The Dangerous Business of Cybersecurity

Consumers and investors need to keep a close eye on cybersecurity

We live in a connected world, able to talk and share with people across the globe in an instant. Computers, cars, phones and fridges all interact with each other to automate our daily lives.

hacked_185x185But beneath the grid of cyberconnectivity lurks the danger of cyberattacks. When all our devices are connected, every piece of technology is a potential door to your personal information.

The recent cybersecurity breach of Anthem Inc (NYSE:ANTM) is a chilling reminder. Names, addresses — even social security numbers — were compromised for tens of millions of customers. The full extent of the damage is still being calculated, and there’s no way of knowing who might be next.

Here’s what you need to know about the dangerous business of cybersecurity.

Cybersecurity Spending Is Growing Rapidly

Cybersecurity spending is estimated to have hit $71 billion last year — an 8% increase over 2013’s numbers. And spending is expected to increase at a compound annual growth rate of 10% through 2020.

Given how much personal — particularly financial — information is being stored on servers these days, those numbers should come as no surprise. Companies like VMware, Inc. (NYSE:VMW), which spent $1.54 billion on AirWatch just two years ago, recognize how quickly the industry is growing and know that some serious spending is needed to keep up.

But what happens when companies can’t keep up?

Big Data Is Becoming a Big Problem

Big Data has been a boon for big retailers, giving them more customer information to analyze and new ways to find and target customers. However, that game changes when those companies are no longer able to secure that data — as Anthem well knows.

As The Washington Post’s Andrea Peterson explains:

“While there may be some hidden value in the vast amounts of data being stored by companies, such troves can also become massive liabilities — either by being compromised by outside sources or being misused by the company’s own employees.”

Companies today walk a narrow tightrope between collecting enough data to gain an edge on their competitors and keeping all of that information safe from hackers. Being a keeper of secrets can be a lucrative business, but if those secrets get out, well … people aren’t going to be happy.

Perhaps worst of all, there is no clear or simple solution for securing cyberspace. President Barack Obama recently proposed a national data breach notification standard to help ensure that people are quickly notified whenever their private information may have been compromised. Sounds like a good thing, right?

Sure … unless the national standards are actually weaker and less effective than some state-enforced standards currently in effect. In that case, the new standards could actually make things easier for cybercriminals by providing them with new chinks in previously sturdy armor.

Stay Plugged Into Cybersecurity Industry Trends

Cybersecurity is a high-growth, high-stakes industry, and it’s well worth watching as both a consumer and an investor.

To help keep your devices protected, check out our guide to securing your cyberspace. We’ve also put together a look back at some of the biggest security breaches of the past few years, to see what kind of effect cybersecurity breaches have on companies and their stocks.

Aggressive investors can look into some of the best cybersecurity stocks to buy to profit from the industry’s steady growth. And don’t miss our cybersecurity outlook exploring how the cybersecurity industry might evolve over the next few years.

There’s no telling where the next attack might come from, and there might not be a clear answer as to how to improve the industry broadly, but one thing is certain.

The cybersecurity industry is going to command a lot of attention in the next few years.

Adam Benjamin is an Assistant Editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

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