Security News > 2011 > May > Cyberwarfare May Be A Bust For Many Defense Contractors

http://blogs.forbes.com/beltway/2011/05/09/washingtons-cyberwarfare-boom-loses-its-allure/ By Loren Thompson Business in The Beltway Forbes.com May 9, 2011 As federal spending on national security has leveled off in recent years, big defense contractors have worked hard to secure a role in one of the few market segments expected to keep growing: cyberwarfare. It’s a relatively new field where the terminology hasn’t stabilized yet, but for the purposes of this posting, cyberwarfare means three things: attacking enemy networks, exploiting enemy information flows, and defending friendly networks. Most of the money Washington is currently spending on cyberwarfare goes to the latter activity -- securing friendly networks -- but offensive activities seem to be growing faster over time. They’re really just different sides of the same coin, since it’s hard to be good at defending computer networks if you don’t have a thorough understanding of how to attack them. The cyber goldrush was sparked in 2008 when President Bush signed two directives establishing a Comprehensive National Cybersecurity Initiative in response to the growing number of digital assaults on federal networks. The initiative was a signal to industry that a new demand driver had appeared in the marketplace just as everyone was getting ready for a prolonged downturn in military purchases. Seeing few other domestic opportunities on which to place bets with the cash they had accumulated during flush years, military contractors poured into the cyberwarfare field, building operations centers, purchasing niche players, and competing aggressively for contracts. The thinking was that cyber threats would keep proliferating for the foreseeable future, and defense companies were more likely to have the necessary clearances and market knowledge to compete in cyberwarfare than outsiders like Google or Microsoft. No doubt about it, the cyberwarfare market has grown fast, helped along by an Obama Administration commitment to expand and refine the digital security efforts of its predecessors. Within months after taking office, President Obama established an executive-branch cybersecurity coordinator and a new Cyber Command colocated with the super-secret National Security Agency at Fort Meade, MD. NSA does most of the government’s eavesdropping, so putting the command nearby and making its head the same general who runs the spy agency was a no brainer: NSA already had the ability to monitor internet traffic for hackers and other malefactors. Setting up the new command, staffing components from each military service, and implementing more stringent network security procedures at each federal agency will generate about $9 billion in federal outlays this year. Additional billions will be spent on classified programs to probe and monitor foreign networks, such as those in China. But even as the government’s cyberwarfare effort expands, some industry executives are beginning to wonder just how lucrative this new opportunity is likely to be. They already know it can’t fill the revenue hole created by cancellation of dozens of weapons programs in recent years, and now they’re starting to suspect the cyber field is so hyper-competitive and volatile they can’t even count on it for significant earnings anytime soon. Once you get past all the fashionable rhetoric about information-age warfare and anarchy on the web, it’s easy to see why they might be having second thoughts. Let’s consider the many ways in which the cyberwarfare market should raise red flags for investors. [...]

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http://blogs.forbes.com/beltway/2011/05/09/washingtons-cyberwarfare-boom-loses-its-allure/