E-Business Growth Demands Security Spending

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E-Business Growth Demands Security Spending
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Rawlson O’Neil King, theWHIR.com
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May 21, 2004 — (WEB HOST INDUSTRY
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REVIEW) — E-business has achieved widespread acceptance as a powerful
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business tool that can, if utilized properly, enable companies to
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enhance their profitability, seek out new market opportunities and
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provide customers with improved services.
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The growth of e-business is such that by 2005, according to research from Business Communications Company Inc. (bccresearch.com), revenues are expected to exceed $3 trillion. Datamonitor (datamonitor.com)
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predicts that global business-to-business and business-to-consumer
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e-commerce revenues will reach $5.9 trillion and $663 billion by 2005
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respectively.
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However, for e-business to flourish,
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there must be a stable approach to security for e-business transactions
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and activities. The approach to security must provide the ability for
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strategic partners, customers and employees to use e-business
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applications without fear of information compromise or corruption.
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According to a new global survey of 237 senior executives conducted by the Economist Intelligent Unit (eiu.com),
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many common business goals, from holding customer data to sharing
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supply-chain data, often entail greater vulnerability to security
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threats. As a result, security is no longer considered a straight cost,
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but a business enabler.
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Early in the decade, approximately 50
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percent of businesses worldwide were spending five percent or less of
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their IT budgets on securing their networks, and e-security breaches
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were causing over $15 billion in damage annually. The events of
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September 11 caused serious rethinking of IT budgets, to the extent
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that security has become the number one priority in a majority of
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corporate IT budgets and certainly in US federal government IT budgets.
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According to a Meta Group (metagroup.com)
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study, while only 24 percent of firms increased their overall IT
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spending in 2002, 73 percent increased spending on security. Security
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as a percentage of IT spending, however, only constituted three
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percent, according to Meta Group. Most of this spending was committed
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to internal network protection.
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Datamonitor stated that public key
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infrastructure and virtual private networks would be the largest areas
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of growth with global investment reaching $2.6 billion and $3.9 billion
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respectively by 2005. Spending on e-security services were also
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predicted to triple from an estimated $4.3 billion in 2000 to $11.9
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billion in 2005.
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A report by the Business Communications
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Company, Inc. stated that overall e-security expenditures were
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estimated at $4.8 billion in 2001. Expected to grow at an average
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annual growth rate of 24.8 percent, overall expenditures are likely to
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approach $14.7 billion by 2006.
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BCC Research also predicts that
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e-security software expenditures will grow from $3.5 billion in 2001 to
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$11.5 billion in 2006, at an AAGR of 26.5 percent. Approximately 54
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percent of these expenditures will occur in authentication and
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authorization processes in 2001 and 57 percent in 2006. These processes
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assure that the right person is in the right place for the right
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transaction 24 hours a day, seven days a week.
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In the “services” category, “e-security
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consulting” services account for approximately 90 percent of
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expenditures. The consulting area featuring the most major impact is
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that of e-security management services, which will grow from $450
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million in 2001 to $1.3 billion in 2006. Overall, the e-security
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services category is predicted to increase to $2.1 billion in 2006,
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from $785 million in 2001, an AAGR of 22 percent. E-security consulting
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however might grow at a quicker pace given the increase of security
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breaches at financial institutions.
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According to a Deloitte Touche Tohmatsu (deloitte.com)
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survey of banks and insurance companies released this week, cyber
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attacks are on the rise. Eighty-three percent of respondents stated
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their IT systems had been compromised in 2004, compared with 39 percent
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in 2003. Approximately 40 percent of the respondents whose systems were
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attacked reported financial losses.
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The survey also found that many financial
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institutions are sliding backwards when it comes to the use of security
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technologies. While more than 70 percent of respondents perceived
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viruses and worms as the greatest threat to their systems in the next
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12 months, only 87 percent of respondents had fully deployed anti-virus
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measures. This result is down from 96 percent in 2003.
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On the upside, the survey revealed some
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significant advancements and trends in the right direction. Financial
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institutions showed improvement in complying with regulations, as
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two-thirds (67 percent) of respondents indicated they have a program
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for managing privacy (compared to 56 percent last year). In addition,
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the majority (69 percent) felt that senior management is committed to
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security projects needed to address regulatory requirements.
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“Financial institutions, particularly
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security officers, are facing greater challenges than ever,” stated
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Adel Melek, global leader of Deloitte’s IT Risk Management &
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Security Services, in a statement. “They are fighting an on-going
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battle to overcome evolving security threats and to comply with an
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increasingly stringent regulatory environment but, at the same time,
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resources have stagnated.”
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To redress the resource situation,
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financial institutions and other associated businesses should make
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greater investments in e-security consulting services. Most complex
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hosting providers offer managed security services that afford increased
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control over security spending, while concurrently providing access to
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skills and protection capacities without the need to hire and train new
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dedicated staff.
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