The global encryption software market size was USD 9265 million in 2021 and is estimated to reach an expected value of USD 36625 million by 2030, registering a CAGR of 16.5% during the forecast period (2022 – 2030). Encryption software is a platform for applications that enables encryption and decryption of a data stream while it is at rest or in transit. It contributes to the security against unauthorized users and helps to protect the content of files, network packets, and applications. Many businesses are implementing encryption software to safeguard the secrecy of digital data as it is stored on their systems and sent over various networks. Additionally, encryption software offers several benefits, including increased data security when a person works remotely and increased data integrity. Moreover, the market analysis also witnessed that the adoption of encryption software among SMEs improves the organization's data security which propels the market's growth.
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Upsurge in Complexity & Volume of Data Breaches and Brute Force Attacks
One of the driving forces behind hardware encryption is the surge in data breaches and brute force attacks caused by increased digitalization. The prevalence of brute force attacks is rising quickly, necessitating encrypted devices. Most businesses have started producing encrypted keys and chips that use the more secure 256-bit and 128-bit symmetric keys, respectively. It is expected that manufacturers would come up with higher encryption algorithm bit keys and generate a higher demand for the same in healthcare, BFSI, military & aerospace, and a few others. Hardware-encrypted devices protect against several security threats and offer an effective way to secure the privacy of sensitive personal and corporate data, which fuels the market's growth.
The Rise in the Adoption of Cloud and Virtualization
Cloud is growing exponentially, with many organizations already using cloud or planning to do so. It has been seen that while startups or small companies are quicker to adopt the cloud, large enterprises have been more cautious about migrating to the cloud. Data security is one of the biggest concerns hindering enterprises from adopting the cloud. The concern is even more significant with public clouds, as these share resources between different users and rely heavily on virtualization, creating additional security concerns around the access to data on the virtual machine. Most organizations fear their data is not as safe as it would be in their private data centers.
Furthermore, the adoption of the cloud is increasing quickly due to the apparent benefits of flexibility and the costs it offers over legacy systems. This increased adoption of encryption in cloud computing is expected to drive the demand for encryption software. By safeguarding the data at rest and in transit, encryption can enable enterprises to leverage the benefits of the cloud and simultaneously ensure data privacy.
High Capital Investment
Significant capital investment required for installing and maintaining hardware encryption devices is the primary factor negatively impacting the market's growth. The overall installation cost of hardware encryption devices comprises annual maintenance cost, licensing cost, the technical cost for a password reset, staging cost, pre-provisioning cost, user excess operating cost, and others. Also, the hardware system updates are only possible through device substitution, making it difficult for implementation and increasing capital investment.
Widespread Adoption of IoT Technology and Cloud Services
Internet of Things (IoT) device collects and exchanges data over the Internet either with dedicated control units or cloud services. Devices with weak encryption or software-based IoT security are vulnerable to cyberattacks, which put the privacy of organizations and individuals at high risk. The hardware encryption technology used for IoT devices provides the highest level of IoT device security. IoT devices secured by hardware-based encryption cannot be changed by using any attack, providing high IoT device security. There is an increase in penetration of IoT devices owing to the adoption of hardware-based encrypted devices, which is opportunistic for the market. For instance, the U.S. is a global leader in IoT spending and is expected to spend almost $194 billion in 2019.
Furthermore, the use of cloud computing has led to an increase in data breaches owing to which many enterprises are adopting encryption software to secure their data. In addition, hardware components in the encryption hold sensitive corporate information or customer data. A stolen or lost drive can become a data breach and a privacy violation. Due to the above-mentioned market trend, there is an increase in the need for adopting encrypted devices among customers.
The global encryption software market is segmented by component, deployment model, enterprise size, function, industry vertical, and region.
In terms of components, the global market is bifurcated into software and service. The software segment dominated the global market and is estimated to grow at a CAGR of 15.9% during the forecast period. Encryption software is designed for handling large sets of unstructured data originating from various operating systems in an organization and providing enhanced security to the data. In addition, organizations in the BFSI and IT & telecom industries have started adopting this software to enhance operational efficiency and provide advanced security to the organization's assets and data. In addition, the surge in demand for cloud-based encryption software and adoption by various organizations for increasing data security while in transit is expected to provide lucrative opportunities for market growth during the forecast period.
Based on the deployment model, the global market is segmented into on-premise and cloud. The on-premise segment dominated the global market and is estimated to grow at a CAGR of 14.9% during the forecast period. On-premise-based software is known for better maintenance of servers, and a continuous system facilitates the implementation of this encryption software. Additionally, the on-premise deployment mode is regarded as being quite helpful in large businesses because it requires a sizable investment to execute and necessitates the purchase of both networked servers and software to run the system. The need for this subset of encryption software is also driven by enterprises adopting it due to the higher data protection it offers compared to cloud-based software.
By organization size, the global market is bifurcated into large enterprises and small and medium-sized enterprises (SMEs). The large enterprise segment was the highest contributor to the market and is estimated to grow at a CAGR of 15.8% during the forecast period. A number of factors and specific business needs influence the choice of particular encryption software used among different large enterprises. The increased usage of mobile devices drives the demand for encryption technology by several governmental entities and the storage of private financial and healthcare data. Large healthcare organizations are one of the critical sectors where encryption would be rapidly adopted. These organizations are expected to be vulnerable targets, as they are slower to adopt measures such as keeping personal information in separate databases that can lead to the event of an attack. Moreover, an increase in data breaches and government mandates for data privacy, especially for large organizations, is expected to offer a lucrative opportunity to grow the hardware encryption market in the near future.
In terms of function, the global market is divided into disk encryption, communication encryption, file/folder encryption, and cloud encryption. The disk encryption segment was the highest contributor to the market and is estimated to grow at a CAGR of 14.8% during the forecast period. An increase in regulatory compliances regarding the protection of private & sensitive data and a reduction in prices of disk encryption devices majorly drive the market growth in this segment. Moreover, factors such as an increase in concerns related to data security and privacy, a rise in penetration of consumer electronics such as smartphones &tablets, and an increase in complexity &risk of data breaches as well as brute-force attacks majorly drive the growth of the market. Furthermore, the widespread adoption of Internet of Things (IoT) technology and cloud services, as well as technological advancements in encryption chips, is expected to provide lucrative opportunities for the market.
As per industry vertical, the global market is classified into BFSI, IT/telecom, government & public, retail, healthcare, aerospace & defense, media &entertainment, and others. The BFSI segment dominated the global encryption software market and is estimated to grow at a CAGR of 13.6% during the forecast period. Implementation of data privacy legislation mandates the use of hardware encryption as one of the most appropriate data protection measures. Thus, the adoption of encryption software is expected to grow in response to data protection compliance regulations and ongoing cyber-attacks. Banks and financial institutions use encryption to protect many digital services and new transaction types, such as cloud-based and peer-to-peer payments. Thus, the adoption of hardware security modules (HSM) among these organizations has increased to meet the stringent security requirements, fueling the market's growth. In addition, players in this market are launching advanced solutions for the BFSI industry, which is opportunistic.
Region-wise, the global encryption software market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.
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North America accounted for the largest market share and is estimated to grow at a CAGR of 15.3%. The growth of the North American encryption software market is driven by several government initiatives, which have helped the region expand its IT security investment. Moreover, the region is home to many established encryption software manufacturing companies, such as IBM Corporation and Kingston Technology Corporation Inc., which fuels the market's growth. These players are adopting various growth strategies such as new products Kingston Digital, Inc., launches, partnerships, and agreements to grow in the market. In addition, the surge in demand for consumer electronic products such as laptops, PCs, and smartphones has helped market players to sustain their businesses. The arrival of cloud services and the development of IoT technology have contributed to the market's growth. Furthermore, factors such as the increase in the need to adhere to stringent regulatory compliances, the surge in the presence of encryption software vendors, and the rise in government support are major market growth factors.
Europe is the second largest region. It is estimated to reach an expected value of USD 36625 million by 2030, registering a CAGR of 16.2%. Encryption provides the confidentiality of sensitive data and offers support to digital transformation in compliance with new regulations such as General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI DSS), Health Insurance Portability and Accountability Act (HIPAA), and eIDAS, which drive the growth of the market. A significant shift toward digital transformation in numerous European countries further boosts market growth. Furthermore, an increase in awareness of the benefits of data security is expected to drive the adoption of encryption software in various government projects in countries where economies are reviving. Moreover, the surge in the adoption of encrypted devices in the healthcare sector, owing to the implementation of various government regulations concerning digital patient records and the emergence of the bring-your-own-devices (BYOD) trend is expected to provide lucrative opportunities for market growth in the region.
The Asia Pacific is the third largest region. The growth of the Asia-Pacific encryption software market is driven by heavy investments made by private and public sectors for securing sensitive data, resulting in increased demand for encryption software used to secure and ensure data privacy. The market for encrypted storage devices is expected to grow at a special rate, owing to a surge in cases of data breaches and a rise in the need for data security, as corporate data breaches are increasing rapidly, due to which business-critical applications are facing malicious threats. Furthermore, numerous global and domestic players are operating in Asia-Pacific, owing to raw materials and cheap labor costs. Increased focus on emerging economies is driving investments in the Asia-Pacific region.
List of top key global encryption software market companies