Sometimes Wall Street investors and channel partners don't exactly see eye to eye. Such is the case in recent days. Indeed, Wall Street wants even faster growth from Palo Alto Networks. But channel partners seem pretty darn pleased with the company's next-generation security strategy.
To understand where Palo Alto is heading with partners, rewind to November 2016. At the time, Channel Chief Ron Myers described how the company was empowering "next-generation security innovators." Grab some time with Myers, and he'll credit wingman Lang Tibbils for coining that security innovators phrase.
Admittedly, we've all been seeking a term that takes us beyond traditional VARs, MSPs and security resellers. Tibbils, senior global marketing leader and strategic communicator at Palo Alto, says "next-gen security innovators" is the perfect term to describe the company's top performing partners.
The math suggests he's onto something. A rather impressive 26 partners grew their Palo Alto-related revenues from at least $1 million in 2015 to more than $2 million in 2016. One hundred percent+ growth in the security sector? That's hard to find elsewhere.
So what's next? The answers come from Palo Alto's partner surveys and meetings. For instance, partner surveys revealed a midmarket and branch office gap in Palo Alto's next-gen firewall lineup. The company promptly filled the gap with a new product launch -- the PA-800 Series -- in February 2017.
Around the same time, PAN-OS version 8.0 arrived. The security-centric operating system includes more than 70 new features that address threat and credential theft prevention, secure cloud enablement, and more, Palo Alto claims.
MSSP Partner Program
Palo Alto's product line has always featured recurring revenue opportunities for partners. But more recently, the company has been "adapting for even more change" -- especially as end-customers demand more OpEx options, according to Myers.
Hence, the rise of Palo Alto's MSSP Partner Program. In recent months, the company quietly tested and rolled out the program to selected partners. "We didn't want to dilute the market by signing up everyone," Myers told ChannelE2E during the recent RSA Conference 2017. "Operationalizing this has been very important. We're very surgical in our approach."
So are channel partners, he adds. Many service providers, for instance, now communicate across multiple end-user organizations -- from networking teams to CISOs (chief information security officers) to CIOs. Many of those same partners, Myers says, are becoming MSSPs. In response, Palo Alto has built training, sales support, deal protection and more for that partner set.
Several of the MSSPs are telecom giants -- names like AT&T, BT and Verizon come to mind. But Palo Alto is prepared to nurture more MSSPs in the months ahead.
Wall Street and Partners: The Disconnect
Now, back to the opening sentence of this blog. Palo Alto is still growing rapidly -- but Wall Street wants faster growth.
Revenue was $422.6 million in Q2 2017, up 26 percent from $334.7 million in Q2 2016. It was a record showing for the company. However, the results were slightly below Wall Street's expectations -- and the company's stock fell sharply on the news last week.
The silver lining: Discussions with partners indicate a "healthy pipeline and win rates" in the maturing security market, Wunderlich’s Bill Choi said in a report.
Among Palo Alto's core rivals: Cisco Systems, which has intensified its security focus; and Barracuda Networks, which is now blurring the line between security and business continuity. At the lower-end of the market, a revitalized SonicWall is preparing its own MSP partner program -- though potential overlap with Palo Alto seems minimal.
Amid that competition, 26 percent growth back at Palo Alto Networks is no small feat. And one hundred percent+ growth for Palo Alto's top partners is downright impressive. Long live next-generation security innovators. And the recurring revenues they drive.