For your point on #3, I'd say it is more of making an inroad into the IBM business, allowing them to convert, upsell into a platform from the IBM systems.
On the comparison with FedEx and UPS, I'd argue that is too far removed from what PANW is doing to consider it relevant. That is the whole reason we see them offering them free products while the customers switch over to the full platform- it takes time and is a big decision for CISOs and CFOs to make the transition of cybersecurity vendors and PANW is making that decision easier by offering them better deals (leveraging their B/S). It is a critical infrastructure that cannot be brought up to speed as fast as switching shipping vendors. Look at recent UNH attack, PANW had Unit 42 there for 3 months working on getting them recovered, ramped up on their platform.
Those are excellent points you raise. Our core thesis, however, is that commercial strategy should be driven by the strength of your product offerings themselves. When you have products that customers are clamoring for, there's no need to artificially bundle or discount them to win on price. We don't get the sense that enterprise buyers care as much about overarching "platforms" if they risk getting locked into a single vendor's ecosystem.
We've certainly noticed Nikesh is a gifted marketer who paints a compelling vision around Palo Alto's platform strategy. While admirable salesmanship, we worry that grand, all-encompassing narrative resonates more with investors than pragmatic IT buyers. The "cure-all" platform proposition can come across as more mythical than realistic to customers.
On the shipping analogy, we don't make that comparison lightly. Implementing a new shipping provider requires immense integration efforts that can quickly become a nightmare. In 2017, we worked with a large government client who walked away from major potential savings because the new vendor badly botched the transition. A painful learning experience, no doubt.
Let us be clear - we have tremendous respect for Palo Alto's cybersecurity capabilities. But to reach the next level, we believe you need to double down on enhancing your individual product strengths through dedicated R&D investment, rather than over-indexing on grandiose platform marketing. Otherwise there's a risk the market loses faith in the substance behind the narrative.
Our feedback comes from a place of wanting to see Palo Alto sustain industry leadership for years to come. Keep executing and delivering best-in-class products, and the rest will follow. We very much appreciate your insights, by the way, the dialogue make us better.
Countering the “offer good products and they will come”, it is harder for these large enterprises that have entrenched products. To have someone come in and replace their ERP system (going from inferior on-prem to superior cloud) takes a long time and is expensive. PANW takes away the expensive pain point that companies were likely discussing with sales/Nikesh and only has a 6-month overlapping period before full platformization (with mainly non-cancellable contracts, which is why he is pointing investors to RPO instead of billings). The main point I was trying to make with the shipping analogy was to depict how onerous switching cyber providers is and Palo’s way of making it easier and cheaper to switch. I have no experience covering Industrials, so I assumed that shipping was more commodified and had lower switching costs (standard loading docks, infrastructure likely in place for all competitors in relevant areas). In terms of execution, I see it as unlikely that PANW will badly botch the transitions, they are already pacing through (aimed #) 70 platformizations/Q.
I also see it as a risk that these companies have 30 different security products- there are going to be signals that come from one area that look benign, and if another product saw that signal, it would say that is a threat. Because of the disparate systems, it creates more vulnerabilities, PANW solves that by hosting most of those products under their single roof and data platform. Their scale (across so many companies) can also help identify problems faster, but the risk that comes with that is a larger target for hackers.
I am learning as well, so I always appreciate the banter. I may be drinking too much Nikesh Kool-Aid, but damn it tastes good.
All great points and what we lack right now is the benefit of hindsight, which will settle the score. This is one of the biggest arguments in cybersecurity today, which strategic bearing not just on the sellers but also the buyers. The number of products argument doesn't really fly for us, as we have seen unique offerings continue to innovate and succeed and fill gaps.
Appreciate sharing the insights and we will need to ponder if we are being too harsh on Palo Alto. Is it a little bit like Microsoft under Nadella? We have to wonder if the innovation is on par. Again, time will tell.
For your point on #3, I'd say it is more of making an inroad into the IBM business, allowing them to convert, upsell into a platform from the IBM systems.
On the comparison with FedEx and UPS, I'd argue that is too far removed from what PANW is doing to consider it relevant. That is the whole reason we see them offering them free products while the customers switch over to the full platform- it takes time and is a big decision for CISOs and CFOs to make the transition of cybersecurity vendors and PANW is making that decision easier by offering them better deals (leveraging their B/S). It is a critical infrastructure that cannot be brought up to speed as fast as switching shipping vendors. Look at recent UNH attack, PANW had Unit 42 there for 3 months working on getting them recovered, ramped up on their platform.
Those are excellent points you raise. Our core thesis, however, is that commercial strategy should be driven by the strength of your product offerings themselves. When you have products that customers are clamoring for, there's no need to artificially bundle or discount them to win on price. We don't get the sense that enterprise buyers care as much about overarching "platforms" if they risk getting locked into a single vendor's ecosystem.
We've certainly noticed Nikesh is a gifted marketer who paints a compelling vision around Palo Alto's platform strategy. While admirable salesmanship, we worry that grand, all-encompassing narrative resonates more with investors than pragmatic IT buyers. The "cure-all" platform proposition can come across as more mythical than realistic to customers.
On the shipping analogy, we don't make that comparison lightly. Implementing a new shipping provider requires immense integration efforts that can quickly become a nightmare. In 2017, we worked with a large government client who walked away from major potential savings because the new vendor badly botched the transition. A painful learning experience, no doubt.
Let us be clear - we have tremendous respect for Palo Alto's cybersecurity capabilities. But to reach the next level, we believe you need to double down on enhancing your individual product strengths through dedicated R&D investment, rather than over-indexing on grandiose platform marketing. Otherwise there's a risk the market loses faith in the substance behind the narrative.
Our feedback comes from a place of wanting to see Palo Alto sustain industry leadership for years to come. Keep executing and delivering best-in-class products, and the rest will follow. We very much appreciate your insights, by the way, the dialogue make us better.
Countering the “offer good products and they will come”, it is harder for these large enterprises that have entrenched products. To have someone come in and replace their ERP system (going from inferior on-prem to superior cloud) takes a long time and is expensive. PANW takes away the expensive pain point that companies were likely discussing with sales/Nikesh and only has a 6-month overlapping period before full platformization (with mainly non-cancellable contracts, which is why he is pointing investors to RPO instead of billings). The main point I was trying to make with the shipping analogy was to depict how onerous switching cyber providers is and Palo’s way of making it easier and cheaper to switch. I have no experience covering Industrials, so I assumed that shipping was more commodified and had lower switching costs (standard loading docks, infrastructure likely in place for all competitors in relevant areas). In terms of execution, I see it as unlikely that PANW will badly botch the transitions, they are already pacing through (aimed #) 70 platformizations/Q.
I also see it as a risk that these companies have 30 different security products- there are going to be signals that come from one area that look benign, and if another product saw that signal, it would say that is a threat. Because of the disparate systems, it creates more vulnerabilities, PANW solves that by hosting most of those products under their single roof and data platform. Their scale (across so many companies) can also help identify problems faster, but the risk that comes with that is a larger target for hackers.
I am learning as well, so I always appreciate the banter. I may be drinking too much Nikesh Kool-Aid, but damn it tastes good.
We all love Nikesh!
All great points and what we lack right now is the benefit of hindsight, which will settle the score. This is one of the biggest arguments in cybersecurity today, which strategic bearing not just on the sellers but also the buyers. The number of products argument doesn't really fly for us, as we have seen unique offerings continue to innovate and succeed and fill gaps.
Appreciate sharing the insights and we will need to ponder if we are being too harsh on Palo Alto. Is it a little bit like Microsoft under Nadella? We have to wonder if the innovation is on par. Again, time will tell.