Deepwatch and the MDR market get a $180M injection as orgs look to cut costs

The mantra for enterprise security in 2023 is “do more with less.” With economists saying that there is a 63% probability of a recession in the next 12 months, cost-efficiency is a mandate for even the most well-resourced security teams. These factors are all leading to increased interest in managed detection and ersponse (MDR) solutions. 

Today, MDR provider Deepwatch announced that it has raised $180 million in financing from Springcoast Capital Partners, Splunk Ventures and Vista Credit partners to meet growing demand for managed security services. 

Deepwatch provides organizations with a cloud security platform designed to offer 24/7/365 automated detection and response to cyberthreats, as well as on-demand support from security experts who can help resolve security incidents. 

MDR solutions like those offered by Deepwatch have the potential to enable security leaders to continue to protect their data in complex cloud environments, while reducing upfront spending on technologies and technical staff. 

How MDR helps ease the cost of security 

The biggest advantage offered by MDR solutions is the ability to eliminate the need to build, staff and maintain an on-site security operations center (SOC). 

In-house SOCs are so expensive that, according to Netsurion, setting up a facility can cost anywhere between $1.5 million to $5 million annually, depending on the technology used and the experience of the analysts involved. 

This is a significant investment, and as the attack surface continues to expand as organizations implement hybrid and multicloud deployments, there is always potential for spending to expand as new solutions emerge to secure these environments. 

At the same time, with research finding that 83% of cybersecurity teams are affected by talent shortages, it’s becoming increasingly clear that a DIY approach to security doesn’t work for a large number of organizations. 

MDR provides a solution to these challenges by enabling security teams to outsource to an external SOC that has the technologies and expertise they need to secure their environments, without the need to purchase elements upfront. 

“MDR providers augment, complement and upskill clients’ internal security teams and security operations,” said Charlie Thomas, Deepwatch CEO. 

He continued: “Security teams leverage MDR providers to obtain 24/7 monitoring of their security events, augment the expertise of their internal SOC analysts, provide stability when personnel depart the organization, assist with or perform response actions and detect and contain threats, offering assurance that cyber adversaries are not in the IT environment.”

The approach offered by Deepwatch and MDR providers isn’t about replacing the security team, but augmenting them, so that they have access to additional technologies and expertise on a subscription basis. 

A look at the MDR market 

The MDR market is growing rapidly, with Gartner estimating that by 2025, it will generate $2.2 billion in revenue, up from $1 billion in 2021, growing at a compound annual growth rate (CAGR) of 20.2%. 

Deepwatch is competing against a wide range of providers in the space, including Sophos, which offers a MDR with customizable service levels.

Sophos’s core solution provides access to more than 500 security experts who can support organizations with threat hunting, deep malware analysis and incident response for both human and AI-driven threats. Thoma Bravo acquired Sophos for $3.8 billion in January 2020. 

Another significant competitor in the space is Arctic Wolf, which provides organizations with 24/7 monitoring of networks, endpoints and cloud environments. 

Arctic Wolf maintains a team of cybersecurity experts who can investigate suspicious activity within an organization’s network to identify legitimate breaches or false positives and respond with root cause analysis to investigate intrusions.   

It’s worth noting that last year, Arctic Wolf closed $401 million in funding as part of a convertible notes offering.

However, Thomas argues that Deepwatch differentiates itself from other MDR providers due to its focus on supporting large enterprises. 

“While other MDRs serve the security teams of small to medium-sized businesses, Deepwatch leads the market in MDR for enterprises and serves the Fortune 2000,” he said. This is with “a dedicated team of cyberexperts that get to know their customers’ unique environments and serve as an extension of their in-house teams.”