Last week, Forrester published its first report on what cybersecurity vendors’ quarterly earnings mean for technology executives. This research involved analysis of earnings calls from 10 publicly listed cybersecurity service providers. This information showcases existing trends and strategies and hopefully saves you some time by highlighting the most important interpretations.
Even though most cybersecurity vendors’ revenue exceeded expectations, and they expect steady growth for 2023, navigating the economic headwinds dominated these calls. Here are some of the key points that we heard and inferred:
- Sharpen focus on customer retention and growth via cross-selling. Limited visibility into customer budget dynamics makes cybersecurity firms cautious about their 2023 forecasts. In response, vendors are doubling down on existing customers and growth via cross-selling. Increasing share of wallet is a top priority, and hiring extra expertise in this area must help secure the deal. Tech execs should not succumb to pressure from more aggressive sales strategies but negotiate discounts and payment terms in line with this research instead.
- Beware of M&As bearing gifts. Even though most startup investors and VCs decided to hit the brakes, M&A activity within the cybersecurity industry remains strong. Earnings calls prove that cybersecurity vendors don’t shy away from strategic acquisitions and investments to pursue innovation. In the past, we’ve seen acquisitions change a company’s direction (sometimes straight into the ground, as we’ve seen with Symantec). Tech executives should keep a watchful eye on M&A activity.
It is important to mention that more and more cybersecurity companies are reverting to private ownership. For instance, SailPoint got acquired by Thoma Bravo, and Reuters mentions Rapid7’s consideration to be privately owned. As a result, technology executives need to pay attention to the intentions of private equity firms in acquiring cybersecurity firms in order to determine whether the technology will continue to see investment in the continued development of the product. It is also vital to see stability in the leadership team for a product following an acquisition so that what made the products unique and valuable in the first place is maintained.
Check out the full report, What Cybersecurity Vendors’ Q1 2023 Earnings Mean For Technology Executives, in which we share more analysis of what we’re seeing in the cybersecurity market and what it all means for technology executives.