Industry Trends

This section leverages the Nine Forces analysis template approach [FLE07] to assess the competitive dynamics that may impact new potential entrants in the PACs marketplace. This Nine Forces approach combines Porter’s widely used Five Forces analysis for assessing competitive factors “near” to a given firm, alongside PEST (Political, Economic, Social, and Technological) considerations to also consider broader trends in the firm’s wider environment.  The analysis considers the competitive viewpoint of new PACS innovators in particular, and competitive advantages or disadvantages they may encounter. A schematic overview depicting key elements of the approach is shown in Figure 3.1.

 

In addition, analysis of PESTLE trends can be accessed in individual pages at the end of this section.   

 

industrychallenges1

Figure 3.1 – Schematic overview of key elements of Nine Forces Industry Analysis Approach

 

Tables 3.1 to 3.9 below summarise some of the broader dynamics that can impact on new innovators in the PACs competitive environment. Each of the nine assessment areas considers broad impacts within each area may have on new PACs innovators entering the marketplace. Enablers that may have positive effects on competitive positioning are highlighted in green (+), with potential inhibitors for each marked in red (-).

Overall, a highly competitive existing environment exists, despite significant opportunities for new innovators also evident, particularly in the newer privacy space. The proliferation of new technologies, the diversification of related infrastructure, the ever increasing threat landscape and increasing regulatory and compliance demands are creating new security requirements and challenges, and changing the manner in which security and privacy measures should be delivered. In turn, a number of factors are slowing the pace of PACs technology adoption and market growth. Sluggish macro-economic growth in recent years in key global regions where the largest PACs investments are made - Europe and North America in particular, have meant that many organisations cannot invest as much in security as they need, or would like to do so – in spite of the overall growth of the PACs market in recent years. Skills shortages are another problem, as organisations cannot acquire the right personnel with appropriate security expertise to protect their infrastructures rapidly, and PACs vendors and service providers are similarly unable to grow their personnel to meet their market demands. The fragmented legislation landscape, particularly across EU regions, is also reducing the ability of European PACs vendors to scale their businesses internationally, leading to a highly siloed regional marketplace within Europe – inhibiting ability to compete in the PACs marketplace at a global level. More detailed assessment of key trends (drivers and barriers) of relevance to the PACs domain is also covered thereafter in Section 4, expanding on the PEST analysis here.


Table 3.1 to 3.9 - Nine Forces analysis of PACs competitive environment

1. Government, Political, Legal Impacts (Impact: HIGH)

(i.e. how do government policy-making, legislation, standards etc impact competing PACs firms?)

ENABLERs

Increasing regulations at federal level and industry-specific levels are driving demand for PACs solutions (+)

 

Geopolitical space increasingly influenced by security and privacy issues, raising profile of threats and demand for PACs marketplace solutions(+)

 

INHIBITORS

Difficulties keeping legislation in step with rapidly changing technology environment is hindering growth potential in the PACs market, and ability for new PACs innovators to scale. For example lack of harmonisation of key PACs legislation around data protection being such an issue at present (-)

 

Heavy certification and clearance  requirements necessary to provide PACs solutions to key customer segments (government and military in particular), preferred list of suppliers leveraged by buyers, hence prior credibility often necessary to enter market, raising entry barriers to new entrants (-)

 

SUMMARY: Government actions and investment are critical in this market, and policy and regulations are core influencing factors in domain that innovators must align closely with on regional, pan-regional and domain-specific levels. Future regulatory and policy initiatives should broadly favour innovating firms in the domain.

 

 

2. Technological Impacts (Impact: HIGH)

(i.e. how are emerging macro technology trends supporting ability of PACs innovators to compete)

ENABLERs

Present Macro ICT shifts (Cloud, Big Data, IoT etc) have significant impact on domain, driving new innovation opportunities (+)

 

Ever-evolving threat landscape creating new PACs innovation opportunities (+)

 

Movement from perimeter-based security approach to more holistic security monitoring approaches driving demand for more diverse portfolio of PACs solutions, and broader solution offering (+)

INHIBITORS

Challenges for new companies in keeping up with pace of new technology change and changes in threats, in sustaining R&D investment in technology roadmaps and in keeping them relevant (-)

 

Agnostic reaction of end-users to technological impact, being ignorant or decisive on accepting risks and challenges (-)

 

 

 

SUMMARY:  A broad spectrum of highly-dynamic technology trends having significant impact and greatly favour innovative firms in PACs space.

 

 

3. Competitive Rivalry (Impact: HIGH)

(i.e. how does existing nature of other PACs competitors impact on ability of PACs innovators to compete)

 

ENABLERs

Fragmented competiive space  with many players exists in PACs, diverse and changing nature of threats creates new niche opportunities exploitable by new entrants (+)

 

Regional concerns are amplified in PACs markets, particularly due to national security issues around PACs, creating opportunity for innovators to gain sustained advantage in local markets (+)

 

 

INHIBITORS

Market for mass-market PACs solutions seems heavily saturated with significant competition. Fragmentation also exists at local level across PACS/ICT suppliers and integrators (-)

 

PACs is becoming a mainstream part of ICT, increasing risk of smaller PACs players being pushed out of market by mainstream ICT competitors increasing focus on security solutions, and competing for security skills that are already in short supply (-)

 

Achieving PACS product differentiation amongst competitors increasingly difficult to achieve at marketing level, for many proposed innovations in the space this tends to exist moreso at esoteric technological level (-)

 

Difficult for small PACs innovators to find resources to perform appropriate commercial and technical analysis of far and near competitors in order to validate their own claimed differentiators (-)

SUMMARY: Strong competition with large number of players exists across many core PACs segments. However localised regional opportunities targeting specific threat niches will always exist, favouring new innovators in those regions and areas of expertise.

 

4. Power of Buyers/Consumers (Impact: MEDIUM)

(i.e. how do key buyers operate and can PACs innovators support them sustainably)

ENABLERs

Many key target buyers of PACs products and services under pressure to increase PACs in response to existing and emerging regulatory pressure, key driver of purchase decision making (+)

 

Buyer switching costs are high for key holistic products with heavy integration requirements (e.g. SIEM) (+)

 

Can be challenging for buyers to differentiate product offerings and their quality in many cases, making highly consultative customer-oriented sale easier to achieve and more relevant, not just about technical product featuresets (+)

 

 

INHIBITORS

Distributors/resellers purhasing from vendors have broad range of PACs offerings to choose from, can be difficult for new PACs entrants to stand out in the channel (-)

 

Similar key trusted PACs contractors serving the Defence space have strong bargaining power over smaller players looking to target segment(--)

 

Mainstream consumers reluctant to pay for many emerging security/privacy innovations (i.e. what's the next big thing, the next anti-virus product?) (-)

 

Commodity security services and low-touch commodity products (e.g. testing, compliance, auditing etc.) easy for buyers to substitute, lowest price often wins (-)

 

Difficult for buyers to quantify appropriate amount of PACs investment in line with risk profile, which can hinder new technology adoption (-)

 

Buyers in the domain can be risk conscious/averse, and inherently suspicious about new PACs innovation and providers  (-)

 

SUMMARY: Regulation and compliance initiatives increasingly driving PACs purchasing decisions and increased spending. However improved ways of quantifying risk and  accurately assigning security budgets would greatly assist PACs innovators in optmising market uptake of new solutions. 

 

 

6. Barriers to New Potential Entrants (Impact: MEDIUM)

(i.e. can other new entrants compete easily alongside other new PACs innovators?)

ENABLERs

Economies of scale or scope  not always a mandatory barrier to entry in PACs domain, bespoke innovation opportunities are emerging depending on subsegment (+)

 

Significant opportunities exist around privacy challenges for new entrants that may not presently exist (+)

 

Possible to discover product opportunities off the back of initial service/consultancy offerings (+)

 

Very active and large social (underground) networks, providing great insight into highly specialised new developments and needs. Strength of social networks via expert networks such as OWASP, ISACA, SANS, ISC², FIRST, etc.(+)

INHIBITORS

Access to necessary inputs can be challenging and exclusive, particularly from military and large orgs, cited difficulty among academia in particular (-)

 

Costs of developing new PACs products/services can be high, high upfront capital expenditure necessary (-)

 

Often slow R&D lead time to market, years rather than months (-)

 

Complex and varied distribution channels necessary, with appropriate mix of product/service support (-)

 

Upfront brand identity and pre-built trust highly important (-)

 

High churn costs (-)

 

Market power of existing providers and vested interests (-)

SUMMARY: Significant barriers to entry exist but fragmented nature of market and threat environment also creates broad spectrum of niche opportunites for PACS innovators

 

 7. International/Economic Impacts (Impact: MEDIUM)

(i.e. how do wider economic impacts influence/prevent successful outcomes of PACs innovators) 

ENABLERs

Increasing incentives for buyers to purchase due to increased global legislation demands (+)

 

Increased regionalisation of security in line with NSA/Snowden scandals, increased desire for EU marketplace to serve themselves (+)

 

Increased investment in PACs technology by investment community, including within Europe (+)

 

M&A roll-up activity occuring in PACs market, increases exit strategy options for new innovators (+)

 

 

INHIBITORS

Complex economic barriers still exist to an optimally-functioning PACs marketplace (-)

 

Justifying economic benefits of purchasing new PACs products can be difficult (-)

 

Increased accountability for economic externalities (i.e. vulnerabilities in products) will likely be assigned to PACs and ICT providers in future, leading to increased certification costs (-)

 

Geographic advantages around PACs innovation exist, those outside those key innovating regions are at an environmental disadvantage (-)

 

Can be difficult to translate advanced product features into economic revenues, particularly in organisations where "good enough" base level security already exists (-)

 

Sluggish macro-economic growth in mainland Europe in recent years (-)

 

Non-European dominitation of the market, European players not recognised for expertise and experience in Europe (-)

 

Continuing consolidation of large non-European dominant market players and larger ICT/Internet buyers of both European and non-European technology companies (eg Google, Intel etc ) (-)

SUMMARY: Economic concerns have significant influence on functioning of PACs marketplace, continued development of mandated and voluntary incentives necessary to support PACs innovation.Regional and national security concerns are also an increasing element of PACs marketplaceconsiderations.

 

8. Threat of Substitutes (Impact: MEDIUM)

(i.e. are alternative PACs solutions easy to develop versus existing solutions)

 

ENABLERs

Difficult to replace certain large-scale security deployments, hence customer lock-in often exists (+)

Integrating PACs with domain specific solutions, Security and Privacy by design, to prevent add-on solutions

(+)

Software as a Service model, allowing faster transition from sunk investment costs to swift change in variable service models
(+)

INHIBITORS

Small and mid-market buyers will often opt for low cost PACs options to meet minimum compliance thresholds, causing pricing race to bottom (-)

 

Broad range of substitute PACs solution options exist across many sub-segments (-)

 

Threat of product subsumption/cannibalisation within many PACs product category groups, and also across categories due to feature roll-up(-)

 

Highly dynamic threat environment can make proposed new solutions quickly obsolete (-)

 

Threat in some product areas from free open-source public domain solutions (-)

 

Fast-moving marketplace with highly dynamic product roadmaps, increases product substitution threat (-)

SUMMARY: Solutions need to be agile and dynamic to keep up with rate of technology change, implies strong investment in R&D and long-term product roadmap necessary from innovating firms.

 

9. Social Impacts (Impact: MEDIUM)

(i.e. how are emerging social trends influencing outcomes of PACs innovators)

 

ENABLERs

Socio-technological trends creating broad spectrum of new innovation opportunities (+)

 

Increasing awareness among general public of PACs issues, potential for new entrants to develop new markets addressing concerns (+)

 

Threat actors raising awareness of security and privacy issues and creating demand (+)

 

Privacy-related research receiving increased prominence within PACs domain as a whole (+)

 

Increasing trust being placed with ICT vendors to manage PACs issues, PACs increasingly treated as black box (+)

 

Movement from compliance-driven purchasing towards genuine desire to mitigate threats will help PACs innovators (+)

 

INHIBITORS

Reluctance still exists among consumers to spend money on many new emerging PACs product concepts targeted towards public (-)

 

Continued discrepancy between new social internet generation and generation of traditional reluctance to change

(-)

 

Dynamics of online social networks also in the domain of PACs (Github, Devops etc) resulting in reliance in open source solutions over product solutions

(-)

 

Increasing social barriers to entry for new entrants, limiting access to experts (-)

SUMMARY: Raised public attention towards PACs should support market growth, however appropriate solutions, economic models and awareness campaigns need to be developed to improve adoption, particularly for consumer privacy solutions.

 

Analysis of PESTLE Trends in the PACs Market
This section elaborates on some of the key PACs competitive factors in more detail via a PESTLE approach. This analysis (sometimes referred to as PESTEL) categorises market environments, dividing key trend aspects into the following categories:
•  Political: what is the political situation surrounding the market environment and how might it have an effect?
•  Economic: what are the prevalent economic factors (macro or micro) influencing the domain?
Social: what societal or cultural trends exist and impact attitudes, behavior and decision making of target customers in the marketplace?
Technological: what technological innovations exist within PACs and the wider ICT domain that can affect market structure, potentially in a highly disruptive manner? Trends such as Internet of Things, mobile computing, BYOD, and cloud computing mean that more people, including employees, partners, clients, outsourcing providers and other contractors are accessing the same applications and data from more places, on more devices and in more ways, than ever before.
•  Legal: what key legislation and regulatory changes exist that will directly or indirectly influence the industry, particularly purchasing and technology adoption behavior for PACs?
•  Environmental: what environmental trends exist (either in the traditional “eco” sense, or in a broader definition of environment) that may influence PACs market function and purchase behaviour?

 

Subsections for each of these PESTLE areas are at the links below:

 

Reference:

[FLE07] Fleisher, C. S., & Bensoussan, B. E. (2007). Business and competitive analysis: effective application of new and classic methods. FT Press. 

Return to Trends and Challenges

 

 

 

 

 

 

 

 

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