The global cybersecurity market could grow from $122.45 billion today to $202.36 billion by 2021, according to a new report from Research and Markets. The firm believes that growth will be driven by an increase of connected objects across the Internet of Things, relaxed BYOD (bring your own device) policies at work, and the need for tighter application security.
It also estimates that the banking, financial services, and insurance market vertical will experience the highest growth due to the rising adoption of web and mobile apps, and that the Asia Pacific region will experience the highest growth as growing markets like China and India deploy more cybersecurity solutions.
That forecast sounds bullish, but investors should also examine these four other stats to understand how rapidly the cybersecurity market could grow within the next few years.
Stat number one
Nearly 178 million personal records were exposed in data breaches in 2015, according to the Identity Theft Resource Center. Nearly 70% of those breaches occurred in the healthcare sector, and almost 20% occurred at government/military agencies.
These organizations will likely increase their cybersecurity budgets considerably in the near future, which means more business for "best in breed" perimeter defense companies like FireEye (NASDAQ:FEYE) and Palo Alto Networks (NYSE:PANW). FireEye's threat prevention platform identifies incoming threats before they strike, and Palo Alto's next-gen firewalls prevent them from reaching internal networks.
Stat number two
The global cost of handling cyberattacks is expected to rise from $400 billion in 2015 to $2.1 trillion by 2019, according to estimates from Lloyd's and Juniper Research. That includes direct damage as well as post-attack disruptions. Payroll giant ADP, hard drive maker Seagate, the FBI, the IRS, and the Department of Homeland Security -- which were all struck by data breaches this year -- all know how costly these attacks can be.
While larger companies and organizations are gradually responding to these threats, Cisco's 2016 Annual Security Report found that just 29% of small to medium-sized businesses used basic security tools like configuration and patching to prevent breaches -- down from 39% in 2014.
Stat number three
Despite that apparent complacence, 52% of respondents in CyberEdge Group's 2015 Cyberthreat Defense Report believed that their companies would be hit by successful cyberattacks within the year. That fear is certainly justified -- Symantec, best known to consumers as the maker of Norton Antivirus, recently discovered that three quarters of all websites had exploitable vulnerabilities.
Companies like Symantec are also evolving into "all-in-one" guardians for these businesses and organizations. Symantec recently acquired security firm Blue Coat to add its network and cloud protection services to its core portfolio of security solutions for PCs, data centers, and emails. That move makes it an "end-to-end" security provider which offers "layers" or protection, which previously required services from multiple vendors.
Stat number four
43% of data breaches were caused internally, according to a report from Intel Security last September. Half of those breaches were accidental, caused by poor security practices, while the other half were intentional -- caused by disgruntled employees and malicious insiders.
Although internal data breaches are rising, most cybersecurity companies only focus on external threats with firewalls and threat prevention systems. The standout performer in the internal data breach market is CyberArk (NASDAQ:CYBR), the market leader in PAM (privileged account management) solutions. CyberArk's platform locks down compromised systems and quarantines internal threats before they can spread to other parts of the network.
The key takeaway
Investing in most cybersecurity stocks today isn't for queasy investors, since many of these high-growth players have high valuations, low profits, and are prone to wild price swings. However, less risk-averse investors should still keep one or two cybersecurity stocks in their long term portfolio since the market still remains ripe for long-term growth and consolidation.