In case you missed the Q1 NextWave Huddle, our quarterly partner webcast, I encourage you to watch the full replay and to review the presentation, especially the Q&A session with our Chairman and CEO, Mark McLaughlin. We weren’t able to get to all of the questions so Mark’s answers are aggregated below.
FY16 was a record breaking year and you helped make it possible. In FY16 we grew revenue 49 percent year over year to $1.4 billion, compared with $928.1 million in fiscal year 2015. We ended the year with 34,000 customers worldwide, more than 12,500 WildFire customers and we reached an inflection point with Traps exceeding 500 customers, putting Traps on a similar adoption trajectory as WildFire, which was announced November 2011.
We don’t succeed, if you don’t succeed and your momentum and highlights in FY16 were simply phenomenal. We had 26 partners that started FY16 with greater than $1 million in Palo Alto Networks revenue grow more than 100 percent. We had 453 partners double their business with us. You, our partners, earned more than 18,000 certifications, more than double FY15. And, you secured more than 3,000 new Palo Alto Networks customers.
Here are my key takeaways from the Q1 NextWave Huddle:
1. Our Mission: Mark highlighted this before his Q&A and I think it is critical that we all understand that while we are all running and driving a business, when it comes to Palo Alto Networks we have a bigger mission. Our mission is to protect our way of life in the digital age by preventing successful cyberattacks. This is a remarkable endeavor to be a part of and can fuel outstanding momentum in FY17.
2. Next-Generation Security Innovator: Our top global channel priority in FY17 is to build an ecosystem of next-generation security innovators, experts at enhancing the Next-Generation Security Platform. Partners who want to: drive larger deals; be more self-sufficient; optimize their revenue mix; and maximize profitability will transform with us to become next-generation security innovators.
3. Need to Know for Q1 FY17:
- Generate Demand and Accelerate Sales: We have several new channel kits that you can use to generate demand and accelerate sales. These kits Traps v3.4, Security Life Cycle Review and Ultimate Test Drive: Next-Generation Firewall, Threat Prevention and Virtualized Data Center, feature a campaign enablement overview presentation, co-brand emails, call scripts, copy block and a customer presentation along with links to other helpful resources.
- Partner Evaluation Tool: This new tool can help you reduce your NFR cost by more than 20 percent by making it easier to register NFR equipment, manage your NFR devices as well as activate and renew NFR licenses.
- Updated Tracker Tool: You can now monitor and track your NextWave Channel Partner Program compliance. To access the new tool, click on the Track NextWave Partner Status button on front page of the Partner Portal.
- NextWave Channel Partner Program Compliance Communications: This will be sent no later than September 28, 2016. Please contact your CBM or nextwave@paloaltonetworkks.com if you have questions.
Mark Unplugged Q&A Continued:
Q1: We have heard Ron {Myers} talk about the Next-Generation Security Innovator as the future of the channel, what is your view on the future of the channel? What role do {your} partners play in the future of Palo Alto Networks?
A1: Partners have been essential to making us the company we are today and will be vital to helping us achieve our mission to protect our way of life in the digital age by preventing successful cyberattacks. To capitalize on this opportunity, together with our partners, we must continue to adapt to the rapidly changing security market. To help our customers protect their organizations and our partners succeed, we have built from the ground up the first fully integrated Next-Generation Security Platform.
We currently have more than 34,000 customers worldwide who are realizing the benefits of our unique platform approach. The next step is building an ecosystem of Next-Generation Security Innovators, experts at enhancing our Next-Generation Security Platform. This is a top priority for our worldwide channels team in FY17 and is a security market game changer. I encourage all of our partners to join us on the transformation journey as it will allow us to continue to work together on defining the next-generation security market.
Q2: I recently read a CRN story where you talked about Traps being at an inflection point…why do you think this is the case? When will the analyst, like Gartner with their endpoint MQ (Magic Quadrant), start validating Traps? And what does this mean for us (your partners)?
A2: When we look at our new offerings, we see a strong correlation between what we experienced in the past and what we expect in the future. At this point in the Traps Product Lifecycle, we are seeing almost the exact adoption rates as we have seen with our previous subscriptions like WildFire. As we train and enable our teams, including partners, we would expect to see similar ongoing momentum. Today we have more than 500 customers and this is reflecting a similar inflection acceleration point to previous adoption rates. On Gartner – our Products and Marketing teams continue to work with leading experts and drive awareness.
Q3: If history repeats itself, and Traps is ready to take off a la WildFire, where are Aperture and Autofocus today?
A3: We launched these one year behind Traps so we expect big things soon.
Q4: What areas of the business are you investing in most in FY17?
A4: Technically, we are very focused on the cloud as well as analytics and continued improvements in threat intelligence. From a go-to-market standpoint, as we grow as an organization, we continue to invest in key “routes to market” at a partner level. We are making significant investments with Managed Security Service Providers and, of course, we are always investing in the channel to assist you in becoming our Next-Generation Security Innovator.
Q5: What do you see as the partners’ role in professional services? I feel like I sometimes compete with Palo Alto {Networks} on professional services?
A5: This is a fair question. Let me start by saying that we are a technology company and, as such, have a very small PS capability. First and foremost, we believe that the customer will ultimately decide how professional services should be delivered. With that said, we have a commitment to our partners and if they are professional services accredited around our CPSP Program - then we will lean on our partners for delivery. This will only work well when our teams are collaborating in field and if you are defining a customer solution around Palo Alto Networks. We encourage you to utilize deal registration so our own teams become collaborative with you and support your efforts.
Q6: Other security companies have been claiming for years they have a platform and if you attended RSA everyone had a platform, how do you curb a customer’s objection that the Palo Alto Networks platform is marketing hype?
A6: That certainly seems to be the case where everyone says they have one. A real platform in security must have the ability to interdict an attack everywhere it had to do something right, have all those capabilities be native to each other in one processing engine. And, as a result, it must be highly automated across the attack lifecycle, be able to provide leverage to every customer from every other customer, and be able to do all that consistently wherever data may be – on prem, endpoints, SaaS applications, cloud, etc. We have that and my simplest non-technical proof of that is that over the last 11 years we have bought or licensed very little; we have built it all seamlessly to provide highly effective breach prevention and no other vendor can make that claim.
Q7: What do you tell healthcare customers that are fearful that WildFire doesn’t support HIPPA compliance?
A7: We provide a few different options for WildFire deployment in a healthcare/HIPAA environment when there is concern about transmitting protected health information (PHI) to our WildFire cloud. Healthcare customers can select from these deployment options:
- Portable Executables to Public WildFire: Some healthcare customers decide to only transmit executables to our Public WildFire cloud due to the very low probability that portable executables (PE) contain PHI.
- Hybrid WildFire Cloud: Healthcare organizations that desire to inspect more than just PEs can deploy WildFire as an appliance in their data center. PEs are transmitted to the Public WildFire Cloud and all other files (potentially containing PHI) are transmitted to their private WildFire appliance.
- Private WildFire cloud: Healthcare organizations can also decide to take advantage of the increased performance of a pure private WildFire cloud appliance in their data center.
Q8: What is your CASB plan and how do you intend to compete in this market?
A8: Data in SaaS applications is very important. As I mentioned in the definition of a real platform, you have to be able to secure data wherever it resides. That is why we have Aperture, which is a very powerful CASB capability in our platform. Unlike other vendors, we don’t proxy as we know that doesn’t scale and it breaks applications, so we have a much more scale-able offering. And, we have complete application visibility from the beginning. Also, like all other point solution shortcomings, no other vendor has the power of the platform where automating protection across the whole enterprise is possible. Point solutions will be subsumed.
Q9: How important is the development of an MSP channel for you?
A9: This route to market is very critical and we are developing programs and offers that provide repeatable opportunities for those partners that have the capability and competency to deliver such solutions.
Thank you Mark for taking the time to answer these questions. Together we delivered record breaking results in 2016. In 2017, let’s breakaway.