A&M'S 2025 Cybersecurity Market Study

Cybersecurity teams are continuously challenged by emerging threats, including a significant rise in cyberattacks, ransomware, and novel threats leveraging artificial intelligence (AI). The cybersecurity landscape continues to evolve to counter these risks while customers navigate changing needs and seek to balance trade-offs between budgets and security posture.

Based on responses from more than 360 technology and cybersecurity leaders, Alvarez & Marsal's annual Cybersecurity Market Study explores how cybersecurity companies are facing an increasingly competitive marketplace with a key focus on trends involving outsourcing, cloud security, vendor consolidation, and AI. These factors suggest cybersecurity technology providers will need to optimize their product portfolios and realign research and development investments for more targeted use cases.

A&M surveyed 360+ technology and cybersecurity leaders on their cybersecurity budgeting practices, technology solutions, and cyber related concerns.

1. Acceleration of Cybersecurity Outsourcing

The trend of cybersecurity outsourcing continues with increasing adoption and related expenditures. Companies of all sizes are relying on third-party cybersecurity providers to deliver specialized expertise, scale security frameworks, and provide cost-effective solutions. Compared to last year's 61%, 69% of this year's respondents replied that they were outsourcing operations, with 66% reporting a year-over-year increase in their outsourcing budget. Cloud security has been the most outsourced service according to our survey, reflecting the critical need to protect cloud environments as businesses migrate to the cloud.

Managed Security Service Providers (MSSPs) remain the primary outsourcing provider, with more than three quarters of respondents using MSSPs or similar providers. While nearly 90% of companies in the Asia-Pacific (APAC) region utilize MSSPs—the greatest amount of any region—only about 63% of European companies do so. This is partly due to the rapid development of regulatory frameworks, including data sovereignty laws, which are driving organizations to adopt MSSPs that provide expertise and ensure compliance with evolving laws. In contrast, European companies prefer in-house solutions due to concerns over data privacy and control, influenced by stringent regulations like GDPR.

MSSPs and other providers are not just vendors. They can be strategic partners who fortify and enhance a firm's overarching security strategy, providing specialized skills and tools, scalable solutions, and 24/7 threat monitoring and response. Outsourcing reduces the burden on internal teams while allowing companies to quickly scale and fortify their cybersecurity frameworks, making it attractive for businesses of all sizes. As businesses continue to adopt cloud-based environments, protecting them against threats becomes a top priority. While MSSPs have traditionally focused on security operations center (SOC) and security information and event management (SIEM) offerings, cloud security has now become a top service provided by MSSPs according to our survey, driven by growing demand to fortify cloud environments as cloud-based platforms become the standard.

This growing emphasis on cloud and network security signals a broader shift toward proactive, cloud-driven strategies within both outsourced MSSPs and internal cybersecurity functions. Additionally, the consistent increase in outsourcing budgets suggests that reliance on third-party providers will continue to grow. There are considerations that cyber technology providers and MSSP businesses can take to enhance their response to increased outsourcing:

2. Increased Focus on Cloud Security

Cybersecurity remains a high priority for virtually all companies, with nearly all firms reporting that they increased or maintained related expenditures. As cloud adoption grows and bad actors target the cloud environment, cloud security has become a strategic priority and is one of the primary drivers of incremental cybersecurity spend. Companies are shifting toward proactive, automated, and data-driven cloud security measures, with investments in cloud security becoming critical for maintaining business continuity in the face of growing cyber threats.

Respondents indicated that cloud security budgets were increasing or remaining the same in 99% of cases, with over 53% reporting a year-over-year increase in cloud security spending, reflecting its current and growing importance. This underscores the increasing need to safeguard critical data, ensure regulatory compliance, and maintain business continuity.

In fact, 70% of respondents identified cloud security as a key concern when it comes to MSSP offerings, budgetary increases, and emerging threats. Only data loss prevention was a higher reported concern at 71%. Cloud security is the most demanded service from MSSPs, being utilized in 93% of respondents, which underscores its critical role in modern cybersecurity strategies and MSSP product mix.

Threat intelligence and hunting, security information and event management (SIEM), and security orchestration, automation, and response (SOAR) were also areas where the majority of respondents indicated increasing spend. This reflects a strategic shift toward proactive, data-driven, and automated security measures.

Bad actors know valuable data exist within the cloud ecosystem, and leadership must continue to stay ahead of these evolving threats by investing in proper safeguards. As cloud adoption grows, cloud security will remain a primary driver of cybersecurity and related research and development (R&D) spend. Ease of integration is a key purchasing criterion, reflecting the need for seamless deployment of cloud security solutions. There are other considerations technology solution providers need to evaluate as well:

3. Continued Vendor Consolidation Trends

Cybersecurity expenditures and budgets are set to increase in response to the ever-changing threat landscape. Overall sentiment, though, suggests future spend may taper off¹ as firms move toward fewer trusted partners to manage cybersecurity. 19% of respondents are planning major consolidation efforts, signaling a material shift toward fewer, more trusted vendors as a strategic priority.

Last year, 86% of respondents reported they were overspending or at the right level for cybersecurity, which increased to 88% this year. This suggests a persistent and increasing trend, with overall sentiment remaining largely consistent across all revenue buckets and company sizes.

In terms of absolute spend, 53% of all respondents indicated their cybersecurity budget has increased from the prior year—suggesting overspending or comfort in current spend sentiment has not translated to a material reduction in total expenditures. This is further supported by the fact that only 3% of those surveyed reported a decrease in their overall cybersecurity budgets compared to the prior year.

However, there has been a shift in focus from the initial approach to cybersecurity, where companies were allocating significant capital to cybersecurity. Now, many firms may feel they are well protected and have moved to focus on cost reduction and optimization to meet more defined needs with a smaller group of trusted partners. As the ever-evolving cyber risk landscape necessitates additional investment in cybersecurity measures, 57% of firms plan to consolidate vendors over the next two years, with one in five respondents planning significant consolidation.

The technology, media, and telecommunications (TMT) industries are leading consolidation efforts, with 66% of technology and 84% of telecommunications and media firms planning vendor consolidation over the next two years—the highest of all industries surveyed. A key driver of this trend is the critical importance of data in these sectors. Consolidating vendors enables TMT companies to streamline and synchronize data across platforms, reducing operational complexity while enhancing control and oversight.

Indications are that while cybersecurity spend trends upwards on paper, the market will become increasingly competitive as vendors compete to be included in an increasingly smaller group of trusted security partners.

According to this year's survey, price was the second most important purchasing criterion, up five times in importance from last year. This rise in emphasis reflects a heightened cost awareness among decision makers. This shift is, in part, driven by a proliferation of vendors offering similar solutions, which has intensified competition for market share and empowered buyers to prioritize both affordability and value.

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Footnote

1. This is as a percentage of IT budgets, which may be increasing based on percentage of revenue.