The Federal Cybersecurity Market Is Growing Amidst Telework Surge

Published: November 05, 2020

Federal Market AnalysisCritical Infrastructure ProtectionCybersecurityForecasts and SpendingPolicy and Legislation

Diverse market factors are driving contract opportunities to support federal agencies in meeting their cybersecurity priorities.

The federal information security landscape continues to present unprecedented challenges. While in the midst of broad technological transformation and modernization efforts, agencies are facing the disruptive impacts of the COVID-19 pandemic. As a consequence, agencies are working to balance and adapt to pressing needs while keeping longer-term cybersecurity initiatives on track.

Deltek’s report Federal Information Security Market, 2020-2022 examines the trends and drivers shaping the federal information security marketplace and provides a forecast for the next five years.

Taking a comprehensive perspective on the federal cybersecurity market, we see six major drivers that continue to create demand for government-wide and agency budget investments:

  • Threat Environment – The complex and diverse threats to networks, devices, data and infrastructure.
  • Technology Policy – Security compliance, standards, and management policies addressing government-wide priorities.
  • Acquisition Policy – Information security is a growing requirement within acquisition policy.
  • Organizational Strategies – The strategies, organizations, programs, and legislative provisions to increase cybersecurity.
  • Technology Solutions – Technical remedies to improve security and emerging technologies that require security for greater adoption.
  • Workforce – Efforts to establish the leadership and skilled workforce to meet the challenge.

Driven by federal agencies’ efforts and plans to improve their cybersecurity posture at every level, Deltek anticipates the demand for vendor-furnished information security products and services by the U.S. federal government will increase from $13.2 billion in FY 2020 to $14.4 billion in FY 2022 at a Compound Annual Growth Rate (CAGR) of 4.7%. (See chart below.)

Due to the unique circumstances of the COVID-19 pandemic and its evolving impact on the federal IT security market, we took a different approach to this year’s information security forecast by narrowing the focus to the near-term years, forecasting for FY 2020–2022. That said, if the trends that are driving this level of growth were to be sustained and extended out to 2025 then the CAGR would naturally be higher, but there are too many variables and uncertainties to assert this with precision. Either way, growth continues to be healthy in this market segment.

Key Findings

  • Rapid Responses. COVID-19 forced agencies to quickly shift to telework, driving rapid modernization efforts to support remote access, including network capacity expansions, Virtual Private Network (VPN) deployments and end-user protections. Some agencies also accelerated their use of cloud computing, contributing to security concerns. Some stimulus funds are available through FY 2021 for IT modernization.
  • Skills Demand. Federal organizations continue to streamline and improve cybersecurity workforce hiring and training efforts, including reskilling, cross-agency assignments and other efforts. Competition for talent continues to hamper filling open positions, sustaining dependence on contractor support.
  • Evolving Requirements. DOD’s developing Cybersecurity Maturity Model Certification (CMMC) program will continue to evolve over the next 6-12 months and beyond, with ongoing opportunities for industry to provide input and help shape program design. The new interim DFAR rule adding CMMC requirements will begin to appear RFPs in FY 2021.
  • Supply Chain Scrutiny. Supply Chain Risk Management is a high priority for all agencies. Risk mitigation and reporting burdens will continue to flow down to contractors.
  • Technology Enablers. Several agencies are investigating the use of AI to enhance cybersecurity operations. DOD is assessing AI for automating information security and VA is looking for a Managed Service Provider (MSP) to implement emerging technology, such as AI, to protect VA networks.

Ever-evolving threats, persistent attacks, rapid technological change, growing interconnectivity and an increasing dependence on technology and data make securing federal information and infrastructure a national security imperative. The rapid shift to remote work and opportunistic attacks during the pandemic add to the challenge.

White House policy directives, legislative mandates, and evolving technology offerings are converging to drive agency cybersecurity strategies and procurements. Complex federal IT environments, where legacy IT operates alongside modern and emerging technologies, make effective threat mitigation difficult to achieve.

The increased use of mobile solutions and cloud-based technologies, coupled with the desire to employ emerging technologies such as machine learning and artificial intelligence, demands that agencies proactively address current security needs while preparing for future requirements.

These wide-ranging influences continue to compel agencies to sustain their investment in vital capabilities while propelling the evolution of the federal information security environment, driving competition and providing significant contracting opportunities over the next several years.

Get more of our perspective in the full report Federal Information Security Market, 2020-2022.