Sector Cyber Security
The Netherlands is renowned for its advanced technology for smart grids, infrastructure security, attack simulation software, and defence and security system design. We aim to use the latest digital technologies to fight crime. For example, Terre des Hommes’ chat robot, Sweetie, has caught thousands of online perpetrators looking to sexually abuse children. The Netherlands is also home to the largest security cluster in Europe (The Hague Security Delta), the Global Forum for Cyber Expertise and the NATO Communications and Information Agency.
Cybersecurity Southern Germany
Many South German companies, especially SMEs, are only at the beginning of their digital transformation process. This will lead to an increasing demand for cybersecurity solutions in the coming years. Smart and autonomous driving concepts and the secure management of online data are driving the demand for cybersecurity solutions in southern Germany.
The German cybersecurity market is highly competitive and German customers often prefer local parties. Nevertheless, people in Germany are looking internationally for specific knowledge and expertise. The Dutch cybersecurity ecosystem has the expertise to deliver this knowledge and skill, on the other hand the Dutch field also needs knowledge and skill from Germany.
Investments in Southern Germany
From 2018 to 2022 Bavaria is investing a total of three billion euros in the digital future of the federal state. Within the master plan, BAYERN DIGITAL II, cybersecurity is one of the most important pillars within digitization. With, among other things, the establishment of the "Landesamt für Sicherheit in der Informationstechnik" in Nürnberg, the research institute CODE of the Universität der Bundeswehr and the expansion of the Bavarian cybersecurity centers "Cyber-Allianz-Zentrum" and the "Zentralstelle Cybercrime", Bavaria aims to become the stronghold of cybersecurity. Baden-Württemberg is also investing heavily: from 2016 - 2020 a total of one billion euros will be invested in digitization. With this Baden-Württemberg aims to become a top region in terms of digitization. In 2017, the federal state developed the digitization strategy "digital@bw" with a large number of concrete innovative projects and measures, also in the field of cybersecurity. Examples include the ZAC (Zentrale Ansprechstellen Cybercrime) and the Cyberwehr.
The Dutch cybersecurity sector
The Netherlands is one of the most digitized countries in the world. We therefore have excellent conditions to be an international leader and are able to roll out and use new technologies safely and freely. In economic terms, it is estimated that at least 30% of the growth in the Netherlands (and other developed countries) is due to (the use of) ICT.
Due to the high degree of digitization and the strong internet connection, the Netherlands has built a very strong cybersecurity sector. At an international level too, the Netherlands is now known as a known and recognized cooperation partner and cybersecurity authority.
The field consists of a relatively small group of 'real' cybersecurity companies. Often these are SMEs, strong in specialist solutions. It is unclear how big the market of cybersecurity service providers exactly is but it is estimated that there are around 250 companies in the Netherlands offering services within the field of cybersecurity. This concerns both companies that focus 100% on cybersecurity and companies that supply cybersecurity products and services as part of a broader portfolio. This excludes the (large) group of independent entrepreneurs. The Dutch cybersecurity market is a true SME and growth sector (source: CyberVeilig NL).
Public-private partnerships in the Netherlands create awareness and promote the development of new technologies, for example Security Delta (HSD), InnovationQuarter, the Cyber Resilience Center in Eindhoven and the Smart Industry Fieldlab 'The Garden' in Hengelo.
One of the priorities of the Dutch Cybersecurity Agenda is that the Netherlands wants to be a leader in the field of cybersecurity knowledge development. Dutch research in the field of cybersecurity is of a high international standard. Experiments and innovations are carried out in various labs throughout the country, for example in the field of attacks, defence and design.
The German cybersecurity sector
The cybersecurity market in Germany is also in the pandemic year 2020 breaking sales records. In Germany, 5.2 billion euros was spent on hardware, software and services in the cybersecurity sector - a record high and 5.6 percent more than in the previous record year of 2019. Further growth of 9.3 percent to 5.7 billion euros is forecasted for 2021.
With 55% the service sector has by far the largest share of the total market. The total spending in 2020 was 2.8 billion euros, an increase of 6.8 percent. 1.6 billion euros was spent on cybersecurity software, 3.8 percent more than in the previous year. 750 million euros was spent on equipment and hardware (up 4.9 percent) (Source: Bitkom).
Cost of cyber attacks in Germany
Criminal attacks on companies cause record losses in Germany. Theft, espionage and sabotage cause a total damage of 223 billion euros to the German economy every year. This means that cyber attacks have once again caused record losses: the damage amount is more than twice as high as in 2018/2019, when it was still 103 billion euros per year. Nine out of ten companies (88 percent) were affected by attacks in 2020/2021. In 2018/2019, 75 percent were victims.
The main causes of this huge increase are extortion incidents, combined with the failure of information and production systems and the disruption of operational processes. They are usually the direct result of ransomware attacks. The damage more than quadrupled (+358 percent) in 2018/2019 compared to previous years. Currently, one in ten companies (9 percent) see their existence threatened by cyber attacks.
In response to the increased threat, companies have increased their investment in IT security: 24 percent have increased it significantly, 39 percent to some degree. For 33 percent of companies, spending has remained unchanged. However, compared to the overall IT budget, spending on increased security remains low. On average, companies spend 7 percent of their IT budget on cybersecurity (Source: Bitkom).
Recent Research
Research by Technopolis (2019)
In the quick scan 'Innovation and trade opportunities for the Dutch ICT sector in Germany' (2019), conducted by Technopolis, a quick scan was made of the Dutch and German strengths, their weaknesses and (export) opportunities in the field of cybersecurity. This quick scan shows that the Netherlands and Germany both have very strong ambitions in the field of cybersecurity and that there is interest from both sides to cooperate with each other. Dutch SMEs already offer specialized products and services in Germany, for example in the field of GDPR and 'dark web' analysis. Products or services that protect companies from cyber attacks are still needed on the German market. Currently, there are not many ‘all-in-one’ solutions that are also affordable. In addition, southern German SMEs are still lagging behind in securing their (production) systems.
Research conducted by SEC Consult (2020)
In order to gain a clear insight into the opportunities for the Dutch cyber security sector in southern Germany (Bavaria and Baden-Württemberg), the Consulate General in Munich together with the Netherlands Enterprise Agency commissioned SEC Consult to carry out a market study. This study identifies the opportunities of Dutch cyber security parties in southern Germany and provides insight into opportunities for cooperation, market prospects, limitations and challenges.
Relevant industries and developments
Bavaria and Baden-Württemberg belong to the leading economic and innovative regions in Germany. These regions have a number of strong industries in which a growing demand for cyber security solutions is expected in the coming years, especially within industrial production, the automotive, mechanical, metal and electrical industry and within automation and robotics. In addition, there will also be an increasing demand within the critical infrastructure, in particular within the health care sector, the pharmaceutical industry and the telecommunications branch (especially in light of the recent developments regarding the Covid-19 pandemic).
These industries are often characterized by a few big players (OEMs) and a large surrounding group of SME suppliers that deliver world class products (Hidden Champions). Production lines become more digitized (through Artificial Intelligence or by the use of Digital Twins) and the communication between supplier and manufacturer becomes more and more based on real time information. This in order to guarantee transparency regarding, for example, delivery services or predictive maintenance.
In addition, these industries are moving away from the purchase of integrated cyber security solutions. Instead they tend to contract multiple providers with very specific solutions to meet their cyber security needs. This can provide new business opportunities for Dutch cyber security companies and can be considered a strategic starting point. And as German SMEs and Hidden Champions within the industrial market are less digitized and more vulnerable to cyber security attacks, Dutch cyber security providers should mainly focus on this target group.
Within the above-mentioned industries, the following trends can be identified to which the Dutch cyber security sector can respond:
Increasing threats
o Malware infections
o Identity theft
o Advanced persistent threats (APTs)
o Botnets
Key drivers of growth
o Regulatory standards (GDPR)
o Data integrity
o Encryption
Challenges and recommendations
Showing long-term commitment is one of the core values according to German companies and customers. It takes time to earn their trust in business relations. Therefore, it is recommended to enter the German market with a multi-annual approach. Also, a collective market entry increases visibility in Germany and this can be of great benefit. In fact, it is much easier to get your foot in the door if Dutch companies act collectively abroad.
