Executive Summary

In 2001, the cost of security breaches in the UK reached £4.86bn, according to Key Note estimates. The cost of security breaches is rising rapidly, at around 14% to 15% p.a. (per annum), reflecting the increasing reliance on information technology (IT) systems by the UK economy. Key Note estimates that, in 2001, expenditure on products and services to prevent security breaches will reach £4.96bn. Spending has declined in the past few years, reflecting a decline in spending on `Millennium bug'-related matters, which has more than offset strong growth in spending on other areas.

This report focuses on two separate aspects of IT security: spending on security breach prevention (covering spending on security products and services and prevention of the `Millennium bug'); and the costs of security breaches (covering the direct costs of suffering a breach and the cost of software piracy in the UK). Security-specific products and services are taking a growing share of the total expenditure on security breach prevention, indicating that companies are focusing more of their spending on IT security, rather than on areas such as physical security and IT maintenance.

Important factors that are shaping the market include the growth of the Internet and e-business (electronic business) generally (which is leading to a growth in computer networks), group working, mobile/remote working and the need to communicate with contacts outside the organisation. This environment is inherently less secure than one based on stand-alone computers and proprietary computer networks. New legislation and rules are also impacting on the market, including how companies must organise and conduct their security policies, e.g. the Regulation of Investigatory Powers Bill (RIP), the Lawful Business Regulations, and the introduction of new security standards such as BS7799 and ISO17799.

Factors impacting on the market include the continued growing threat of virus and hacker attacks on companies (which is aiding sales of anti-virus and firewall products), new developments such as the ending of export restrictions in the US and the ending of the RSA encryption patents (which are making encryption products cheaper to develop), and the creation of mainstream software with greater security features as standard, e.g. self-healing software.

In the future, spending on security breach prevention is set to grow strongly in the UK. Spending will become increasingly centred on networks as companies try to build secure systems that are also open and flexible to outsiders (e.g. suppliers and customers). This will result in strong growth for trust products and services, and also access control products and measures.

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