Cybersecurity Outlook 2019: Sector Growth to Soar

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Security Investing

As the end of 2018 nears, here the Investing News Network looks at the cybersecurity outlook for the year ahead.

With cybersecurity in the spotlight again in 2018 — thanks to regulations and data breaches — it’s expected that spending in the sector will “outpace” other tech areas in 2019.

As noted in our 2018 cybersecurity trends article, the industry has become a focal point, even for governments. Case in point: the US is allocating US$15 billion for cybersecurity-related activities for 2019.

The money allocated by the US government is US$583.4 million higher than it was in 2018, and does not even represent all the funds the country is spending on cybersecurity — a note states that some budget items have been excluded due to their “sensitive nature.”

India’s central bank has also put an emphasis on cybersecurity. This means that banks and fintech players in India could be spending a portion of their budgets to strengthen cybersecurity.

As we head into 2019, the Investing News Network (INN) is taking a look at the cybersecurity outlook for 2019 with insights from industry analysts and companies in the space. Read on to learn more.

Cybersecurity outlook 2019: Spotlight on spending

Steve Morgan, founder and editor in chief of Cybersecurity Ventures, believes that spending on cybersecurity will continue to outpace other verticals, with cybercrime damage costs expected to hit US$6 trillion.

“Cybersecurity spending will remain at 12 to 15 percent growth and continue to outpace most other tech sectors,” Morgan told INN in an emailed statement. “Cybercrime damage costs remain on a trajectory towards reaching $6 trillion annually by 2021.”

In a report in August, research firm Gartner projected that worldwide spending on products related to information spending would touch US$124 billion in 2019 at a growth rate of 8.7 percent, up from a projected US$114.8 billion in 2018.

In terms of segment breakdown, Gartner states that security as a service will represent at least 50 percent of security software delivery by 2020.

“Persisting skills shortages and regulatory changes like the EU’s Global Data Protection Regulation (GDPR) are driving continued growth in the security services market,” Siddharth Deshpande, research director at Gartner, says in the report.

Meanwhile, Morgan cautioned that not every company in the space will reap the benefits of spending on the sector from governments and organizations.

“The market can’t sustain the number of companies that are receiving venture funding and corporate investments,” he said. “We’ll start to see more startups crash and burn, making it more difficult for new market entrants seeking capital.”

While Morgan predicts that market will be hard for new entrants, Idan Udi Edry, CEO of Trustifi, says that the success of companies can be boiled down to their compliance.

“The compliances are way more important than the actual technologies,” Edry said in an emailed statement. “For example, if a company is not compliant with GDPR, they’re already out of the game.”

Cybersecurity outlook 2019: Emails a concern

Currently 91 percent of cyber attacks begin with spear-phishing emails, and Edry said that the trend could spike up as 2019 begins.

Edry believes that emails will be a prime target, and thinks there will be more than 3.5 billion active emails by the beginning of next year.

“Cyber attackers target emails to gather consumers’ PII because it is the biggest way we communicate online,” Edry said.

Verizon’s (NYSE:VZ) 2018 data breach report states that one in five data breaches occurs due to human mistakes, which include sending an email to the wrong person or clicking on a phishing email.

“On average, four percent of the targets in any given phishing campaign will click it,” the report reads. “And incredibly, the more phishing emails someone has clicked, the more likely they are to do so again.”

A Mimecast (NASDAQ:MIME) report from July notes that 90 percent of organizations surveyed revealed that phishing attacks increased or remained similar over a 12-month period.

“Email-based attacks are constantly evolving and this research demonstrates the need for organizations to adopt a cyber resilience strategy that goes beyond a defense-only approach,” said Peter Bauer, CEO of Mimecast. “This is more than just an IT problem.”

Cybersecurity outlook 2019: AI is everywhere

Symantec (NASDAQ:SYMC) recently made its predictions for 2019 and beyond in a blog post, highlighting the use of artificial intelligence (AI) both by attackers and defenders.

According to the firm, AI will be used by attackers for malicious input to exploit automated AI-based business systems. It states that attackers will use AI to “supercharge” their attacks, while making phishing and other networking attacks more complex.

“For example, imagine a fake AI-created, realistic video of a company CEO announcing a large financial loss, a major security breach, or other major news,” the report suggests. “Widespread release of such a fake video could have a significant impact on the company before the true facts are understood.”

However, the firm also notes that AI will be a key tool in defending sophisticated attacks, as it will be used to detect new threats. Essentially cyber defenders could potentially uncover new vulnerabilities before attackers find them.

“For example, AI-powered systems could launch a series of simulated attacks on an enterprise network over time in the hope that an attack iteration will stumble across a vulnerability that can be closed before it’s discovered by attackers,” the report adds.

Cybersecurity outlook 2019: Investor takeaway

2018 proved to be a complex year for cybersecurity, and 2019 is set to be a critical year for the sector as new tools are set to be used by attackers and defenders.

Morgan singled out KnowBe4, a company engaged in the security awareness training market, as one to watch out for next year.

“They are expected to eclipse US$100 million in revenues in 2018, and there’s no signs of them slowing down,” Morgan said. “And they’re a leader in one of the fastest-growing segments of the cybersecurity industry.”

While spending on cybersecurity is set to increase and outpace other sectors well past 2019, it remains to be seen whether cyber defenders can hold the fort, or if the odds continue to favor attackers.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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