China's cloud economy has been expanding at annual growth rates that had almost touched three-digit numbers. This new economy has brought its unique and complex security needs which have caught the attention of the deep pockets, unsurprisingly.
The Chinese private cybersecurity firm Elex (博智安全) announced on December 23 that it has secured over CNY150 million to improve its "satellite system communications" and telecommunications network security products. Asset Management Association of China (AMAC)-backed China Science and Techinnovation Capital Management (CSTC) led the Series C financing round for the cybersecurity firm.
The company is betting its resources into the cloud and encrypted network security, mainly aiming at serving local governments and the military facilities industry in China. Traditional systems are not agile enough to overcome complex security needs of enterprise data found McKinsey, bringing about the necessity for information security-seeking institutions to use enterprise security SaaS.
Security SaaS is an emerging horizontal field in China's ever-growing SaaS field. The most prominent representatives are IDG-backed Bangcle Security (梆梆安全), China Capital Management-backed Qianxin (奇安信) and identity management cybersecurity firm Trustfort (芯盾时代). (Check EqualOcean's report on China's SaaS scene to gain a deeper understanding of how these firms fit into a complex and growing segment of the tech market.)
Elex is significantly small compared to its peers, yet differentiates itself by serving mainly the local governments, which is a common phenomenon – that has also been so-called ‘2G’ –in China. In a nutshell, it is yet another Chinese software company that adheres to the ‘military-civilian fusion’ notion.
The Chinese cybersecurity scene had long been dominated by Qihoo 360 (QIHU: NYSE), yet the emerging enterprise security SaaS field brought new players to the game. Elex’s revenue composition has mostly been comprised of advertisements and other value-added services.
According to the National Bureau of Statistics of China, domestic security spending reached CNY 1.24 trillion (USD 180 billion) in 2017, up from 2007’s CNY 348.6 billion (USD 49.36 billion) with a CAGR of 13.59%, the EqualOcean artificial intelligence monetization report postulated. This gigantic scene is powered by new generation hardware, software and a variety of solutions to complex security problems. Enterprise Security SaaS is yet another field for which industry analysts have been predicting exponential growth in the coming years, especially for those that sell to the public sector.