (10 percent); threat intelligence (10 percent +); mobile security (18 percent); and cloud security (50 percent). A Tech Republic story states the cloud security market is expected to be worth $12 billion by 2020, according to a report from Transparency Market Research.

• Demand for vendor-furnished information security products and services by the U.S. federal government will increase from $8.6 billion in FY 2015 to $11 billion in 2020 at a compound annual growth rate (CAGR) of 5.2 percent, according to “Deltek’s Federal Information Security Market Report” – which examines the trends and drivers shaping the federal information security marketplace and provides a forecast for the next five years. Deltek states that as federal agencies struggle to stay ahead of the cybersecurity threats, more and more of their IT spend is being devoted to cybersecurity, reaching over 10 percent of IT spend by 2020.

• Respondents to the “PwC Global State of Information Security Survey 2016” boosted their information security budgets by 24% in 2015. PwC says businesses are investing in core safeguards to better defend their ecosystems against evolving threats.

• Million dollar plus cybersecurity deals (vendors selling to end-users) are on the rise. In a research note last year, analysts at FBR & Co., an Arlington, Va. based investment banking and M&A advisory firm, indicate that the number of seven-figure (cybersecurity) deals have increased by 40 percent year-over-year.

TOP STORY

Security Spending Will Top $1 Trillion On ‘Hackers-For-Hire,’ IoT

– Investor’s Business Daily

Global cybersecurity spending will top $1 trillion between 2017 and 2021, driven by a legion of “hackers-for-hire” and the underprotected Internet of Things market, industry tracker Cybersecurity Ventures predicted Friday.

The forecast hinges on 12%-15% year-over-year growth through 2021 vs. the average 8%-10% growth model by other industry analysts, says Cybersecurity Ventures founder Steve Morgan. He expects other analysts to bump up their estimates later this year.

Cybercrime cost models cut a wide swath. The newest estimates put cybercrime costs at $2 trillion to $3 trillion in 2016. Last year, Juniper Research stuck a $2.1 trillion price tag on cybercrime by 2019, but Microsoft (MSFT) CEO Satya Nadella says we’re already there — $3 trillion in 2015. More…

Read the full security spending story on Investor’s Business Daily

MARKET WATCH

Security Freeze: Giants IBM, Cisco ‘Squeeze’ Palo Alto, Check Point

– Investor’s Business Daily

Fears of a broad cybersecurity freeze could amplify after vendors Palo Alto Networks (PANW) and FireEye (FEYE) missed April-quarter expectations and Check Point Software Technology (CHKP), Fortinet (FTNT) and Imperva (IMPV) guided toward slower growth.

Then again, rather than a broad slowdown, the pure-play security leaders might in fact be losing some business to tech giants Cisco Systems (CSCO) and IBM (IBM), which are expanding deeper into security, and to specialized security vendors such as CyberArk Software (CYBR), Proofpoint (PFPT) and Mimecast (MIME). More…

Read the full security freeze story on Investor’s Business Daily

Stay tuned for the Cybersecurity Market Report, Q3 2016 edition, coming in August.

CYBERSECURITY VENTURES

Steven C. Morgan, Editor-In-Chief

Steve Morgan is Founder and CEO at Cybersecurity Ventures, and Editor-In-Chief of the Cybersecurity Stock Report and the Cybersecurity 500 list of the world’s hottest and most innovative cybersecurity companies. Steve has written hundreds of cybersecurity blogs and articles which have appeared in CIO, Computerworld, CSO, Forbes, Homeland Security Today, InformationWeek / DarkReading, Infoworld, ITworld, SandHill.com, TMCnet, and others.