In Shakespeare’s MacBeth, Banquo says to the witches “If you can look into the seeds of time, and say which grain will grow and which will not, speak then to me…” He has little faith in their collective ability to read his fortunes.
Predicting the future is difficult, particularly during turbulent and unpredictable economic periods. The US humorist Evan Esar once said, “An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today”, which is a damning verdict on a profession’s ability to forecast future events. In the defence of economists, predicting how complex systems will react to a global shock like coronavirus is a challenging assignment. We need models that are logical, based on fact and flexible.
In April 2019 Westlands Advisory undertook a project to build a series of databases that will help our customers understand how the cyber security industry will evolve. As part of the project we looked extensively at how different trends influence the market, from product lifecycle maturity, to technology disruption and attitudes to risk. One of the factors often used to forecast future market growth is economic performance. As we mentioned in a previous article “Predicting Security Investment During Economic Uncertainty”, relying on GDP growth can be misleading, though during periods of economic turmoil it becomes the most important determinant of how market demand will change. As part of the project, we worked with several economic scenarios to understand the relationship between economics and cyber security investment and, by applying these scenarios to the current crisis, developed a series of conclusions.
The correlation between previous economic downturns, technology and security company performance is strong, though it is also important to evaluate how cyber security has changed since 2009. Today, regulation mandates tighter controls on data and privacy, approaches to risk have evolved in digital enterprises, and business models are transitioning to cloud based or managed services. As a result, security has become an increasingly strategic issue and enterprises are less able to dispense with it when cost cutting. Nevertheless, enterprises will struggle with cashflow in 2020 and project postponements are likely to be widespread, delaying investment in new cyber security projects.
In 2018 the global market for cyber security technologies and services was $115.4 billion and grew to $128.6 billion in 2019. Our current forecast is that market expenditure on cyber security in 2020 will decrease before resuming growth in 2021 at a CAGR of 6.2% (2019-2023). However, there is significant variation by technology and service. Whilst we expect customer renewal revenue to remain stable it is likely that new customer expenditure will slow, beyond organisations spending in the short term on securing virtual private networks. We also expect that security professional services, the largest market segment, will be the most adversely affected in 2020 and this will result in a decline in the overall market size. WA’s current forecast is likely to change once it becomes clearer how long the pandemic will last and what the direct consequence is on economies and businesses.
The predicted strong recovery is based on the underlying forces that have sustained consistently high growth in recent years, including a continued and heightened cyber threat and changing attitudes to risk. Additionally, the growing global economy provided the capital for organisations to invest in new digital processes and the security needed to improve resilience. These interrelated trends, coupled with the low level of security market saturation, resulted in growth as enterprises invested in new tools and managed security services. This picture is illustrated by WA’s analysis of 46 cyber security technologies and disciplines, 39 of which are still at an early stage in their product lifecycle, characterised by high growth, low customer saturation and large supplier ecosystems.
Post 2020 the cyber security growth trend will resume as infrastructure investment recovers. The overriding market forces stimulating investment outlined above will remain largely unchanged, whilst industry innovation to create new customer value, including increased automation, better visualisation, and faster detection and response, is likely to create new revenue opportunities.
About Westlands Advisory’s Cyber Series
Research for WA’s new Global Cyber Security Market Analysis began in April 2019 with the aim of providing an alternative source of insight for industry professionals and a transparent approach to evaluating the market. The research process included building an industry database that captures financials and products for over 1,800 cyber security vendors and service providers. Data was generated through using secondary information sources, analyst briefings from leading vendors, informal meetings with smaller start-ups and attendance at a wide range of industry events from exhibitions to specialist cyber security shows. The data analysis began in February 2020 and was concluded in April. Due to the economic impact of Coronavirus at the time of completion, WA has provided several growth scenarios based on different economic outlooks. This first analysis is part of a wider set of reports that will be available throughout 2020. In May 2020 WA will be releasing an evaluation of the Global Cyber Security Market ecosystem.