 theCUBE presents Ignite 22, brought to you by Palo Alto Networks. Hey guys and girls, welcome back to Las Vegas. It's theCUBE, we are live at Palo Alto Networks Ignite 22. This is day one of two days of CUBE coverage. Lisa Martin here with Dave Vellante. Dave, we've had great conversations today, talking with executives, the partner ecosystem is evolving, it's growing at Palo Alto Networks. Going to be digging into that next. Well, we heard a lot of talk about Palo Alto, the goal, $100 billion market cap company and to me, a way and I think a critical way in which you get there is partner with the ecosystem because you can't do it alone. The power of many versus the resources of one. Agree, completely agree. We've got Carl Soderland with us, SVP of North America Ecosystem Sales at Palo Alto Networks, welcome to theCUBE. Thanks so much for having me, it's great being here. So here we are, first full day of the conference. Actually started yesterday with the partner summit. Give the audience a flavor of the partner summit, who was there, what was talked about, what's the current voice of the partner these days? Yeah, great question. So we had 150 partners from around the globe representing all of our different routes to market and for us, our partner community is expanding. We work with system integrators, we work with GSIs, we work with service providers, distributors, traditional value added resellers, so it was a whole host of partners that were there. It was a C-level audience and we really talked about the direction of where we're going as a company, how they can continue to invest with us and have greater success long-term. And so from a voice of the partner standpoint, what they're here to do is share with us where they want to engage more, how we can enable them to be successful. You talked about the power of one versus the community. We're really looking at a segment of the marketplace right now for us to scale and hit our aspirational goals, what we can't do with Palo Alto Network Employees. We have an employee base of 12,000 people. If you take our ecosystem, it's over 100,000 employees. So if we can get them aligned and selling and motivated, it's going to be a good day for all of us. So what are they telling you? Where do they want to spend their time? Where do they want to add value? Where are they winning? Yeah, that's a great question. So there's a transformation that's going on right now in the partner community. What's happening is a lot of partners that are transitioning from what would be traditional transactional partners or resale partners to being services led. And the market's driving them there. And what I mean by that is that customers are in a desperate dire state needing assistance, figuring out and solving these very complex security problems. So if there's a subset of partners out there that have the skill set and capabilities that can come in from a consultative standpoint, help them develop the structure through deployment and full loan management and do life cycle management, that's a tremendous value. I mean, the numbers you hear thrown around in the industry right now is up to seven million security IT jobs right now that are out there. The open headcount is tremendous. People can't hire, people fast enough. All of us in the industry are going through and trying to find early in career or college graduates so we can train quickly or cross train from other segments to get them into cybersecurity. So if our part of community can continue to get skilled and expand, it's only going to help. And the cloud is obviously, where does the cloud fit in, Carl? Because a lot of the partners, when the clouds really started on the steep part of the escrow, we're like, we have an opportunity here. And by the way, if we don't transition our business, we could get commoditized. So that, what you were talking about, they're transactional. We can help people move to the cloud and a big part of that has got to be, we can secure them in the cloud. Because in a lot of ways, cloud security is great, but in a lot of ways it adds complexity. What are you hearing from the partners? So we are fortunate at Palo Alto Networks. When you look across the three largest cloud service provider from a Google, AWS, and Microsoft for sure, we're either their number one ISV or absolutely their number one security ISV. So we've got a great relationships with them. Now our partners are coming along and saying, how do we transact, how do we add value? A lot of times that value to your question is wrapping services around it to make sure it's a successful deployment. Because exactly what you stated, the complexity is an all time high. So how do we make sure that we can solve a complex problem in a short term while increasing their security posture? And that's really the goal. And so where there's sometimes complexity and mystery, there's opportunity. Part of it's going to be profitable in doing that. I wrote a piece once, chaos is cash. I have a security, criminals and vendors as well. Yes, yes. Where there is challenging complexity, there is great opportunity. Talk about some of the partner program evolution and some of the things that were announced with respect to the Next Wave program just yesterday. Yeah, so at Next Wave, the program's been around for 12 years. We constantly are looking to make enhancements. And how we make those enhancements are by going out and speaking with these partners and listening to what they need. So I have the honor to get to represent what their needs are and how we bring it to market for them. So a couple of interesting announcements that we made yesterday. First of all, we announced a new structural format for the program, which is really going to allow our different route to markets to have a program that's fit for them. Because in the past, when we were just traditionally a firewall company, when the ecosystem just meant resale, it was an easy model to have. It's complex right now. Sometimes it's resale. Sometimes it's influence. Sometimes it's services only. We really need to be flexible and credible. So we announced a services only path. So if you are a consulting company, if you are a insurance company and you want to bring opportunities and leads to Palo Alto Network and you want to provide the services, but you're not interested in the transaction, you don't want to get involved in that, we now have a pathway for you to support you, to enable you and candidly to give you recognition within Palo Alto Networks from an alignment standpoint. So we're super excited about that. As I know, you guys speak quite a bit about the managed services industry. So it's a red hot area within Palo Alto Networks. One of the needs out there was that not all managed service partners are created equally. And so some have fantastic capabilities, some have gaps. We were calling it a P2P, part of the partner program within managed services. So our two managed services partners can actually work together to solve the problem that the end user has and give them a better outcome and fill each other's gaps. So candidly, it's been going on for a while, the partnering, but we've never really recognized it. So we really built a program around it and now are sponsoring and supporting it versus people doing it on a sidebar. So those guys were here in force yesterday. Yes, sir. Right? And so obviously a lot of energy, I'm sure. Yeah. Do you see a day where they're here in force on the show floor? Yeah. And how do you see that evolving? So they are here in force in the show floor. Talk about that. I can see a few of them. I'm looking at AWS, who's our, you know, we are their largest ISV. I'm looking at CDW. We had them on. Who is our, if not largest, second largest partner globally right now and continuing to grow at a rate, well, they will probably be our first billion dollar partner to think about the size and scale of that relationship and where we've come from. They have a name CDW. They never really thought of CDW, right? As a, as a security firm. Wow, what a transformation, but please carry on. And think about that. Let's talk about CDW saying, think about reach that CDW has is a $23 billion organization. And in a way an inside out sales model, meaning there's a tremendous reach they have from their inside sales team and the relationships that they have, traditionally, historically, they were procurement relationships. In a way, and I said this to the CDW team, they were the easy button in the past. Now what they're doing is they made seven acquisitions over the last two years, all of them services oriented. So now they're coming in as a consultative viewpoint and solving a lot of complex problems. And I see Google Cloud right here. And they're the great partner for us that we continue to invest in. We have a great amount of integration technology integration with them. And so, and those are the three that I'm seeing just looking over my left shoulder, right? If I turn around, I'll probably name five more. So the majority of this room are the partners that fall within our ecosystem today. Fantastic. So, okay, so what's your vision for where you want to take this ecosystem? Because as I said at the top, I mean, ecosystems are sort of the hallmark of a, I guess you're not a cloud company. See, I think of you as a cloud company. As do I. And so, okay, good. So, and I know you don't own your own public cloud. You know, your history is you had your own data centers, but you're the security cloud. And so a security cloud, any cloud needs a great ecosystem. So what's your vision for the ecosystem? Let's go, you know, five plus years out. Sure. We start with the end in mind. And what I mean by that is we always start with the end user. What's the end user's needs? The end user today needs flexibility with how they consume the technology. They need help in how they support and deploy the technology. They need guidance in how they plan out for their future and what their growth is. So what we're doing is building a very diverse set of partners in our ecosystem that all have special skills that they bring to the table. So when Nikesh sits up here and talks about being a 10 billion or a 20 billion or a 50 billion dollar company, we absolutely cannot do it without our ecosystem. And without having a very diverse ecosystem that all has different skills that can help us scale. Cause again, Paul also does not want to be a services company, right? Let's work with the people who are the best at that. When we think about the Deloitte's and Accenture's and the value they have within the end user base and our joint customer base, what a fantastic time to partner together and solve those boardroom challenges. And that's where I really see the vision is that at the boardroom, we're building out a plan that's three to five years that's going to continue to increase their security posture because if we're not forward thinking like that, we'll be left behind because the bad actors are thinking about how they find the different areas to penetrate. They're getting so sophisticated, the bad actors, the adversaries, they are well funded, they're motivated, the ransomware attack numbers in terms of the velocity, the complexity, it's no longer, are we going to get it? It's when? Yeah. Big challenge for organizations across, I mean really across an organization, regardless of industry. Are you guys having any conversations with boards in the partner organization to help align the board with the executive level and really not just have security as a board level initiative, but actually being able to execute a strategy? Yeah, and you nailed it. It's not an initiative. An initiative to me means there's a beginning and an end. A strategy means there's going to be a comprehensive approach how you continue to improve. And we are very fortunate that a lot of our largest partners around the globe have that position within the boards, where they are the trusted advisor. So what we're doing now is enabling them and giving them the skills so they can have a more comprehensive conversation around our platform approach. Around the challenges, you know, BJ, I knew who was with you earlier today, likes to say that the average customer he goes and sees has 50 to 70 disparate technologies within their environment. How do you manage that? How do you maintain it? How do you do renewals? Oh, and by the way, most likely the people who actually initially procured that aren't with you anymore. They're a different company. So the need for a platform approach is there more so than ever, but the decision for the platform quite often has to come from the most senior levels within the organization. Because again, I'm going to go back to your, what was your chaos line that you said? Chaos is cash. Chaos is cash, well also chaos is job security. So if you're at the lower level within an organization, that chaos and that magic gives you a little job security, but that's a short term, long term, you really need to think about how you're protecting the environment holistically. So it is a boardroom decision down that we need to have. And you know that chaos, the motivation for that piece that I wrote was from the criminal standpoint. Right. And then I was like, okay, but there's great opportunities for the technology industry. But I think that, you know, where we're headed, and I wonder if I can get your thoughts on this Carlos, we always talk about the boardroom. I think we're going now beyond it. Here I am, I'm hypersensitive about my security. I got password managers, two factor authentication. I don't want SMS based two factor authentication. I want my own authenticator. And that's still not enough. I got air gaps, you know, for my crypto, you know, I'm super paranoid. My point is, I think the individuals are getting much more savvy about security. Why? Because we've all been hacked. You know, it's like when you lost your data because you weren't backed up. You know, that never happens anymore. It's in the cloud or, you know, some people have multiple backups. So it's becoming a cultural trend beyond the board. And it's because of the board. What's it, hey, this is really important. And so I think it's not only top down. I think you're going to see bottom up and middle out. And the exciting part for Palo Alto Networks is, and maybe for you as well, is there any more exciting environment to talk about that's rapidly changing and constantly changing? You could come back next week and our conversation is going to change as far as what we're doing. We constantly need to be thinking three steps ahead of where we're going to move and be flexible and dynamic enough to change. And that's what's going to keep us ahead of the competition. Yeah, there's no segment as dynamic. I mean, data is dynamic, but not as fast-changing as cyber. I mean, because of the adversary, as you mentioned. I mean, so smart. So now they have open adversary ecosystems. I mean, the adversaries are building ecosystems, right? Yes, absolutely. I've got peers that are bad guys. Right, right, right, chaos is cash. What's your favorite partner's story that you think really demonstrates the value of the ecosystem that Palo Alto Networks has built? Yeah, so without sharing names, I'll talk about a large U.S. national partner that was founded on a networking business and partnered with a very large networking company that built that business and was successful doing that. They wanted to pivot into the security space and very early on, they made a commitment to Palo Alto Networks to say, we're going to learn, we're going to invest, we're going to align with your sales force, and we're going to work together. And right now, they are our largest partner globally and they grew 70% year over year. Wow. So think about that. This is not on a small base. We're talking about a half a billion dollars in revenue growing at 70% year over year because to your point earlier, it wasn't an initiative, it was a strategy and they're executing on the strategy. So I tell a lot of, we call war stories like that to other partners that are looking to invest from different markets. It could be a large service provider that's trying to transform themselves into a security player and talk about the potential of what it could be for their marketplace. And by the way, I say publicly, quite often, Palo Alto Networks will be your most profitable relationship that you have because of the total addressable market that we're going after, because of the solutions that we bring to market and because of the opportunity within the end users right now. And we're excited. I want to come back to the MSSP in that context. So we've seen the rise of the MSSP, and particularly, we were talking earlier, I think it was with Wendy that, no, it was with CDW. Like 50% of the organizations in North America don't even have a sock. Yeah. So they need a service provider to come help. So you said, you don't want to be in the services business, right? You're a product company, right? And that's from a financial standpoint. That's phenomenal. You're roughly $50 billion market cap company. Let's call it $6 billion in revenue. So that's a nice revenue multiple, 8x, you know? And the market's down. So you're a 10x revenue multiple company. Typically services companies are a 1x or a 2x. Are you seeing a change there where technology is giving these service providers operating leverage where they're able to scale, whether it's because of the cloud, because of the partnerships, the eco, what'd you call it before, the peer-to-peer ecosystem? It's like the gap fillers? Yes. Do you see the economics of services changing? Yeah. From a baseline economic standpoint, not looking at the valuations, but let's look at it from an opportunity to be profitable at Paul-Alton Networks. We know if you are just doing the transaction, you have a certain range of margin that you're going to make in the opportunity. We know if you wrap services around it, you're going to get 3x to 4x at margin. We know that if it's managed services and there's life cycle management, you're talking 5x to 8x, that initial transaction. And by the way, it's recurring revenue for them. So if you think about it, if you just do a transaction, your only recurring revenue is a renewal. That's predictable, but it's not extremely profitable. Now we're saying the operating leverage you get is you wrap that services and you're going to have an increased opportunity for greater margin and it's sticky. It's hard to replace a partner who's adding value to your team. And in a lot of times, you walk in the end user, you can't tell who the partner is and who the end user is because they are one team. That's value. Yeah, so that's going to drive EBIT for your partners and that's going to drive valuation. You know, I want to come back to valuation not as a comic, but because I do my prediction post every year and I predicted last year that we're going to see a spade of MSSPs. I predicted you're going to see something go public. Nobody's going public these days, but I still think it's a great business that's an untapped opportunity. It's not an 8x or 10, it's not a software marginal economics, but it's really sticky, super high value and I think it has long-term potential. Yeah, to your point, if we want to talk valuations for a second, let's look at what's happened to the marketplace over the last 12 to 18 months. A large majority of the non-public partners that we work with have taken on capital from private equity. The private equity that has come in has challenged them to go through a transformation. That transformation is we need you to be services led and that services value because they believe there's going to be a greater valuation from that end and they'll be able to scale and grow and stay ahead of the market doing that. So when we have conversations, when I have conversations, yes, I'm talking about the technology and the direction of the company, but I'm also in there as a consultant saying, where's the direction of your company and how do we have this great platform and how do we build it into your business and you wrap services around it and those are the conversations that CEOs want to have when I'm sitting down with our partner CEOs. They don't want to talk about our product being better than someone else's product. They want to talk about the direction and health of their business. Yeah, it's their business, that's a business discussion. Business discussion. And they're thinking about, my five-year strategic plan, because they got to make bets. They got to bet on a platform that they can add value to that creates that flywheel effect and they got to bet on your ecosystem as well. Correct, correct, absolutely. Good to be the leader. It's good to be a leader and I'm sure as you've heard a few times, we believe that economic headwinds are going to favor the market leaders and economic headwinds are going to favor the platform approach. So we're going in more aggressive with our partner community than ever before and there's just so much energy and excitement. I feel like I keep on using that term over and over again but that's really what we walk away with. Last question for you is we have about 30 seconds left. A lot of momentum in the partner ecosystem as you've described eloquently, what's next? What's next? What's next? Yeah, so when I rolled out the strategy for what's next and what it is is a foundational platform that is going to allow flexibility for the partners and for them to decide where they want to invest and it can be in new areas. It can be I want to align closer with the cloud service providers. It could be I want to build a managed services business. Can you help us do this? It could be I want to go through and I want to drive greater penetration into geographical areas we haven't been before. So again, we're almost acting as a consultant looking at what they're going from the direction and building a program and a platform where we can grow and work with them. It's exciting, it's fun. It's great. Highly collaborative. Highly collaborative, highly collaborative. Thank you for joining us on the program. Giving us the land on the partner program, the ecosystem better together and what you guys are doing and ultimately how it benefits the end user customer. We really appreciate your insights. Excellent, thank you. Thank you so much. Appreciate it. All right, our pleasure. For our guest and Dave Vellante, I'm Lisa Martin. You're watching theCUBE, the leader in live enterprise and emerging tech coverage.