Spurred in part by Russia’s campaign of hybrid warfare in Ukraine, the Pentagon will purchase more electronic warfare equipment, a move that could lead to consolidation in the cybersecurity industry, an analyst said in a new report.

Russia’s use of electronic warfare combined with conventional combat tactics during its 2015 invasion of Ukraine exposed how the Department of Defense needed to increase its spending on cybersecurity, Brad Curran, an analyst at Front & Sullivan told Fifth Domain.

Greater use of offensive cyber and electronic weapons by Russia means that the U.S. is expected to boost defense of its communications systems, and possibly look to increase its own offensive weapons.

A September report from Frost & Sullivan projected a 2.9 percent compound annual growth rate in cybersecurity spending from the Pentagon through 2023.

Securing electronic communications “is a high priority,” Curran said. The Defense Department is “just getting started” and it will be “a continuous effort to make sure our combat networks are secure.”

The focus could benefit firms like Raytheon, which have invested heavily in electronic warfare, Curran said.

Curran said that government purchases of enterprise systems will likely stay the same or even shrink because many of the acquisitions are meant to boost efficiency. One example is the government’s investment in the cloud. But he predicts an increase in purchases of electronic warfare and offensive cyber capabilities, which will favor larger defense firms. The result will be consolidation of the cybersecurity industry among the biggest companies.

During the Black Hat conference, one cybersecurity firm described the industry as “cut-throat” and added they expected industry consolidation because of purchases from the largest contractors.

In 2017, the Pentagon awarded more than $1.22 billion to cyber contractors. That money went to 69 prime contractors and 50 different companies.

The Pentagon’s 2019 budget request for cybersecurity totals $3.6 billion, according to the report, half of which is dedicated to operations and management. The Air Force has the largest share of cybersecurity programs, at $2.19 billion.

Booz Allen Hamilton was the top recipient of public contracts from the Pentagon in 2017 with a total of $115.4 million in awards, according to the report. In August, the Pentagon awarded Booz Allen Hamilton a $91 contract to manage cybersecurity for the Ballistic Missile Defense System.

But while artificial intelligence will be an area that the U.S. government focuses its investments on the future, Curran said it is not currently a major factor in acquisition.

“The future is AI but right now it is more of a concept," he said.

Justin Lynch is the Associate Editor at Fifth Domain. He has written for the New Yorker, the Associated Press, Foreign Policy, the Atlantic, and others. Follow him on Twitter @just1nlynch.

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