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Cybersecurity Fear Spells Opportunity

With roughly ten billion devices connected globally—a number expected to grow to over fifty billion by 2020—the Internet of Things (IoT) is both an incredible growth market and a security nightmare. Cybersecurity firms are hoping to capitalize on this rapid expansion.

Retail, healthcare, banking, and many other sectors are raising security budgets and fortifying their current cybersecurity practices. Gartner says retailers spend 4% of their IT budgets on security, compared to 5.5% for banks and 5.6% for healthcare companies. IDC Retail Insights expects retailers to spend over $720 million on digital security this year, an increase of 5.7%. That’s a start, but more is coming—and security firms like FireEye FEYE, Palo Alto Networks PANW, Qualys QLYS, and startups like BitSight Technologies will be waiting to reap the benefits.

As more medical data enters the cloud, the potential consequences of a security breach seem more ominous. A 2012 Ponemon Institute study found 94% of hospitals surveyed had been hacked during the previous two years.

The security firm Arbor Networks, owned by Danaher DHR, estimates that third-party vendors with devices running legacy operating systems accounted for roughly 70% of the breaches it reviewed. An unnamed major oil company allegedly had its main network hacked via an Internet-enabled vending machine.

Target TGT invested $1.6 million in a FireEye system, only to have it breached at the height of the holiday season in 2013. FireEye’s intrusion alarms functioned properly, but were ignored. Meanwhile, the creative hackers managed to enter the system via stolen credentials at an air conditioning company Target had contracted. The hackers took forty million credit card numbers, and will end up costing the company billions in market capitalization.

Even when companies invest in advanced cybersecurity systems, human error can lead to a breach. Determined hackers work diligently to break into the most sophisticated security software. Considering that barriers into many company systems are less robust than those at Target, the cybersecurity market appears to have a great deal of potential.

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