Feeling insecure

Small tech best placed to take on Big Brother

Feeling insecure? So are companies everywhere. The lesson of 2013 was that there are grievous flaws in security systems once thought virtually impenetrable. Business needs better protection. The most credible providers may be smaller tech players.

Governments from the United States to China have embraced online surveillance and regulation. That won't end in 2014: paranoia is rising, and besides, spying between countries isn't technically illegal. Corporate spying has increased too, particularly as cloud-based services introduce new vulnerabilities. Detected attacks were up 25 per cent year-on-year in 2013, according to a PricewaterhouseCoopers corporate survey. Half of respondents say security spending over the next 12 months will increase.

But whom to trust? Market leaders are suspect. The likes of IBM and Cisco Systems are seen as facilitating US state surveillance, and have suffered a sharp drop-off in revenues, led by clients in overseas markets like China and Russia. Other deep-pocketed giants such as Deutsche Telekom and Huawei want to offer alternatives but they may also appear compromised. Deutsche Telekom's SiMKo secure phone and tablet technologies are undermined by its state ownership. Privately owned Chinese group Huawei is at pains to deny it has connections to the military and can be pushed around by the state.

Where smaller specialists excel is in perceived neutrality. Privately owned Silent Circle - who provided encryption services to former US spy agency contractor Edward Snowden - has grown its subscriber base by around 400 per cent since the second quarter of 2012: the company showed its anti-surveillance cred by closing its email unit to protect client data. It's hard to imagine Google or Yahoo! taking such extreme measures to show their independence.

There are relatively few ways to invest in the sector but scarcity only incites keener interest. Barracuda, which provides security and data storage products, debuted on the New York stock market in November with a 32 per cent first-day share price pop. Shares in malware protection firm FireEye and cloud security company Qualys have both risen 90 per cent since they floated in September. This may not last forever. Cisco Chief Executive John Chambers thinks the giants will regain trust and market share - though it could take time. But for now, "small tech" will be best placed to take Big Brother down a peg.