IBM's CEO On Hackers: 'Cyber Crime Is The Greatest Threat To Every Company In The World'

The British insurance company Lloyd’s estimates that cyber attacks cost businesses as much as $400 billion a year, which includes direct damage plus post-attack disruption to the normal course of business. Some vendor and media forecasts put the cybercrime figure as high as $500 billion and more.

The World Economic Forum (WEF) says a significant portion of cybercrime goes undetected, particularly industrial espionage where access to confidential documents and data is difficult to spot.

Then there's the hacks and breaches which go unreported by privately held and unregulated companies who are fearful of how cyber incidents will damage their reputations -- which can have a negative impact on revenues, company valuation when raising capital, customer acquisition and retention, and their ability to recruit top talent.

Ginni Rometty, IBM Corp.’s Chairman, President and CEO, had the following to say at the IBM Security Summit in New York City earlier this year, when she addressed CISOs (Chief Information  Security Officers), CIOs, and CEOs from 123 companies in 24 industries. – “We believe that data is the phenomenon of our time. It is the world’s new natural resource. It is the new basis of competitive advantage, and it is transforming every profession and industry. If all of this is true – even inevitable – then cyber crime, by definition, is the greatest threat to every profession, every industry, every company in the world."

IBM has built up a big security business in response to the cybercrime epidemic. Rometty said IBM has created a Security Business Unit that marshals the knowledge of 6,000 experts.

According to IT research firm Gartner Inc., IBM Security is the fastest growing vendor in the security market with a 17% growth rate, and they are the third largest security software vendor with nearly $1.5 billion in revenues. Gartner has called IBM the largest security vendor selling exclusively to enterprises.

When speaking at the IBM Security Summit, Rometty was so pumped up on security that she could have been mistaken for a CTO (chief technology officer). She had this to say on IBM's new security technology: “We announced that more than 1,000 organizations across 16 industries are participating in our X-Force Exchange threat intelligence network. We only launched the network a month ago, so its rapid growth speaks to significant need. And we’re bringing a potent weapon to the fight – a 700 terabyte threat database including two decades of malicious cyberattack data from IBM’s security operations, as well as anonymous threat data from more than 4,000 organizations, which have contributed 300 new collections of data in the last month.”

While IBM's security business is trending up, the company has suffered a string of quarterly declines that now spans 14 periods despite company efforts to scale back on legacy hardware and push into cloud-based software and services. Right now security only makes up about 2% or less of IBM's total revenues.

The worldwide cybersecurity industry is defined by market sizing estimates that range from $77 billion in 2015 to $170 billion by 2020. Million dollar plus cybersecurity deals (vendors selling to end-users) are on the rise. In a recent research note, analysts at FBR & Co., an Arlington, Va. based investment banking and M&A advisory firm, indicate that the number of seven-figure (cybersecurity) deals have increased by 40% year-over-year.

Big Blue would be smart to double-down on cyber and put the full weight of the company behind security in 2016. It may prove to be the sweet spot for IBM's refocusing on next generation technologies.