How government cyber cuts will affect you and your business

Deep cuts in cybersecurity spending risk creating ripple effects that will put many organizations at a higher risk of falling victim to cyberattacks

03 Jul 2025
 • 
,
4 min. read

We often hear about cybersecurity fatigue, the mental and emotional strain that weighs on individuals and teams on the frontlines and leads to decreased productivity, burnout and, ultimately, increases the risk of a successful cyberattack. Add staffing and funding cuts to the mix, and the problem is only likely to get worse. In fact, the impacts will be felt not only by those directly involved, but will extend to cybersecurity vendors and service providers, who will have to either innovate their products or adapt their service offerings to changing market dynamics.

The shifting ground

Recent cuts in federal budgets and workforce reductions in key organizations such as the Cybersecurity and Infrastructure Security Agency (CISA) will undoubtedly weaken the cybersecurity posture of not only the federal government, but of all businesses and institutions – whether they utilize CISA’s threat intelligence and notifications or are reliant on best practice guidance through cybersecurity frameworks.

Beyond the agencies that are directly funded by the U.S. government, there are many companies that provide specialized cybersecurity services and technology to both federal and state-level entities. Governments are among the largest consumers of cybersecurity services, and private companies are often reliant on the revenue from these contracts. Thus, any reduction in contracts may lead to reductions in headcount and in investment in research and development. At the same time, it may further accelerate demand for automated features and AI support – perhaps even beyond what is currently proven efficacious.

If this all seems far away from your day-to-day, real world, then you may need to think again. Consider the direct impact of initiatives like the U.S. State and Local Cybersecurity Grant Program, which provided almost $700 million in funding between 2023 and 2024, giving a much-needed boost for states that needed to refresh and improve their cybersecurity posture. Many states used the funding to centralize some elements of their cybersecurity, allowing all state-funded entities to benefit from volume licensing of modern, advanced cybersecurity technologies. For example, if your local school district or regional government benefited from these types of funding programs, any change in future funding could put you and your family at risk should there be a cyber-incident.

Stifling innovation, straining talent

Some vendors latched onto these federally-funded initiatives and grabbed market share, dominating the opportunity. It’s vendors such as these that are likely to fall victim to funding cuts, either through reduced service contracts or future grant funding. This market dominance also led to single-vendor monoculture issues (you can read more about my concerns on this in this article). As affected cybersecurity vendors take stock of the situation, they will implement their own reductions in headcount, which some have already done, and will make cuts to their R&D budgets. This directly affects the innovation of future technologies, which, in turn, may reduce cybersecurity defense effectiveness.

There is an upside – or is there? As companies reduce headcounts, the talent shortage in cybersecurity teams should be alleviated to some degree as additional talent becomes available. At the same time, those left in smaller, leaner teams will likely suffer increased cybersecurity fatigue to the point where they may decide to leave the industry and look for less stressful opportunities. And if the market has more talent to choose from, then salaries being offered could plateau, maybe even decrease, making the industry less attractive to new talent and those considering a career in cybersecurity. Lower investment may also see education establishments removing or reducing the opportunity for students to participate in courses, further shrinking the pool of future talent.

Filling the void

There may be a silver lining. Federal cuts to CISA could create new opportunities for Managed Service Providers (MSPs) and cybersecurity vendors offering Managed Detection and Response (MDR) services. With reduced federal funding, organizations may seek alternative solutions from operational budgets to maintain their cybersecurity posture, turning to private-sector providers for their expertise and resources. This shift could lead to increased demand for MSPs and MDR services, as businesses look for cost-effective and reliable ways to protect themselves.

The reduction in funding may also be felt in other ways; for example, in the evolution of standards and dissemination of intelligence and awareness that is often gained from public-private collaborations. Even critical resources like the MITRE CVE database hosting recently faced a funding challenge, and while the issue did get resolved, at least for now, it served as a stark reminder of how quickly even foundational elements can be threatened. Agencies such as the National Institute of Standards and Technology (NIST), who are responsible for the development of cybersecurity frameworks that are the backbone of many companies’ cybersecurity policies, may struggle to develop new frameworks and delay crucial updates to existing ones.

These are examples of how funding issues may materialize; however, in reality, the impact is likely to be felt across all agencies, institutions, businesses and even by consumers who become the victims of breaches that could have been avoided.

The true impact of a reduction in federal funding that affects the cybersecurity sector will not be immediately apparent; the underinvestment it causes could take years to materialize. Slowing innovation and the adoption of new technologies will play out over time and the issue caused will be on someone else’s watch.

The bottom line

One thing is for certain, though: there will be no slowing down the development of the sophisticated techniques being used by cybercriminals. A funding reduction in cybersecurity hands cybercriminals a significant opportunity, ensuring their activities will reap long-term rewards and maintain stability in their revenue stream.