Growing risks from hacking, virus deployment and piracy require increasingly sophisticated cybersecurity solutions - we believe the long-term opportunity for investors is clear.
Multiple high profile cyber-attacks highlighted the significance of this issue last year. Ransomware isn’t going away, nor is it slowing down. In an connected world, no business or industry should consider themselves immune from attack.
This theme has longevity
While cybersecurity has been and will remain a strategic priority for customers and vendors, it is now more significant than ever. The reality is that traditional antivirus software just isn’t good enough for organisations to protect against modern-day attacks.
Needless to say, the IT security market is currently booming. Having seen exponential growth in these past few years, this looks set to continue as government regulation, increased corporate focus and the growing complexity of threats fuel demand. Advisory firm Gartner predicts total worldwide spend on security products and services will hit ~$100 billion this year and 8% forecasted growth per annum. Furthermore, more than 60% of organisations look set to invest in next-generation security software by 2020 .
As the average cost of cybercrime increases, this means the consequence of not investing in cybersecurity can prove extremely damaging. As one of the global leaders in the field, Sophos Group has benefited from the need for business to shore up cyber defences. Focused on small to medium-sized enterprises, the company recently reported market-leading growth in its full-year financial results. Our analysis and corporate engagement highlighted the rapid innovation taking place behind the scenes as threat detection relies more on advanced, synchronised security strategies. This technology needs to be smarter, more scalable, and higher performing, particularly given the business has moved deeper into a cloud management platform.
Advisory firm Gartner predicts total worldwide spend on security products and services will hit ~$100 billion this year
Global industry data implies the market scale and opportunity for cybersecurity companies is vast. One prevalent theme we are also seeing is the use of artificial intelligence (AI). While not as glamorous as robotics and augmented reality, it is an exciting development still early in its evolution.
As we move into a more synchronised security world, it is interesting to see another example of Charles Darwin’s influence on modern thought. As a theory on the security evolution, a Darwinian approach is required to adapt to the threat landscape. Intelligent solutions, using more realtime software, allows the ecosystem to adapt automatically. Next-generation technology, using a combination of machine and deep learning, is much more intuitive than re-active software that we have seen in the past. Given the rapid pace of hacker innovation, security spending needs to focus more on adopting this model.
CEO of Sophos Group, Kris Hagerman recently said that this theme has longevity. We would agree. The cyber industry is growing annually at high single digit growth rates and is likely to increase as the number of and types of attacks constantly change. Automation and intelligence of software solution is also fuelling industry growth to unprecedented levels. As a global theme, we believe the long-term opportunity for investors is clear.