Phishing for Moats
Customers are hooked on cybersecurity vendors' lures.
Cybersecurity is at the forefront of business and government decision-makers’ minds. Why? Because several hundred data records were stolen in the time it took to read these two lines. In addition, legislation has led to significantly higher breach costs, while changes to the networking environment make cybersecurity even more complex. These trends should allow the cybersecurity market to command an abundant level of spending as customers look to secure all the data and traffic flowing between on-premises assets, a multitude of cloud-based resources, and always-connected users proliferating the quantity of data being generated.
The cybersecurity vendors we cover have formed economic moats by becoming part of the lifeblood of customers, and we believe the potential disruption associated with changing from these vendors is not worth the risk. Due to the various parts of cybersecurity required for proper security, no company provides all the solutions necessary, and there are multiple ways to develop a moat. However, most competitors fail to develop a moat, and various security subsegments are less moaty than others.
Mark Cash does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.