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Security Biz: the double edged sword

Boom/Bust

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The security industry is in a state of a flux. While companies like Baltimore and iDefense are suffering self-evident problems, the rest of the market appears to be buoyant.

IDC reported last week that the security industry looks set for a bumper few years and with the UK's Confederation of British Industry stating that two thirds of companies fell victim to cyber crime last year, it seems that security companies could be set to boom.

According to IDC, the security market is going to grow from strength from strength over the next four years, rising at a compound annual rate of 23, until it tops more than $14 billion in 2005. This isn't just for virus protection either -which seems to be an increasingly virulent threat - but for all sectors of the security industry: firewalls, encryption, authentication authorisation and administration.

Evidence of the boom can be traced as early as last year when, again, all sectors experienced considerable growth. Antivirus software turned in a healthy 25 per cent growth figure while the firewall segment managed an astonishing 42 per cent growth in 2000. Internet security, benefiting from the surge in ecommerce activity throughout 2000, also managed considerable gains, rising 33 per cent to $5.1 billion.

'The question that vendors will be asking themselves however is where do I need to be investing?'

The problem with the security market right now however is that it is, as IDC says, a 'double-edged sword.' Whilst Baltimore has seen the bottom fall out of its market and iDefense has filed for Chapter 11, others in the market are booming.

Brian Burke, senior research analyst in IDC's Internet Security program, said: "On the one hand, it [the economic climate] is 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.' And obviously that's where security products can help.

The question that vendors will asking themselves however is "where do I need to be investing?" According to IDC, the most popular areas of security over the next few years are going to be the 3As, authentication, authorisation, and administration. This segment alone is expected to surge beyond the $9 billion mark by 2005, buoyed by a compound annual growth rate over the next four years of 28 per cent.

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