The Impact of the Top 3 Strategic Imperatives on the Data Protection Industry

Geopolitical Chaos

WHY

• Cyber crimes and threats are escalating annually.
• The average business was negatively impacted by a successful security attack 26 times from February 2022 to February 2023.
• The average ransomware attack costs USD 101.1 million for firms with revenues greater than USD 2 billion.
• 41% of businesses struggle with the security and compliance of data and applications.

FROST PERSPECTIVE

• With data being a strong business differentiator, companies must take strong measures to protect against threats.
• Government regulators are holding businesses more accountable for data protection and privacy, despite escalating threats. Penalties for breaches can be steep.
• In this environment, businesses need trusted partners who provide easy-to-implement data services that proactively counteract threats and anticipate future issues.

Industry Convergence

WHY

• The data protection industry has experienced convergence in recent years as threats escalate and businesses find data use more important.
• Providers that previously only handled backup and recovery now provide at least some security capabilities, especially around ransomware detection and mitigation.
• Providers in adjacent sectors—like storage and security—are adding capabilities to their portfolios to handle backup, recovery, and data management.

FROST PERSPECTIVE

• As convergence continues, data protection providers must provide a more complete portfolio of services, spanning backup and recovery, security, and storage.
• Services that can detect and mitigate ransomware—one of the most common threats—will lead the industry.
• Additionally, companies that can provide cyber detection technologies that improve response times will be the most attractive.

Disruptive Technologies

WHY

• Use of data-intensive technologies like artificial intelligence (AI) is increasing.
• Machine learning (ML) requires massive amounts of data to train models.
• Proprietary data inputs and data that is generated must be protected with care, particularly in regulated industries.
• At the same time, AI technologies are being
  used to enhance and automate data
  protection.

FROST PERSPECTIVE

• As both threats and data handling regulations increase, it is critical for businesses to protect their data with consistency and in ways that detect and mitigate current and emerging threats.
• Use of AI and ML to learn new threat trends or suspicious behavior and to help apply protection measures consistently helps businesses better safeguard data and ensure compliance with applicable data privacy and handling regulations.

Scope of Analysis

• Data protection solutions use software to replicate workloads, data, and sometimes even user settings to a target recovery environment. In the event of a server failure or breach of primary production data, the backed-up data and applications are spun up in a recovery environment of the customer’s choosing and remain operational until the primary site becomes operational again.
• Though the industry has been converging through mergers and acquisitions, it is also very segmented because providers from adjacent industries—like data security or storage—are adding backup and recovery functionality to their portfolios. As such, the market now includes not only pure-play data protection vendors but also storage providers, security companies, and a broad ecosystem of managed service providers.
• Providers that previously only handled backup and recovery often now also offer at least some security capabilities, especially around ransomware detection and mitigation. Many offer heightened storage file security through technologies like blockchain, immutable, or air-gapped storage.
• As a critical capability, data protection services can provide growth opportunities in additional industries.
• Revenues were calculated at the platform level based on the number of service deployments coupled with the amount of data under management.
• This study is global in nature because geography does not impact service delivery, assuming a network connection is available to the customer. However, many vendors offering platforms in this space are based in the United States or Europe.

Segmentation

Data Protection Market

Software/Platform Providers

These are providers that created proprietary software or platforms so, at a minimum, facilitate application and data backup and recovery.

These vendors may augment their capabilities through acquisitions or partnerships, but the core service is their own intellectual property.

Many providers have expanded to include adjacent services.

Storage Providers

These are providers whose core service is storage infrastructure.

These providers have expanded their services by enabling backup and recovery of applications and data.

They may acquire or partner with backup and recovery service providers, but they market these services as part of their own portfolio.

Security Providers

These providers’ core services are in the security space, such as malware/ransomware software.

These vendors are increasingly partnering or acquiring capabilities around data replication and recovery to enhance their services.

Cloud Hyperscalers

Providers whose core service is cloud infrastructure.

Many players in this space offer a data backup and recovery offering, but it may be a feature of the infrastructure platform and often does not handle data outside of its own infrastructure.

Some hyperscalers rely on their marketplace providers to fill this need.

Managed Service Providers

Managed service providers (MSPs) remotely manage customers’ IT and cloud infrastructure and systems.

These providers frequently have backup, recovery, and security services, but rarely offer their own platforms; they typically partner with software or platform providers to offer data protection services.

Growth Drivers

Growth Restraints

Restraints

Modern cloud-based data protection solutions rely on network connectivity and appropriate bandwidth to transfer data. Businesses transferring large amounts of data may not have the bandwidth required to use a modern data protection solution.

As a slowing economy and decreased macroeconomic growth continue, organizations face budget constraints and longer cycles to procure solutions. As such, they may choose to keep adequate protection solutions that require no additional expenditures over shifting to better and more modern solutions.

Many network providers still charge data egress fees. The cost of transferring vast amounts of data for protection purposes may be prohibitive.

In recent years, IT has experienced a shortage of skilled experts in various functions. Limits on in-house skills and expertise to shift to a new type of solution may restrain adoption.

IT may also desire to fully leverage its existing investments for backup and recovery technologies or services that still function adequately but may not have the latest features.