Global Network Encryption Market Size and Share Outlook - Forecast Trends and Growth Analysis Report (2024-2032)

Network Encryption Market Insights

• In recent years, 33% of companies suffered data losses due to lack of encryption, which indicates a crucial role encryption plays in protecting sensitive information.
• As per industry reports, approximately 90% of IT professionals believe that encryption is beneficial to various aspects of network security.
• In FY 2021, around 60% of organisations reported using encryption for their archive and backup data, showcasing network encryption demand growth in data security.
• SSL (Secure Sockets Layer), TLS (Transport Layer Security), IPSec (Internet Protocol Security), and VPN (Virtual Private Network) are some common protocols for encryption.

Network Encryption Market Analysis

Network encryption refers to a method of encoding data, information, or message transmitted over a communication network using hardware and software systems. Confidential data, such as passwords, credentials, and files, among others, can be protected using network encryption. The growing adoption of network encryption across different industry verticals, such as telecom and IT, BFSI, and government, among others, to secure internal networks and protect virtual private networks (VPN) is driving growth of the network encryption market.

Growing research and development activities by leading providers to offer low-cost network encryption solutions with secure access are also expected to boost the market demand in the forecast period. Cisco, Fortinet, and Juniper Networks are increasingly investing in R&D to innovate and reduce costs, ensuring that their solutions are accessible to small and medium-sized businesses. For example, Cisco's Quantum Key Distribution (QKD) is an advanced encryption technology that provides secure communications at lower costs for critical infrastructure sectors.

Heightened adoption of cloud-based network encryption solutions across enterprises to ensure their compliance with regulatory standards, enhance privacy, and combat data breaches is further adding to the network encryption market revenue. Flexera conducted a 2022 survey that found that 94% of enterprises reported using cloud services, with a significant focus on securing sensitive data in transit and at the same time, which underscores the importance of encryption. Furthermore, with the increasing number of data breaches, such as the Marriott International breach in 2018, which exposed 500 million customers' information, encryption has become crucial in preventing such risks.

Network Encryption Market Trends

Rising Adoption of Cloud-based Encryption Solutions

As organisations continue to migrate to cloud infrastructures, the need for securing data in transit and at the same time is growing rapidly. Cloud-based encryption services are becoming a key component of compliance and data protection, particularly for industries with stringent regulatory requirements such as healthcare and finance. Gartner reports that 60% of organisations will have adopted cloud-based encryption services by 2025 to ensure compliance with privacy regulations such as General Data Protection Regulation (GDPR) and HIPAA. This trend in the network encryption market is expected to lead to the demand for scalable, flexible encryption solutions, as demonstrated by the heightened use of AWS Key Management Service (KMS) and Microsoft Azure Encryption.

Surging Demand for Post-Quantum Cryptography

With the advent of quantum computing, traditional encryption methods are increasingly becoming vulnerable to future decryption. Post-quantum cryptography (PQC) is aiming to develop encryption techniques that can be used to prevent attacks from quantum computers. Governments and enterprises are beginning to invest in research for quantum-resistant encryption solutions. In addition, the U.S. National Institute of Standards and Technology (NIST) is working on standardising quantum-resistant algorithms. In August 2024, NIST formalised first post-quantum crypto standards to secure systems against future quantum threats, including 3 algorithms for key encapsulation and digital signatures, urging immediate integration to mitigate risks from potential quantum attacks. Moreover, the quantum cryptography market, is expected to grow at a high CAGR as about 76% of IT professionals now possess knowledge of post-quantum cryptography (PQC), further influencing the network encryption market outlook.

Market News

September 2024

EU have implemented new cybersecurity regulations, such as DORA, NIS2, and CRA to impose stringent requirements on secure software development, including adopting secure coding practices, conducting regular security testing, and ensuring continuous compliance. These requirements aim to enhance the cybersecurity landscape in the EU by integrating security into every aspect of the software development.

September 2024

As per network encryption market overview, Mastercard has agreed to acquire threat intelligence firm ‘Recorded Future’ for USD 2.65 billion to enhance its cybersecurity capabilities. Recorded Future, which serves more than 1,900 clients globally, uses AI-powered analytics to provide real-time threat visibility. The acquisition is expected to close by the March 2025.

Opportunities in Network Encryption Market

The main opportunities in the market are the growing demand for secure communication across emerging technologies such as 5G networks, IoT (Internet of Things), and edge computing. As 5G deployments expand globally, the volume of data transmitted across networks increases, a greater need for robust encryption solutions will be created to safeguard sensitive information. By 2025, 1.2 billion 5G connections are expected globally, accounting for 15% of all mobile connections, which presents a massive opportunity for network encryption market providers to ensure secure, real-time data transmission in low-latency environments.

Furthermore, with IoT devices expected to reach 30 billion connected devices by 2030, the need for end-to-end encryption to safeguard communication between devices will grow. This creates additional network encryption market opportunities for companies such as Palo Alto Networks and Cisco to develop encryption solutions that address the unique security challenges posed by 5G, IoT, and edge computing environments. Furthermore, the advancement of Zero Trust Security Models, which require continuous verification of users and devices, provides another opportunity for encryption solutions that enhance data security across distributed networks.

Network Encryption Market Restraints

One of the key restraints in the market is the high cost that comes with implementing and maintaining network encryption software, especially for small and medium-sized enterprises (SMEs). Sophisticated encryption solutions require hefty investments in hardware, skilled personnel, and software. This acts as a barrier for companies having limited budgets. As per Ponemon Institute report, in 2023, the average cost of deploying this technology for a firm surged to USD 400,000. This figure is anticipated to further increase in 2024 as the cybersecurity threats have also become more advanced, resulting in a demand for network encryption technologies. For small businesses, this financial burden can be prohibitive and can significantly impact network encryption demand forecast.

In addition, the complexity of encryption keys and the risk of major data loss if the keys are mishandled contribute to the reluctance of firms to fully adapt to encryption software. The need to comply with several regulations across different countries further complicates the implementation. Moreover, 50% of the global data privacy laws were modified in 2023, which led to additional costs and complexity of network encryption, lowering the adoption rates of network encryption in various industries.

Network Encryption Market Overview

The rise in cyberattacks and data breaches is one of the most significant drivers of growth in the network encryption market. In 2023, the average cost of a data breach was estimated to be USD 4.45 million, according to a report by IBM Security, with encryption being a key defensive strategy to mitigate these costs. Moreover, high-profile breaches, such as the MOVEit file transfer hack of 2023, which exposed sensitive data from numerous organisations, underscore the growing need for robust encryption solutions. As a result, businesses are increasingly adopting network encryption to protect their data, particularly in sectors such as BFSI, healthcare, and government, where the cost of data breaches can be particularly high. However, only 22% of companies regularly inspect encrypted traffic for potential threats, which can allow many cyberattacks to go undetected.

Regulatory compliance has also become a key factor affecting network encryption market dynamics and trends, with the increasing enforcement of global and regional data protection laws, such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the U.S. These regulations mandate stringent encryption protocols to protect personal data, with non-compliance leading to severe penalties. For instance, GDPR fines reached over USD 1.3 billion in 2022, incentivising organisations to prioritise encryption to avoid hefty financial repercussions. Additionally, regulatory bodies in regions such as Asia-Pacific are implementing new data protection laws, resulting in the need for encryption across industries to ensure compliance and safeguard user data.

Network Encryption Industry Segmentation

“Network Encryption Market Report and Forecast 2024-2032” offers a detailed analysis of the market based on the following segments:

Market Breakup by Deployment Type

• Cloud
• On-premises

Market Breakup by Component

• Hardware
• Solution and Services

Market Breakup by Organisation Size

• Small and Medium-sized Enterprises
• Large-sized Enterprises

Market Breakup by End Use

• Telecom and IT
• BFSI
• Government
• Media and Entertainment
• Others

Market Breakup by Region

• North America
• Europe
• Asia Pacific
• Latin America
• Middle East and Africa

Network Encryption Market Share

By Deployment Type Insights

Cloud-based encryption solutions are witnessing rapid adoption, fuelled by the increasing migration of enterprises to cloud platforms and the increasing demand for scalable, flexible security solutions. As organisations continue to move their data and operations to the cloud, encryption becomes essential to safeguard sensitive information in transit and at rest. Hence, the cloud network encryption market share is growing due to the expanding use of cloud-based services and heightened concerns over data breaches.

Another significant driver behind the adoption of cloud-based encryption is the regulatory environment. Companies are under increasing pressure to comply with laws such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA), which mandate strong encryption techniques for data stored and processed in the cloud. Cloud encryption solutions are also favoured by small and medium-sized enterprises (SMEs) because of their cost-effectiveness. According to a Gartner report, 70% of new encryption deployments are expected to be cloud-based, particularly due to their cost benefits. As per the network encryption industry analysis, start-ups like Virtru are also providing cloud-based encryption services that integrate seamlessly with Google Workspace and Microsoft 365, making it easier for SMEs to access them.

In addition, on-premises encryption solutions remain a significant component, particularly for industries that deal with highly sensitive or classified data, such as government, defense, and banking. Cisco's Quantum Key Distribution (QKD) technology, which is designed to secure sensitive data in defense and banking sectors, is an example of innovation in this segment. Cisco expanded its QKD technology in 2023, addressing concerns about quantum computing threats and further bolstering the need for on-premises encryption in critical infrastructure industries. Additionally, many government agencies and large financial institutions favor on-premises encryption due to concerns about data residency and control, a trend that continues to influence the network encryption demand.

By Component Insights

Hardware-based network encryption solutions provide specialised encryption devices or modules, such as routers, gateways, and encryption devices. This helps secure data traffic between networks. These solutions are often favoured for their speed, reliability, and ability to handle large volumes of data with minimal latency, making them essential for industries such as government, defense, and telecommunications. 

On the other hand, the solutions and services segment in network encryption market encompass software encryption tools, cloud-based encryption services, and professional services such as consulting and implementation. This segment is expanding rapidly due to the rise in cyber threats, data breaches, increasing regulatory requirements for data security, and growing adoption encryption. As of 2023, approximately 95% of web traffic was encrypted, a significant increase from nearly 40% in 2013. This segment is projected to grow at a high CAGR due to the widespread adoption of cloud-based services and presence of companies like Symantec and McAfee, which are leading providers of encryption software.

By Organisation Size Insights

The adoption of network encryption among small and medium-sized enterprises (SMEs) has been increasing rapidly due to increased cybersecurity threats, leading to network encryption market growth. However, SMEs often encounter budget constraints, which makes cloud-based encryption solutions more attractive due to their lower upfront costs. In 2023, SMEs accounted for approximately 40% of the demand for cloud-based encryption solutions, driven by the need for flexible, cost-effective security solutions. The growth of managed services and Software-as-a-Service (SaaS) encryption platforms, such as those provided by Virtru and Zscaler, is enabling SMEs to improve their cybersecurity posture without investing higher in hardware.

Large enterprises, particularly in finance, healthcare, and government, require more high-performance encryption solutions to secure vast amounts of data across multiple networks and locations, which has also resulted in growth of the network encryption market. Large enterprises comprised over 60% of the market in 2022, and this segment is expected to continue to dominate the market due to their higher cybersecurity budgets and more complex infrastructure. IBM and Cisco also launched new encryption technologies in 2023 to offer enhanced security features like quantum-safe encryption to prepare for future threats.

By End Use Insights

Governments worldwide are implementing encryption to safeguard classified information, critical infrastructure, and public services. The increasing emphasis on national security, as well as the increasing threat of state-sponsored cyberattacks, has led to a surge in demand for encryption solutions. According to network encryption market statistics, the Department of Homeland Security announced USD 374.9 million in grant funding for the Fiscal Year 2023 State and Local Cybersecurity Grant Program (SLCGP) in August 2023 to enhance cyber resilience among state and local governments. The segment is also experiencing innovations in quantum-safe encryption and end-to-end encryption, particularly in defense and intelligence agencies.

The BFSI sector is also highly regulated, with strict compliance requirements such as Payment Card Industry Data Security Standard (PCI-DSS) requiring the encryption of financial transactions and sensitive customer data. As cyber threats against financial institutions rise, the demand for advanced encryption solutions is expected to increase. In 2023, the BFSI sector contributed significantly to the network encryption market value as encryption solutions were implemented to secure online banking platforms, payment gateways, and internal communications by banks like Citi Group.

The telecom and IT sectors are other significant users of network encryption, due to the increasing need to secure vast volumes of data transmitted across global networks. With the rise of 5G technology and cloud computing, encryption is critical to safeguarding sensitive customer and corporate data. The sector is expected to grow as network operators invest more in encryption to protect against cyberattacks and data breaches. For instance, Vodafone announced a partnership with Thales in November 2023 to deploy advanced encryption solutions across its infrastructure.

Network Encryption Market Regional Insights

North America Network Encryption Market Trends

North America is likely to experience a healthy growth in the forecast period due to the increased demand for network encryption solutions from security and law enforcement agencies. Meanwhile, the continued expansion of leading network encryption companies, such as Becrypt in the United States, is further bolstering market growth in the region. Furthermore, the introduction of regulations, such as the Cybersecurity Information Sharing Act (CISA) in the U.S., the implications of international policies like GDPR, and advancements in digital ecosystems are factors expected to add to the network encryption market development across NA in the coming years. Furthermore, U.S. President Biden's executive order of 2023 aimed at enhancing cybersecurity standards, further highlights the growing emphasis on encryption. In Canada also, the government has been increasing its investment in encryption technologies following high-profile cyberattacks such as the SolarWinds breach, which exposed vulnerabilities across the continent.

Asia Pacific Network Encryption Market Drivers

The market for network encryption in Asia Pacific is expanding rapidly due to increased digitalisation, increasing cyber threats, and stricter data security regulations. China, Japan, India, and South Korea are leading the region's demand for encryption technologies, particularly with the expansion of 5G networks and cloud infrastructure. As per network encryption market analysis, Huawei is heavily investing in encryption for 5G in China, while Japan's NEC Corporation secures sectors like finance and healthcare. India's new data protection laws have also facilitated encryption adoption. Recent developments in the region include South Korea’s 2023 cybersecurity guidelines, which has mandated stronger encryption across many sectors. China’s Cybersecurity Law also promotes advanced encryption standards.

Europe Network Encryption Market Opportunities

Europe's focus on privacy and data security has led to a higher demand for robust encryption technologies, particularly in sectors such as finance, healthcare, and government. Europe's countries such as Germany, the UK, and France are leading the way in adopting encryption solutions to secure sensitive data. Key players in Europe, such as Atos and Gemalto (now part of Thales), offers quantum-safe encryption to protect critical infrastructures of banking and telecommunications industries. Moreover, European Union (EU) is focused on strengthening encryption standards. This is highlighted in its Cybersecurity Strategy of 2023, which aims to protect digital infrastructure and critical sectors. Furthermore, increasing concerns over ransomware attacks and cyber espionage have pushed companies and governments to invest more in network encryption.

Latin America Network Encryption Market Growth

Growth in LATAM region is fuelled by the expanding use of mobile networks, cloud services, and digital transactions, particularly in countries like Brazil, Mexico, and Argentina. The need to protect sensitive financial, government, and personal data has become a priority as cyberattacks have become more frequent in the region. Kaspersky reports that Latin America experienced a 24% increase in ransomware attacks in 2022, prompting businesses to strengthen their encryption defenses. To protect data, several Latin American governments have also enacted stricter data protection laws, such as Brazil's Lei Geral de Proteção de Dados (LGPD).

Middle East and Africa Network Encryption Market Strengths

The market in the Middle East and Africa (MEA) is experiencing a robust growth, due to the increasing cybersecurity threats and the widespread adoption of cloud technologies, particularly in sectors such as telecoms and banking. The region also benefits from ongoing technological advancements, which is evident in Rohde & Schwarz's launch of high-speed network encryptors in November 2020. Additionally, collaborative efforts in countries like the UAE aim to enhance cyber threat intelligence sharing. However, budget constraints remain a challenge as only 27% of organisations in MEA have a dedicated cybersecurity budget. This has hindered investment in encryption technologies in the region.

Innovative Startups in Network Encryption Market

Start-ups in the market typically focus on enhancing data security solutions to combat increasing cyber threats. They are developing technologies such as hardware-based encryption, which integrates encryption chips directly into devices. Additionally, these start-ups are leveraging the advancements in cloud technology and IoT to provide scalable encryption solutions that address the specific needs of various industries, particularly healthcare, which has significant data breach risks. Start-ups that have caused network encryption market expansion are:

Cyware Labs was founded in 2016 and is headquartered in New York, United States. It has quickly become a major player in the cybersecurity sector, particularly in threat intelligence and secure collaboration solutions. In 2021, they raised USD 30 million in Series B funding, accelerating the development of their threat intelligence-sharing and security operations platforms. Their flagship product, the Cyware Situational Awareness Platform (CSAP), uses advanced encryption to securely share threat intelligence between enterprises and government entities. Cyware’s innovations in automating security operations have positioned them as a key player in the network encryption industry.

Virtru was founded in 2012 and is headquartered in Washington, United States. The company's unique approach is to offer user-friendly encryption solutions that seamlessly integrate with widely used cloud platforms such as Google Workspace and Microsoft 365. The USD 60 million Series C funding round they secured in 2021 was a major milestone for Virtru, owing to a growing demand for their services. Their proprietary Trusted Data Format (TDF) encryption standard ensures data remains secure at all stages, from storage to transmission, providing end-to-end encryption solutions across email, file sharing, and cloud storage platforms. Its solutions are highly favoured by government agencies, healthcare organisations, and enterprises.

Competitive Landscape of Network Encryption Market

The focus of market players in the market is on the integration of advanced technologies such as artificial intelligence and machine learning to enhance encryption protocols, as well as a shift towards software-defined networking and zero-trust security frameworks. Major players are also focusing on developing robust encryption solutions for healthcare, finance, and government sectors, to protect sensitive information and maintain compliance with regulations such as GDPR. Additionally, the increasing adoption of cloud services and Internet of Things (IoT) devices is driving innovation in encryption technologies.

Key Industry Players

Thales Trusted Cyber Technologies is a technology company which provides services such as identity and access management, data discovery and classification, and network encryption, among others. It was founded in 2014 and is headquartered in Maryland, the United States.

Juniper Networks, Inc. is headquartered in California, United States and was founded in 1996. It primarily develops and markets routers, switches, network management software, security products. Juniper Networks has been recognised as a leader in AI networking and cloud solutions. It was acquired by Hewlett Packard Enterprise for approximately USD 14 billion in early 2024.

atmedia GmbH is a company which offers secure and reliable data communication services. It is one of the largest market providers of high-speed encryption solutions. The company was founded in 1996 and is headquartered in Saarbrucken, Germany.

Atos SE is a leading information technology company which provides data encryption products for sensitive networks. The company was established in 1997 and is headquartered in Bezons, France.

Other network encryption market players include Certes Networks, Inc., Senetas Corporation Limited, Viasat Inc., Raytheon Technologies Corporation, Securosys SA., and PacketLight Networks Ltd., among others.

Recent Developments

September 2024

The US government created a roadmap to enhance internet routing security by promoting the adoption of Resource Public Key Infrastructure (RPKI) to address vulnerabilities in the Border Gateway Protocol (BGP). The initiative urges ISPs, businesses, and critical infrastructure operators to implement RPKI to prevent route hijacking and leaks.

August 2024

Healthcare has been the target of 21% of ransomware attacks, an increase from 18% the previous year, according to Barracuda Networks. These attacks have significantly impacted patient care, leading to canceled operations, delays in services, and demand for network encryption market.