The worldwide IT security market is already quite sizeable, exceeding US$25 billion. And all industry analysts are predicting 20-30 percent growth in the next three years. Multiple drivers will fuel this growth, including increasing complexity of IT solutions – which raises the level of challenges for supporting security – and much higher value assigned to proprietary information.
Yet, I believe the structural nature of demand will drive quite an important shift in customer buying preferences going forward. As large enterprise clients recover from the global economic crisis of 2008, they are increasing their emphasis on costs. And despite increased willingness to pay, IT security cost is not immune to this pressure. In order to avoid separate management costs associated with standalone IT security service agreements, enterprises prefer to bundle IT security support with either large IT outsourcing deals or existing telecommunications contracts, as the network is still perceived as the most security-exposed element of IT delivery. Moreover, large corporate clients prefer to deal with a single point of responsibility for actual IT delivery and corresponding security support, which eliminates any risk of finger pointing, and streamlines their governance activities.
So what are the implications of buyer preferences for the existing provider landscape? I believe they will be game-changers primarily for niche IT security service providers and traditional security software vendors. Under the threat of missing their portion of anticipated incremental demand, they will be actively seeking alternative distribution channels and experimenting with different forms of industry cooperation. Everest Group also expects to see increased M&A activity in the IT security industry as large, integrated IT suppliers will be seeking ways to further enhance their capabilities in efforts to capitalize on the rapid growth of this market.
So let’s check in one year from now on the state of the IT security industry, although there is no doubt that it will look different from what we see now.