Post-pandemic security market still set for growth, but slower
The global security sector still presents “tremendous investment opportunities” in spite of the global economic crash forced by the Covid-19 coronavirus pandemic, and is expected to rebound after a brief slowdown, although growth will be slower than previously predicted, according to analysis by Frost & Sullivan.
In their report, Post-pandemic growth opportunity in the global security industry, Frost & Sullivan predicted that in the best-case recovery scenario, the industry would grow at a compound annual growth rate (CAGR) of 4.3%, hitting $140.6bn (€123bn/£112.4bn) in 2025 from $109.3bn in 2019.
A more conservative prediction would be that the market sees a CAGR of 3.1%, taking it to $131.bn. Without Covid-19, it was expected to have grown 7.1% in the same period to $165bn.
“Covid-19 will cause a brief slowdown in the security market after almost a decade of uninhibited progress,” said Danielle VanZandt, aerospace, defence and security industry analyst at Frost & Sullivan.
“Additionally, while some security sectors may find themselves experiencing a slower recovery than others, much of the industry will witness a shift to more service-based solution offerings after years of hesitance by customers to adopt these solutions.”
Frost & Sullivan said that remote and cloud-connected access to security systems and monitoring tools would see a dramatic rise in demand, while an increased emphasis on contactless technologies will bring good opportunities around identity and access management.
Earlier in June, Gartner reported that worldwide spending on cyber security and risk management technology would slow dramatically in the second half of the year. Having previously forecast growth of 8.7% in 2020, it has now revised this back to just 2.4% for a total market value of $123.8bn.
Meanwhile, analysts at Canalys have reported that the cyber security industry has seen a bumper year so far – up 9.7% in the first quarter of 2020 to $10.4bn – with a particularly strong showing for endpoint protection technology and web and email security, at the expense of network security, reflecting the transition to remote working.
This said, growth will slow in the last six months of the year as IT budgets are reassessed to account for worsening economic conditions, with many planned increased in cyber security spending expected to be scaled back or stopped altogether, although their may be some uplift as free trials and special pandemic offers expire.
Fewer upfront payments for multi-year contracts may also be another limiting factor in the coming months, although this will be less of a problem for those that have shifted to more predictable subscription models.
Canalys said that this would likely impact the security market landscape, with suppliers backed by private equity at particular risk of cost-cutting measures, while startup owners will accelerate their exit plans, giving rise to a more small acquisitions by large, stable players.