Edmond de Rothschild Megatrends - Cybersecurity - March 2023

Even as the macroeconomic environment darkens, the fundamental drivers for cybersecurity remain intact as threat environments continue to become more complex.

While CIO budgets have come under scrutiny across the broader enterprise IT landscape, cybersecurity spending still appears to have made its way into supplementary budgets for 2023, and to be more resilient than other IT subsets. In fact, the digital transformation and the shift to the cloud require a higher degree of security to protect all workloads. Identity threat detection, PAM (Privileged Access Management), endpoint/vulnerability and zero-trust architecture remain the most attractive areas of security right now, and are where most of the spending will likely be concentrated. Interest is also growing in DevSecOps, which stands for Development, Security and Operations, and which differs from DevOps (Software Development and Operations) in that it introduces the security element at every stage of the software development cycle, thereby improving the quality and security of the software itself.

In terms of the overall macroeconomic environment, we are seeing higher deal scrutiny and a slight pick-up in discounting, although the latter remains concentrated in the smaller-scale vendors. Additionally, Europe and SMEs will remain the weak spot in spending in the coming quarters. M&A is certainly accelerating, highlighting, on the one hand, the highly appealing nature of the sector and, on the other, the growing interest after the recent multiple compression which resulted in more de-risked valuations.