Why Investing in Data Security and Privacy is a Great Idea for Investors
In the age of data and digital transformation, ensuring cybersecurity and privacy of data is at the top of most businesses’ priorities.
As such, the realm of data privacy and cybersecurity has become one of the most investable industries, with private equity firms and independent investors alike hopping on board to increase the total cybersecurity investments by around 10% in 2021, as forecasted in reports by both Canalys and Gartner.
While the world of business has been undergoing digital transformation and harnessing technology such as the Internet of Things, the Industrial Internet of Things and cloud computing for years, the events of the last year – namely, the COVID-19 pandemic and the resulting lockdowns – have forced many more businesses to become more digitally enabled.
While this propelled many businesses forward, allowing them to connect with customers in new ways, keep their employees working remotely, and update their systems to become more competitive and efficient in the digital age, this also provided more opportunities for malicious cyber attacks.
As a result, 2020 had the most cyberattacks on record. One SonicWall report showed that the number of hacking attempts had increased by 20% in the first half of the year. A Helpnet Security article cited that ransomware attacks increased by around 60% in 2020.
In particular, public sector industries – which were under immense strain during the pandemic period, especially healthcare and education entities – were also the most targeted by cyberattackers and fraudsters, increasing the incentive to invest more of their budget into cybersecurity.
This is especially true as these entities – among many – hold sensitive data about individuals, making security and privacy of data even more essential to protect these individuals, in addition to protecting against reputational damage and GDPR-associated fines for not adequately protecting data.
Therefore, despite the advantages that increased interconnectivity, data collection and online working offers, there is also increased risk, and companies who want to succeed in the quickly evolving modern world – which is becoming more and more technologically enabled – have to take and mitigate, this risk to compete with companies that use data to their advantage.
Organisations such as Facebook, Google and Amazon, established in the age of data, are all examples of how data – collected and used effectively – can fuel immense success, and these companies similarly take excellent care to implement measures to keep their data secure and their – and their customers’ – privacy protected.
Therefore, even during the pandemic, more giant corporations’ cybersecurity spending remained resilient. However, smaller businesses cybersecurity budgets were affected, despite the increased risk of cyberattack.
However, now that lockdowns around the world have eased. Consumer spending has increased – and it looks as though the economy is beginning to stabilise, and employment statuses feel more secure – small to medium businesses will likely hike up their security spending, as the threat of cyber-attacks and data breaches remains high and is expected to grow, with the range of cyber threat expanding.
All of these factors – among many more – are a few of the reasons why cybersecurity is a continually growing industry. Also, one of the most investable, as businesses become more technologically enabled and harness the power of data and the threat of cyberattack simultaneously grows.
Across the many different types of cybersecurity, including data security, web and email security, endpoint security and network security, all cybersecurity segments are forecasted to grow in 2021 from 5-12% across the various sectors, as cited in a report by Canalys.
This is reflected in the stock market as the value of the cybersecurity industry is recognised, with numerous cybersecurity companies achieving a composite rating of above 90 – meaning they’ve outperformed 90% of all other possible stocks in the country traded in – including CrowdStrike, Proofpoint, Zscaler and Palo Alto Networks among more.
More than this, CrowdStrike and Zscaler feature in the top half of the IBD 50 roster of growth stocks. With CrowdStrike cracking the top 15 stocks and Zscaler making the top 25 already this year, the former specialising in malware detection on devices with access to corporate networks and the latter specialising in cloud-based web security gateways.
More than their stellar performance in the stock market, cybersecurity companies are being invested in by huge private equity companies and even acquired by some of the most successful corporations, such as Microsoft, who recently bought RiskIQ – a security and threat management company – for $500 million.
Bearing in mind the impressive financial potential of the cybersecurity industry and the guarantee that cybersecurity will become even more essential for the protection of privacy and data – especially now that the financial strain of COVID-19 and subsequent lockdowns are easing – investing in cybersecurity, data security, and privacy protection will likely be more lucrative than ever in 2021/22.