The growing number of online and mobile interactions is increasing the cyberattack surface. By 2025, damage from cyberattacks will amount to about $10.5 trillion annually, which is a 300% increase from 2015 levels. In 2021, organizations around the world spent around $150 billion on cybersecurity. This amount is growing annually at 12.4%.
According to a survey by McKinsey, nearly 80% of the observed threat groups operating in 2021, and over 40% of the observed malware were never seen previously. These dynamics indicate a nearly $2 trillion addressable market opportunity which is 10 to 15 times the total level of spending today.
5 key factors driving the cybermarket
1. More attacks targeting SMBs: Smaller organizations are more vulnerable to digital threats such as ransomware and malware attacks. The proliferation of ransomware attacks targeting SMBs and midmarket companies indicates that those that don’t currently employ or engage a security team must implement cybersecurity protection to keep their organization safe.
2. Impact of regulations: At least 45 states and Puerto Rico have introduced or considered over 250 bills or resolutions that deal significantly with cybersecurity. The US Securities and Exchange Commission (SEC) is planning new rules for breach notifications. Compliance challenges keep getting more complicated as there are more ecosystems. The European Union’s General Data Protection Regulation may fine companies up to 2% of their global turnover if they do not protect their customers.
3. CISOs want to close the log visibility gap: Companies have boosted their share of total log volume visibility from about 30% to about 50% over the past three years. They are pushing toward 65% to 80% over the next three years. SMBs are planning to widen their deployment of end-point detection and response (EDR) tooling, ingest and monitor their cloud environments from a single pane of glass, and take the help of managed-service partners for more sophisticated activities.
4. Scarcity of talent: CISOs and talent partners are struggling to fully staff their organizations. The global cybersecurity talent shortage often forces IT leaders to do business with third-party service partners.
5. More customer engagement: Until recently, many companies that needed cyber protection weren’t fully engaged with the challenges. They considered it too expensive and complicated. As attacks are happening more often now, the risk of not doing anything is greater than the cost and complexity of taking action. So, security and privacy are becoming important issues for C-level executives in all industries and businesses of all sizes. This means that there are opportunities for providers and investors in this area.
4 ways by which cybersecurity providers can seize the market opportunity
The current market dynamics give security technology and service providers a chance to expand their reach into both existing accounts and the new space. Here are 4 things that providers must do:
- Benefit from cloud transformation
Public-cloud migrations will continue to be a big part of enterprise technology strategies for the next few years. Providers should think about how they can specialize in hybrid and multicloud architectures.
Cloud providers that offer cybersecurity solutions often do not have the same capabilities as specialists. Organizations that use multiple clouds or keep important workloads on-premises will need the best security solutions available. Many businesses want more visibility into their data. This can create opportunities for providers to get involved. In addition, regulation can also provide opportunities for providers, as highly regulated verticals are migrating to the cloud much faster.
- Create a pricing model suitable for midmarket
Larger organizations can pre-pay or buy in bulk to get a discount on cybersecurity solutions, but many SMBs and midmarket companies are not able to negotiate as hard for these solutions. Small and mid-size businesses have a smaller number of employees, so they have to pay more per employee for cyber-tooling than larger companies do. They have to choose between paying a lot for each employee or not having some security controls.
- Incorporate automation, AI, and machine learning in solutions
Providers should work to create assisted intelligence that makes human analysts more efficient. This can be done by using advanced analytics or integrating with other security platforms. To provide low-cost services that are optimized, managed-service providers can focus on the brains of next-generation security products by innovating in areas like data source integration and neural/logic engines.
- Expand the managed services and create a midmarket-friendly security solution
The demand for full-service offerings is going to grow by 10% each year for the next three years. So providers should develop bundled offerings that take advantage of popular use cases. And they should focus on results, not technology. A potentially rewarding approach would be to work with a managed service provider to build a workbench solution. Vendors should invest in building collaborative sales capabilities with their partners. They also need to plan how their products can be sold through MSPs and partner channels. They also need to work with partners who focus on selling to small businesses. These partners will help them market their products more effectively.
The cybersecurity market is about to get a lot bigger. Cybersecurity service providers should take this opportunity to find what products and services work well together and then offer them to specific target groups. They should also make sure these products and services can be adapted to different situations so that more people can use them. If the industry can do all this, it can start to increase its market share in different areas.
Image and source credits: McKinsey & Company
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