Cybersecurity firms are re-evaluating their business strategies as economy takes a hit

    Sam Sabin

    Image of the Splunk logo on an office building

    Splunk’s Silicon Valley campus in April 2017. Photo: Smith Collection/Gado/Getty Images

    Heading into 2023, cybersecurity companies are starting to see the first signs of the economic downturn hitting their businesses.

    The big picture: More companies are starting to see their customers prioritize services like incident response over more costly, proactive IT investments like transitions to the cloud.

    Why it matters: Customers’ changing habits are prompting companies to rethink their business strategies, which often assumed that cyber would be a fully recession-proof industry.

    Details: Splunk CEO Gary Steele tells Axios that customers started deferring decisions about major cloud purchases back in July. That trend continued through the end of October.

    • Microsoft is reportedly seeing fewer customers buying a once-popular bundle of software and cybersecurity tools, with more opting to purchase only the essentials, The Information reported.
    • Chester Wisniewski, a principal research analyst at Sophos, tells Axios that demand for firewalls, antivirus programs and other products has “just collapsed this year” because of customers deferring IT modernization projects. Meanwhile, “on the services side, the growth has been through the roof,” he says.

    Between the lines: It’s still unclear when customers will return to their old buying habits, leaving companies to consider preemptive cost-cutting measures in case demand takes a more permanent nosedive.

    • Steele says he’s been eyeing cost-cutting measures surrounding Splunk’s office real estate, reliance on contractors and new employee hiring as some product demand slows down.
    • “We need to control the things that we can control,” Steele says.

    Yes, but: Cybersecurity is still seen as a top tech budget priority, according to recent polling from IBM and Morning Consult.

    • 36% of global business leaders said in a survey conducted from Nov. 15–26 that they planned to invest in cyber solutions next year — the second-most popular investment after 5G wireless upgrades.

    The bottom line: Long-term customer spending habits will dictate how much cyber companies have to change in 2023 as they face a changing economy.

    Sign up for Axios’ cybersecurity newsletter Codebook here.

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