The new security line
The need for safety and security is rising all the time, accelerated by technological developments such as the cloud or 5G. There are considerable challenges ahead.
However, more and more innovative companies are emerging that are proposing smart solutions to tackle these challenges. Investors can benefit from this fresh momentum along the security line.
The global population is growing; mass displacements and migrations of populations are placing ever greater demands on governments; infrastructure and industrial facilities are increasingly becoming the target of physical and virtual attacks; the habitats and livelihoods of many people are under threat.
The demand for products that effectively ward off attacks and threats will increase in the coming years by an annual 5% to 8%.
Some people might argue that these megatrends have no impact on their personal day-to-day lives. They enjoy the privilege that in most developed countries, effective safety and security systems are in place to protect them. These systems are by their sides 24/7 and make their presence felt in many different ways, starting with breakfast and food that can be enjoyed with peace of mind thanks to well-functioning healthcare. When we hit the road or board public transport, we rely on countless safety systems that are built into our cars or keep us safe in infrastructure facilities such as airports and ship terminals. In the workplace, virus scanners and firewalls safeguard our IT systems and sophisticated apps allow us to make secure payments. We also benefit from a high level of environmental safety – thanks, for example, to environmentally friendly waste disposal – and near seamless crime prevention. There are so many accomplishments we take for granted.
On a stable growth path
But we shouldn’t take them for granted. Safety and security can only be ensured if the necessary structures have been established, appropriate processes defined, and corresponding investments funded. The amounts of money involved are considerable. The revenue that is generated worldwide from services and products for safety and security is currently estimated at USD 500 bn. Viewed over the long term, experts forecast average growth of 7.7% per year between 2004 and 2024. Growth rates of 5%-8% are expected in the years ahead.
Demand is being fueled on the one hand by the megatrends outlined above. On the other, technological developments are calling for newer and newer services and products that afford us safety and security. This phenomenon is illustrated, for example, by cloud and 5G technology.
Making sure cloud users don’t fall from the sky
The digital transformation is becoming unavoidable for a great many companies, making them increasingly dependent on having a cloud infrastructure. For Chief Information Officers (CIOs), this development is somewhat of a cause for concern, since the technology is susceptible to security loopholes. In addition, cloud service providers have access to the data stored in the cloud at any time and could change or delete it, whether by accident or on purpose. It is also not uncommon for cloud service providers to be able to share the data with third parties – for example with government agencies – without being authorized to do so. Alongside security loopholes and data losses, cloud users also risk falling victim to hardware failures on the part of their provider.
It’s no exaggeration to say the challenges for cloud users are immense. So, what can be done? One solution is for customers to take the protection and security of their data and information saved in the cloud into their own hands. This is where security applications come into play, which monitor the flow of data between an internal company network and the cloud, identify data usage rights, and record how data are used and which tools are deployed for this purpose. Experts are convinced that demand for applications and tools of this kind will skyrocket in the years ahead. Companies that offer secure and efficient solutions at the interface between cloud users and cloud providers are also becoming of increasing interest for investors.
5G calls for new security solutions
The new 5G technology is posing similar challenges. It is 100 times faster than the current 4G standard and will be crucial to the proliferation of the Internet of Things (IoT). 5G enables cars to drive autonomously and surgeons to perform operations remotely, to name just two remarkable potential applications. But what about security? 5G will massively increase the number of end users on the network. This will also increase the number of vulnerabilities, since all hackers need is one point of access to penetrate the network and, in the worst case scenario, manipulate it. It is easy to imagine the havoc this could create on the roads and the safety it could put at risk. The potential threats to power networks, water supplies, oil pipelines, and the like are becoming more and more prevalent in the age of 5G and are creating demand for integrated 5G solutions. Here too, prevention, protection, and security are the drivers for a new market segment. It could be worthwhile for thematic investors to take a closer look.