[ISN] IT security spending disappoints

From: InfoSec News (isnat_private)
Date: Wed Jul 17 2002 - 06:44:17 PDT

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    Forwarded from: William Knowles <wkat_private>
    By Paul Festa 
    Staff Writer, CNET News.com
    July 16, 2002, 2:20 PM PT
    Investors who had hoped that increased security concerns after Sept.  
    11 would yield an immediate bonanza in the information security sector
    have been sorely disappointed, according to two new analyses.
    The reports come as high-tech companies in the middle of a painful
    contraction eagerly seek out security-related work, particularly if it
    involves government contracts.
    But the IT security market is in for at least another year of doldrums
    before sales start to pick up, according to a new report by New
    York-based Vista Research. According to Vista, the information
    security market will not see significant signs of a revival until
    2004, when corporate IT departments upgrade their security systems.
    In addition, a panel recently convened by Thomas Weisel Partners
    concluded that government expenditures on the cybersecurity front have
    been more sporadic and less generous than expected but predicted that
    those funds will eventually loosen up.
    "All parties present agreed that spending on homeland security
    initiatives has taken longer to materialize than initially expected,"  
    Thomas Weisel wrote in a summary of its Growth Forum 4.0 conference in
    Santa Barbara, Calif., last month. "While bureaucratic process could
    slow contract awards, all agreed that incremental funds will flow into
    the vendor community over the next 18 to 24 months."
    Readers who responded to a recent survey by CNET News.com were more
    optimistic. Approximately one-third of the respondents ranked security
    as the highest priority in spending in the information technology
    Vista predicted that the security sector--in which it included Cisco
    Systems, Check Point Software, Symantec, VeriSign and Internet
    Security Systems--will grow 3 percent this year and 11 percent next
    year. The growth rate will rise to 18 percent in 2004 with a predicted
    upgrade cycle and then taper off to about 15 percent growth annually
    in 2005, 2006 and 2007.
    The sector should grow to $11.7 billion in 2007 from about $5.9
    billion in 2002, according to Vista.
    The current doldrums have manifested themselves in a series of summer
    downgrades that have hit Internet security stocks including Check
    Point and Macrovision.
    Following last September's terrorist attacks on New York and
    Washington, D.C., there had been an expectation on the part of
    investors that information security companies might outperform the
    overall market, according to Igor Stenmark, senior adviser of research
    at Vista. Now, however, that seems much less likely
    "It's not panning out because security at the end of the day does not
    save money or generate revenue," Stenmark said. "It's always an
    afterthought. It's sacrilegious to admit this in public in this
    climate, but from talking to lots of CIOs we've found this to be
    While security companies have languished in an era of tight budgets,
    disaster recovery specialists have found a high-tech silver lining
    post-Sept. 11. Vista singled out SunGard and its recently acquired
    Guardian unit as companies that have directly benefited.
    Vista also predicted considerable consolidation in the IT security
    sector over the next year and a half, with mergers and outright
    business failures winnowing the pool of competitors.
    "A lot of the private companies are going to shut down," Stenmark
    said. "If they haven't broken out yet, they're not going to be able to
    get funding right now. There are probably more than 300 vendors in the
    security space, and I don't think there are more than two or three
    good management teams."
    "Communications without intelligence is noise;  Intelligence
    without communications is irrelevant." Gen Alfred. M. Gray, USMC
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