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National Defense > Blog > Posts > No Austerity in Cybersecurity: Double-Digit Growth Predicted

11/30/2011

No Austerity in Cybersecurity: Double-Digit Growth Predicted
A new forecast for cybersecurity spending cements the industry’s status as a growth sector, rather than a passing fad. The study, published Dec. 1, predicts more defense contractors will be scooping up information-technology companies in the coming years as a means to capture market share.

Analysts at the global accounting and auditing firm PwC project that overall global cybersecurity spending will reach $60 billion in 2011, and will grow at a rate of 10 percent annually during the next three to five years.

The United States accounts for over half of the total, the report says. The next largest market is Japan, followed by the United Kingdom. In most countries, the private sector makes the majority of cybersecurity investments. The notable exception is the United States, where government spending is almost equal to that of the private sector, the study says.

The PwC analysis does not reveal any new insights on why governments and companies are expected to spend more money to protect their information networks. It attributes the rise to fears of hackers and other threats such as malware, greater vulnerabilities due to the more pervasive use of mobile devices and cloud computing.

Corporate mergers and acquisitions in the cybersecurity industry since 2008 total nearly $22 billion, says the report. Acquirers have been from a range of sectors including technology, IT services, aerospace and defense as well as financial investors. Total deal value increased by more than 70 percent in the first half of 2011 versus the full year 2010 to $10.2 billion. This was driven primarily by Intel’s $7.8 billion acquisition of McAfee which was completed in February 2011. Total deal volume, the study says, in the first half 2011 is slightly ahead of the same period in 2010.

During the past three years,  two major defense contractors — BAE Systems and The Raytheon Co. — were featured in the top 10 deals. Defense contractors, the report says, are seeking to diversify away from traditional military sales. "Defense contractors have targeted acquisitions that provide access to new customers, new capacities and access to scarce security-cleared personnel," says the report.

In the United States, experts see increasing demand for technologies to protect companies’ intellectual property. Defense contractors are said to be prime targets.
Army Gen. Keith Alexander, commander of U.S. Cyber Command, has described the theft of sensitive information and trade secrets from corporate networks as staggering and the “greatest raid on intellectual property” in history.

For all the hype and blaring headlines about the boom in cybersecurity, it is still a drop in the ocean compared to global spending on weapons and military equipment. World military expenditures in 2010 were estimated at $1.6 trillion.
Posted at 4:32 PM by Sandra Erwin | Permalink | Email this Post | Comments (0)

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