Fear of Incidents Propels Security Market

The worldwide market for Internet security experienced significant growth in the year 2000 according to International Data Corp. (IDC), which found that all four security software markets — firewalls; encryption software; security authentication, authorization and administration (3A); and antivirus software grew 25 percent or more in 2000. The firewall segment grew the most at 42 percent.

Overall, worldwide Internet security software revenue jumped 33 percent to $5.1 billion in 2000. By 2005, this market will amass more than $14 billion in revenue — a 2000 to 2005 compound annual growth rate (CAGR) of 23 percent.

“For security software vendors, the current economic instability is a double-edge sword,” said Brian Burke, senior research analyst in IDC’s Internet Security program. “On the one hand, it’s forcing companies to reduce spending. On the other hand, it’s forcing companies to look for ways to cut costs, become more security proficient, and build trusted relationships with customers, partners, suppliers, and channels — which are areas security software can help.”

IDC predicts that security 3A will be both the largest and fastest-growing segment of Internet security software. 3A revenues are expected to increase at a 2000 to 2005 CAGR of 28 percent to more than $9.5 billion. This represents a 2005 market share of 67 percent. Antivirus software will also play an important role in the market’s growth. “The explosive growth of wireless handheld devices that are able to transmit and receive data opens the door to a whole new opportunity for virus writers and the vendors who try to stop them,” Burke said.

North America will continue to account for more than half of worldwide Internet security software revenue in 2005 at 52 percent. Asia-Pacific will be the fastest-growing region for Internet security software, with revenues increasing at a 2000 to 2005 CAGR of 32 percent. This growth will help hike market share in this region from 12 percent in 2000 to 17 percent in 2005.

But just how common are the incidents this software is supposed to guard against. A survey in Britain by the Confederation of British Industry (CBI) in collaboration with the Fraud Advisory Panel, PricewaterhouseCoopers, ArmorGroup and The Nottingham Trent University International Fraud Prevention Research Centre found that two-thirds of respondents have, in the past year, experienced a “serious incident” such as hacking, virus attack or credit card fraud.

According to the CBI survey, organizations are more confident about security procedures for conducting B2B over the Internet than B2C transactions. More than half of the respondents regard the Internet as a safe place to conduct B2B commerce, but only 32 percent regard it as safe for B2C.

Small and medium-sized firms (SMEs) are more willing to adopt B2C than B2B initiatives but are inhibited by lack of resources and a fear of cybercrime. Seventy percent of firms with more than 10,000 employees have the facility to sell over the Internet, compared with 32 percent of SMEs (firms with fewer than 500 employees).

The source of threats varies between sectors. Terrorists are viewed as an important source of threats by some parts of manufacturing, but are of minor importance to retailing and services. Threats from current and former employees are a higher priority in telecommunications and technology and the professional/consultancy sectors than in the financial services and manufacturing sectors. However, the threat of hackers is particularly high in the financial services industry.

Loss of reputation, through adverse publicity and loss of trust, is a greater fear than financial loss for most organizations. Sixty-nine percent of respondents consider their e-business financial loss to be negligible and credit card fraud represents a mere 4 percent of the most serious incidents over the past year.

“This survey clearly shows that fears about potential financial losses and damage to reputation from cybercrime are stalling the growth of e-business, especially for business-to-consumer transactions,” said Digby Jones, director-general of the CBI. “That will only be overcome when all parties are reassured that adequate security is in place to protect them. Achieving that means firms understanding what the threats are and Government keeping the law up to date and making sure it’s properly enforced.”

The CBI survey was sent to organizations in a variety of industry sectors and of varying size, 148 responses were received.

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