The rapid development of digital technology has spurred a surge in cybercrime, creating opportunities for criminals to access sensitive data and breach security. If current trends continue, the McKinsey report reveals that economic damage inflicted by malicious attacks will skyrocket over the next six years, reaching an unprecedented $10.5 trillion annually by 2025 – representing a 300% growth from 2015 levels!
In 2021, the global cyber landscape saw around $150 billion invested to protect organizations against a rising tide of malicious threat actors. The total addressable market from cybersecurity investments is estimated at up to two trillion dollars globally; however, only 10% penetration has been achieved thus far within this vast potential space. Considering the low uptake of cybersecurity solutions, it appears that many CISOs are not provided with sufficient resources to safeguard their organizations. To tackle this issue and effectively protect businesses from potential cyber threats, providers must update their offerings and modify how they market them.
5 key drivers of why the cybersecurity market offers significant potential
- More attacks targeting smaller companies
Small and midmarket businesses (SMBs) are targeted by criminals due to their lack of sophisticated security tooling. There is an increasing responsibility for SMBs to act on the threat of ransomware and other cyber threats. The SMB segment is becoming truly addressable by cybersecurity products and services.
2. The impetus from regulation
Compliance difficulties increase with the proliferation of ecosystems. The US Securities and Exchange Commission (SEC) is considering new rules around breach notifications. Rules around the world are similarly strict; for instance, the European Union’s General Data Protection Regulation has the potential to impose fines of up to 4 percent of global turnover against companies that fail to secure customer data.
3. CISOs want to close the log visibility gap
Companies have increased log visibility from 30% to 50% in the past three years. SMBs and midmarket companies are more actively deploying visibility solutions than larger enterprises. They anticipate wider deployment of EDR (endpoint detection and response) tools, single panes of glass for cloud monitoring, and MDR (managed detection and response) services for sophisticated activities.
4. Talent shortages and service offerings
Global cyber-talent shortage compounded by the COVID-19 pandemic has created growth opportunities for service providers as IT leaders often rely on third-party service partners due to a lack of qualified talent.
5. Higher levels of customer engagement
Frequent attacks have raised security and privacy concerns among businesses of all sizes. This has created opportunities for providers and investors alike. The potential exists for innovation in prices and bundles, geographic coverage, target customer groups, integration, and off-the-shelf analytics.
4 ways how cybersecurity service providers can maximize this opportunity
Cybersecurity service providers have the opportunity to expand their reach in current accounts and untapped markets, with predicted spending on products and services from vendors projected to rise 13% annually through 2025.
Here are four things cybersecurity service providers can do to seize this opportunity.
- Consider security products for hybrid and multi-cloud architectures
Public-cloud migrations will remain a defining factor in enterprise technology strategies for the foreseeable future. Vendors must specialize in hybrid and multi-cloud, providing ease of implementation, day-to-day use, integration, and agility. Highly regulated verticals are migrating to the cloud at a quicker rate than low-regulated ones, allowing companies to unlock new markets with complex cross-border data flows, local regulations, and geopolitical issues.
2. Create a pricing model considering SMBs
Many cyber solutions are mispriced for SMBs, which struggle to negotiate the same bulk discounts as larger organizations. SMBs often lack information about typical costs and services, meaning consumption-based pricing models can be risky. Outcome-based or “plannable” pricing models (e.g. per workload) have become more attractive to customers, as they offer more defined expenses.
3. Offer solutions based on automation, AI, and machine learning
Managed service providers should strive to enable high-fidelity assisted intelligence to increase analyst efficiency. Investment in data source integration and neural/logic engines will yield indirect revenue opportunities. Also, investing in both cutting-edge AI and static rules libraries will ensure their research and development efforts are productive.
4. Expand managed services creating a midmarket-friendly solution
Demand for full-service offerings is set to rise by 10% yearly over the next three years, requiring providers to develop bundled offerings focused on outcomes. Adopting co-creative models with MSPs and investing in development tooling will help create centers of excellence and lead to faster implementation and more efficient operations.
They should adopt a clear MSP partner strategy, invest in collaborative sales capabilities, articulate industry-specific use cases, and optimize marketing. Providers must work with SMB-focused channel partners and re-platform offerings as lightweight SaaS-first solutions.
In short, cybersecurity technology and service providers should optimize their engagement with the cloud and develop midmarket-friendly pricing models. They should embrace innovation and expand managed-service offerings. By meeting these priorities, momentum will increase, broadening penetration across segments and making a $2 trillion prize attainable.