Overall, damage from cyberattacks is expected to amount to $10.5trn annually by 2025 – a 300% increase from 2015 levels.[i] As such, Gleeson says companies, organisations and governments are having to take cybersecurity increasingly seriously as they seek to protect themselves from more frequent and more sophisticated attacks.
“The global cybersecurity market was valued at $154bn in 2022 and is expected to grow to $425bn by 2030[ii],” he says. ‘However, the total potential opportunity could be as much as $2trn[iii] as companies do not always adopt sufficient levels of products and services, while the current solutions available do not all meet the ever-evolving needs of customers.”
Gleeson says enterprise-level cybersecurity firms such as Palo Alto Networks and CyberArk offer year-round services ranging from vulnerability assessment to managed security services, and even damage control consulting if the worst happens.
“The risk of underestimating the importance of cybersecurity, and underinvestment in that area, could leave a company as the equivalent of the only house in the street without a burglar alarm – and an unlocked door,” he says.
“That is why even in a more difficult economic environment, cybersecurity budgets tend to be more resilient, as customers prioritise digital transformation – and the need for digital protection. This is why we expect potentially strong long-term earnings growth and relatively low volatility in the cybersecurity-related tech sector.”
Gleeson points out that a requirement for cybersecurity is widespread in modern businesses, both large and small, but the expertise to create and implement such strategies is highly specialised and therefore valuable.
Software as a service (SaaS) firms stand to capitalise on demand for such services, he believes, as spending on all cloud-application SaaS by end-users is expected to increase from $167.3bn in 2022 to $232.3bn in 2024.[iv]
“A lack of in-house skills and the scale of investment needed to keep up with the changing cyber risk landscape – as cybersecurity must keep up with technological innovation - are among the reasons why many companies turn to third-party providers, buying in cybersecurity as SaaS.
“As well as cybersecurity, other types of SaaS products include customer relationship management, workflow automation to improve efficiency and corporate management solutions such as bringing together human resources and finance systems.”
Gleeson says SaaS firms are showing signs of healthy growth despite a challenging economic climate, making the sector a compelling opportunity for investors looking for more defensive tech stocks in the current environment.
“Many SaaS companies are continuing to demonstrate growth even in a challenging economic environment. For example, ServiceNow, which allows companies to manage their IT service requests, grew revenues by 23% in the second quarter of this year compared to the year before.[v]
“We see potential long-term opportunities within SaaS as companies look for efficiencies and embrace digitalisation, with this underlying structural trend supporting tech companies in this space. With its potential for scalability, repeated revenue streams and an ever-growing market of potential customers, we see good scope for potential growth in this sector.”
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