Revenues from Global Enterprise Investment in Security Products Predicted to Hit $13.5bn by 2006

London, 8 August 2003 – Increased interest in security solutions amongst enterprises globally has ensured that security product revenues have exceeded those of many other IT solutions. In a new report, “Enterprise security product markets,” independent market analyst Datamonitor (DTM.L), says the growing awareness of the constant need to offer IT systems greater protection generated enterprise security product revenues of $7.1bn in 2002. Datamonitor predicts that global enterprise investment in security products will rise to $13.5 billion in 2006. Intrusion protection, vulnerability assessment solutions and security management tools are tipped to be key revenue generators. Whilst North America will remain the largest market, predicted to reach $6.9 billion in 2006, Latin America, followed by Asia Pacific will be the fastest growing between 2002-2006, with compound annual growth rates of 25% and 23%, respectively whilst Europe, the Middle East and Africa (EMEA) will be 18%.

However, vendors have struggled to increase demand in what is still a soft market. The report finds that security product vendors with more than one solution in their portfolio have often performed well in one market but have mostly failed to increase sales of their other products. The failure to achieve significant cross-sell opportunities has been a frustrating experience for vendors that have invested heavily in the “one-stop shop” school of security product promotion. However, vendors have turned to new solution models and subsequently new markets are evolving. According to Datamonitor, positioning best-selling solutions within an overall security framework, will allow them to better leverage their best of breed products to greater effect and enable them to gain more revenues from areas where stronger growth is predicted in the future.

Rise of new security solution models means new markets have evolved all of which will drive security product revenue growth

Depite being the most mature, anti-virus and firewall solutions have seen strong growth due to a number of high-profile virus outbreaks ensuring that perimeter protection solutions remained popular. One of the new models, that for “layered security’, will help ensure that these markets continue to grow steadily. The layered security approach encourages enterprises to embed more technologies at each layer of the enterprise: at the perimeter, within the network, on servers and on client devices such as PCs and PDAs. This will increase sales of more traditional security solutions as well as encouraging greater sales in complementary markets such as threat protection and content filtering.

Vendors have also increasingly turned to other solution models that combine the properties of a number of solutions to meet a common aim. New markets have subsequently evolved including threat protection, secure content management, security management and identity management. While some vendors are looking to cross-sell opportunities, others see it as a natural way to meet the needs of ever more demanding clients. The secure content management market, for example, combines anti-virus content filtering and employee Internet management solutions to ensure that all unwanted content is filtered out from incoming emails or the Internet: be it viruses, pornographic images or unauthorized text.

The increased need for security management will see the security management tools market grow at a compound annual growth rate (CAGR) of 30% from 2002 to 2006

As companies increase the number of products in their architectures, they struggle to manage a heterogeneous environment. Security administrators will look to cope better with the thousands of security alerts their systems generate on a daily basis and as both legislation and regulations force companies in a number of industries to respond to increasingly strict policy compliance mandates. This will fuel the need for security management tools.

Vendors of solutions such as threat management and security policy compliance products have responded to this need by pushing more sophisticated solutions to help reduce the IT departments’ workload. By bringing with it a powerful return on investment argument, the market for security management tools generated global revenues of $371m in 2002. By 2006 Datamonitor predicts that this market will be worth $1.1bn.

The intrusion protection and vulnerability assessment market generated revenues of $642m in 2002

Vendors have learned from their mistakes and as well as improving their technologies to reduce the number of false alarms, they have looked to create closer links between traditional security mainstays such as greater integration with firewall and anti-virus solutions. A more focused positioning of the technologies involved and an industry-wide push for more far-reaching “threat protection’ solutions will see the combined intrusion protection and vulnerability assessment grow at a CAGR of 20% to reach over $1.3bn by 2006.

Ian Williams, Program manager for Datamonitor’s Enterprise Security team, comments:

“The more traditional security product markets such as firewall and anti-virus demonstrated some impressive growth in 2002 and although some vendors struggled in the face of stiff competition, the overall market increased by around 11-12% from year-end 2001 to 2002. While the market for other products such as intrusion protection and vulnerability assessment solutions will see stronger growth over the next few years than previously experienced they will achieve greater success as part of a more complete security solutions package than by themselves”

Datamonitor’s report, “Enterprise security product markets,” covers 12 of the key enterprise security product markets including anti-virus, encryption, firewall & VPN and security management tools. It provides a comprehensive overview of each market, highlighting trends, drivers, inhibitors and the competitive landscape as well as detailing future scenarios to 2006 and Datamonitor’s opinion on how vendors can best exploit any market opportunities. Geographic regions covered are, Europe, North America, Latin America, EMEA and Asia Pacific.

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