ISO 27001 & SOC 2: Compliance and Audit Market Size and Growth

Today, most of the companies values are focused on their reputation, brand and trustworthy relationship with customers. In addition, there are rules, regulations, laws, etc. when handling data and information. This leads to the need for companies to look at security measures and their solutions, such as an ISO 27001 certification or the SOC 2 framework. As a result, business behaviour is influenced worldwide. So let's take a look at the market development for this.

First, a quick explanation: What do the following terms eGRC and CAGR actually mean?

Definition of eGRC and CAGR

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What is eGCR?

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As a company grows, so do the risks and challenges. To overcome the difficulties and take advantage of the opportunities, companies set up a series of processes called governance, risk and compliance.

The three components of the eGRC previously existed as separate areas and eventually became one because they are interrelated in content. Birds of a feather flock together.

EGRC is an integrated, holistic approach to governance, risk, and compliance management that ensures an organization complies with its policies, mandatory regulations, and risk acceptance decisions by aligning its four main components - strategy, processes, technology, people - while improving efficiency. It sounds like an ISO 27001 certification or a SOC 2 audit framework.

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What is CAGR?

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Because markets are constantly fluctuating, it is difficult to know which assets to invest your money in. While it is impossible to reliably predict how a particular market will perform, there are some indicators that can give you an idea of which opportunities might be worthwhile.  The compound annual growth rate (CAGR) is one of such indicators.

The CAGR calculates how the value of an investment has changed over a period of time, assuming that all returns have been reinvested and no deductions have been made. This calculation allows investors to determine how much an investment has gained or lost over one or more years to determine overall performance. It is a useful tool for comparing multiple investments.

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The Development of the Global Compliance and Audit Market from 2021 to 2028

As a result of the COVID 19 outbreak, risk managers and compliance officers continued to struggle and fight with the side effects of this pandemic. It has quickly become obvious that optimizing risk management is one of the best defensive measures an organization can take to ensure business continuity.

While a proactive approach would already be the best risk management option under normal circumstances, the challenge now was to quickly focus on approaches that could respond just as quickly to the latest developments.

According to Markets and Markets, it could be observed how in 2019, the global enterprise governance, risk, and compliance (eGRC) software market was valued at $31.5 billion, growing at a CAGR of 10.3%.

Additionally, Grand View Research claims that the global eGRC market is expected to grow from $36.1 billion in 2021 to $60.7 billion by 2026, at a CAGR of 10.9%. And by 2028, the global eGRC market is expected to grow to $97.3 billion.

So, the increasingly complex regulatory environment and the need to comply with various government regulations are expected to further drive demand for eGRC solutions.

The structure of regulatory measures varies from country to country and from company to company. Therefore, the lack of a clear standard is considered to be one of the factors restraining the growth of the eGRC market. It makes it difficult for eGRC solution providers to meet the various requirements of end users. The biggest challenge that can affect the growth of the market is the provision of an integrated eGRC solution.

This is because many companies still use multiple standalone GRC tools, each focused on a specific area (governance, compliance, policy, or risk management). The current changes in the market reflect the growing interest in integrated solutions.

Market demand for a platform that unifies all GRC data and processes into a single control center to simplify management and reduce costs is resonating widely with technology vendors and professional service providers worldwide.

Key Factors driving the growth of the Global Compliance and Audit Market

Key factors driving the growth of the eGRC market include the increasing need to avoid the reputational risk of non-compliance and to contain the growing complexity of the compliance, regulatory, and risk management environment in enterprises.

Factors such as changing business scenarios due to the Covid 19 pandemic, security needs with increasing IoT - and AI - technology, and external reporting requirements are expected to create a need for unprecedented governance, risk, and compliance management requirements. The increasing amount of digital data, the resulting need for continuous monitoring and analytics to ensure data security and privacy, and regulations issued by various regulatory bodies continue to drive demand for eGRC.

The advent of IoT and digitization of business processes have triggered rapid growth of various industries by contributing to a range of business functions from manufacturing to marketing. An eGRC solution is important to address the challenges of a hyper-connected business model.

For example, the digitization of banking has given businesses the opportunity to simplify their processes. However, this has also increased opportunities for cyberattacks and fraud. Financial institutions and banks are increasingly investing in eGRC solutions to minimize the risks of compliance failures and fraudulent transactions.

Incidentally, the Banking, Financial Services and Insurance (BFSI) sector was the largest segment of the global EGRC market in 2020, accounting for over 20% of total revenue. However, banks and financial institutions are now using analytics to identify enterprise-level links and monitor suspicious activity of various linked accounts used for money laundering activities. As a result, much capital is being allocated to implement advanced technology-based eGRC solutions.

Nevertheless, the telecom and IT segment is expected to be the fastest growing segment in the eGRC market, growing at a CAGR of 15% between 2021 and 2028. Telecom companies are already heavily regulated due to the nature of data collected, stored, and processed in the industry. In addition, regulations have been introduced to monitor bandwidth usage by telecom operators. The increasing number of these regulations and the risk of penalties for non-compliance have led to increased demand for eGRC solutions among telecommunications companies.

North America eGCR software market was worth $9.45 billion

North America led the global market in 2020 with a revenue share of over 32% and is expected to maintain this dominant position through 2028. North America is home to many large enterprises that are constantly exposed to the risk of cyberattacks and regulatory scrutiny. As a result, enterprises are opting for flexible and advanced software solutions that require fewer resources due to staff shortages and cyber threats.

Key players in the eGRC market include IBM (U.S.), Microsoft (U.S.), Oracle (U.S.), SAP (GER), and SAS Institute (U.S.), as well as several other major competitors, primarily from the United States. These vendors have adopted various types of organic and inorganic growth strategies, such as new product launches, product enhancements, partnerships, and mergers and acquisitions.

On the other hand, the Asia-Pacific region is expected to be the fastest growing regional market for this sector during the aforementioned forecast period. This is due to the growing IT industry in India and the manufacturing sector in China.

Market size of ISO 27001 vs SOC 2 audit framework

The market size of organizations that have met SOC 2 and/or ISO 27001 in recent years is difficult to determine.

However, we were able to gather some useful statistics according to hackernoon:

Start-up companies in pre-seed and seed (less than $1M in funding) have a harder time getting SOC 2 compliance, with only about ~7% of them featuring the compliance.

However, about 45% of the companies with $100 million or more in funding feature a SOC 2 compliance.

Additionally, only 18% of SaaS companies have secured either SOC 2 or ISO 27001, with 13% having both.

IT and security apps are the biggest market of SOC 2 with 33%.

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