Enterprises Getting Soft on Security

Security losses are down, and so are security spending plans, according to new reports. But enterprises who let their guard down now could be in for a punishing blow, experts and studies say.

The average loss from security violations is down 18 percent from the year before, according to data from the forthcoming annual joint survey by the Computer Security Institute and the FBI. The report, which will be issued July 12, indicates that the average incident now costs about $167,713 -- down from $203,606 in 2005.

"The evidence we have gathered from 500 or so security professionals each year for the past 11 years leads me to believe that their losses to cybercrime each year are emphatically not spiraling out of control," says Robert Richardson, a co-author of the CSI/FBI survey. "This is not a trivial observation to make -- we're constantly barraged with unsubstantiated claims that security professionals as a group have somehow thrown the barn doors open and are powerless to avoid losing the horses."

Meanwhile, in a separate survey completed last week, Merrill Lynch reports that CISOs are planning to increase security spending by about 2.9 percent over the next 12-18 months. That's down significantly from the 11.4 percent Merrill Lynch reported in March.

"These results underscore concerns of a broader market softness, particularly following broad weakness in the March quarter," the Merrill Lynch study says.

The reports have touched off an industry debate over the current level of risk among enterprises and the state of the security market. After hearing the CSI/FBI numbers, Gartner research vice president Rich Mogull sharply criticized the report, stating that the CSI/FBI study "lacks a consistent loss model" that properly reflects changes in the online security space.

But CSI reports that an independent study by another section of the FBI confirms its findings. In fact, a survey of large and small businesses in four major metropolitan areas conducted by FBI special agent Bruce Verduyn found that the average loss per respondent was actually even smaller than the CSI/FBI study indicated: about $24,000 per incident.

The disparity might be explained by the fact that Verduyn studied smaller companies than the CSI, although it is interesting that the non-CSI members reported smaller losses than the CSI members surveyed in the CSI/FBI study, Richardson observes. "The security-unsavvy would appear to be losing a lot less money," he says.

Similarly, a report issued last week by Deloitte Touche Tohmatsu offers a different view from the Merrill Lynch study. In a survey of 150 security executives, DTT reported that more than half had experienced breaches in the last 12 months, and most are worried that they aren't doing enough to prevent it from happening again.

"Less than one quarter of the [respondents] believe the security tools they have deployed are being used effectively," the DTT report says. "Only 20 percent of companies surveyed are confident that their patents and other intellectual property is safe." Respondents are primarily concerned about internal threats, rather than external, the survey says.

The strong responses in the DTT study suggest that Merrill Lynch's reading of a dropoff in IT security spending plans since last quarter might be an anomaly. Merrill Lynch concedes that because the new study is only its second on the topic, its findings might not indicate a major shift in attitude. "It is unclear how much of the decline is due to variation in the sample pool and how much may be due to a more cautious seasonal spending stance," the research firm said.

But figures from the CSI/FBI study support the contention that some companies are cutting back on security spending. About 47 percent of the enterprises surveyed are now spending less than 3 percent of their IT budgets on security, up from 35 percent in 2005. (See CSI/FBI: Small Firms Pay Big For Security.)

No matter what their position on the market's direction, however, virtually all of the researchers warned IT shops against letting their security guard down. "A dropoff in the average loss in no way mitigates the need for strong technologies and policies," Richardson says.

— Tim Wilson, Site Editor, Dark Reading

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