Resilience over hype: a cautionary cybersecurity market tale
The UK cybersecurity market is facing a perfect storm of funding constraints, margin compression and operational challenges that threaten even established providers with strong market positions. Recent developments demonstrate how these forces can overwhelm companies, regardless of their technical capabilities or market reputation.
Market vulnerabilities exposed
This pattern is becoming worryingly familiar across the sector. Companies that seemed stable can find themselves in untenable situations. Take the recent collapse of Edinburgh-based Adarma, once hailed as one of the UK’s fastest-growing security operations specialists. The company’s revenue declined from £47.4 million in 2023 to £43 million in 2024, a 9% year-on-year drop that triggered a cascade of financial problems.
By April 2025, private-equity backer Livingbridge had withdrawn support, removing the working-capital lifeline the company desperately needed. Just three months later, joint administrators were appointed, on 14 July 2025 trading ceased immediately and 173 staff lost their jobs.
What makes this particularly telling is that the failure wasn’t due to technical shortcomings, their SOC capabilities were well-regarded and their client relationships generally strong. The failure was fundamentally financial, highlighting systemic market issues.
Warning signs for the sector
The cybersecurity market faces multiple interconnected challenges:
Margin compression
Across the industry, the inability to maintain pricing power against global MSP competitors is gradually eroding profitability. Even innovative service providers struggle to justify premium rates in an increasingly commoditised market.
Client concentration risks
Many cybersecurity firms face dangerous customer concentration. The loss of key customers or major accounts, can drive revenue down significantly, creating cascading cash flow problems. While some firms maintain relatively broad customer bases, losing multiple large accounts simultaneously can prove devastating.
Cash flow paralysis
Revenue declines can trigger liquidity problems that prevent structured turnaround efforts. Without working capital for marketing, product development or sales restructuring, companies become trapped in downward spirals, unable to invest in the very capabilities needed to retain customers.
Capital drought beyond early stage
According to the ECSO/EIB investment-gap report, VC funding has collapsed dramatically, with most available capital now going to early-stage startups. More established firms seeking growth funding face severe under-capitalisation that hampers both product development and financial stability
For software companies dependent on continuous innovation, this funding gap creates pressure to achieve profitability early, often at the expense of customer relationships or technical advancement.
Cost inflation outpacing revenue growth
Rising wages and operational expenses are consuming cash reserves faster than new business can replenish them across the sector.
Customer behaviour and vendor selection
Recent market disruptions will accelerate changes in how customers choose their cybersecurity partners. Organisations will become increasingly cautious about long-term contracts with financially unstable providers, concerned about being locked into relationships that could leave them stranded. They’ll question vendor partnerships where poor business models threaten reliable service delivery. Multi-year agreements that once seemed beneficial will appear risky when the provider’s financial stability is uncertain.
Industry observers expect that savvy customers will recognise warning signs and move to alternative providers before collapses occur. Each formal collapse will serve as a market-wide wake-up call about the importance of vendor financial due diligence.
The Broader Market Reality

This funding crisis particularly impacts mid-stage companies trying to scale operations. With capital concentrated in early-stage rounds, established firms seeking growth funding face a perfect storm of market conditions that can quickly turn promising businesses into cautionary tales.
The true cost of vendor failure
When any cybersecurity provider fails, the impact extends far beyond contract renegotiation:
People and platform disruption
When SOC monitoring goes down, attackers can break into systems and establish long-term access without being detected.. Beyond technical systems, customers lose the human expertise that acted as an extension of their internal teams, forcing organisations to absorb additional risk and potentially divert internal resources to cover security gaps.
Service continuity breakdown
Security response plans often rely on specific vendor teams and support processes. When these disappear overnight, organisations face weakened security response capabilities precisely when they may need them most and any remaining vendor staff during company closure may lack the focus needed for critical security work.
Emergency procurement
Finding replacement services under pressure leads to overtime costs, setup fees and unexpected expenses, with rushed decision-making that increases the risk of choosing the wrong provider..
Data accessibility concerns
Customer logs, threat intelligence and historical security data may become inaccessible during administration proceedings, creating compliance and forensic challenges.
SCC – Stability through ownership structure
SCC represents a fundamentally different model, one built on private, family ownership rather than venture capital dependency. As Europe’s largest privately-owned IT services company, SCC serves over 2,500 organisations across 50 countries with £3.3 billion in group revenue. This scale, combined with 100% family ownership, creates operational independence that VC-backed competitors simply cannot match.
The ownership structure enables patient, long-term decision making without external pressure for unsustainable growth or premature exits. While mid-stage cybersecurity firms struggle with Series A funding constraints, SCC’s financial independence allows continuous investment in capabilities like the new CREST-accredited Birmingham SOC and the 58% year-on-year growth in cyber-services. This represents the stability that only comes from five decades of consistent market leadership and reinvestment.
Strategic implications for risk management
The Adarma case highlights why vendor selection should prioritise financial resilience alongside technical capabilities. Organisations can no longer rely solely on technical demonstrations and feature comparisons when evaluating cybersecurity partners. Cash flow problems create operational risks that standard procurement processes don’t capture, making financial due diligence as critical as security assessments.
Practical recommendations
Based on current market conditions and the lessons from recent failures:
Service transition expertise
SCC maintains a proven track record of seamless service transitions, including integration with existing ITSM platforms to ensure minimal disruption for organisations requiring urgent continuity of service.
Partnership selection methodology
When choosing cybersecurity partners, organisations should evaluate ownership structures, funding dependencies and long-term viability alongside technical capabilities. The most innovative solution becomes irrelevant if the company behind it cannot maintain operations.
Diversify critical capabilities
Distribute SOC, endpoint protection and identity management across multiple financially independent providers to eliminate single points of failure.
Prioritise proven stability
While innovation matters, established providers with decades of operational experience and conservative financial management offer superior continuity assurance for mission-critical security functions.
Looking forward
The cybersecurity market will likely see additional consolidation and failures as capital remains scarce and competitive pressures intensify. Organisations that recognise vendor financial health as a security issue, rather than merely a procurement consideration, will be better positioned to maintain continuous protection.
For those concerned about their current cybersecurity vendor landscape, SCC offers expert consultation on market risks and vendor resilience. Our five decades of market experience provide unique insights into identifying warning signs and building more robust security partnerships.
Contact your SCC account director or fill the below form in to discuss your potential exposure and explore strategies for strengthening your vendor portfolio.
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