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Lane Bess has been confident enough in the growth of Palo Alto Networks that an IPO is always on his mind. But based on how the network security startup closed out calendar year 2009 and is progressing in its fiscal year 2010, he now has a stated goal: next year.
"We just ended the first half of our fiscal year 2010 -- we run on a fiscal year from Aug. 1 to July 31 -- and to put it mildly, we're doing great," said Bess, Palo Alto's CEO, in a recent ChannelWeb.com interview. "We're private so I won't give you numbers, but I presented a very aggressive plan to our board, and we went beyond that and grew 130 percent last year. We're firing on all cylinders, and we've begun the next stage of some very aggressive recruiting."
Palo Alto's firewalls give users control and visibility of applications and content by user, not by more traditional means like IP addresses or ports. The company has attempted to harness the momentum of so-called next-generation firewalls (NGWFs) which, according to an October 2009 Gartner research report, represent less than 1 percent of the security on Internet connections today but will hit 35 percent of the installed base of connections within the next five years. Gartner also projects that 60 percent of new firewall purchases over that time will be NGWFs.
Palo Alto's next stage includes an updated channel program, which Palo Alto dubs Next Wave and has in essence soft-launched this past month with no great fanfare, Bess said. It marks a far cry from one year ago, when Palo Alto eliminated the position of then-channel chief Nancy Reynolds, whom it had recruited only four months earlier, and had many observers questioning whether its channel momentum had stalled.
In November, Bess and recently recruited vice president of worldwide marketing Rene Bonvanie told ChannelWeb that they'd been able to put concerns about channel management to rest and that a new partner program was on the way.
Next Wave has arrived and includes traditional classification tiers designed to reward Palo Alto's most loyal partners.
"The picture is so vastly different than a year ago," Bess said. "Interest is spreading and in North America alone we have well over 100 channel partners at this point. We are recruiting, but we are also choosing to really focus on enabling them and making them effective vs. going for quantity."
Palo Alto began articulating Next Wave to partners in late January. The program includes two levels, Gold and Platinum.
Gold partners are required to have one Palo Alto-accredited configuration expert and one trained sales representative, be registered on Palo Alto's Partner Resource Center and Support Center, have one network fault resiliency (NFR) demo unit, and complete ongoing Palo Alto Networks sales, technical, and application, visibility and risk (AVR) report training. In return, Gold partners get product discounts up to 25 percent, service discounts up to 15 percent, instant take-out rebates, recurring revenue opportunities from support software renewal contracts, advanced product information and more.
Platinum partners get all the benefits of the Gold status, plus product discounts up to 35 percent, service discounts up to 15 percent, quarterly business reviews and planning sessions with Palo Alto brass, the opportunity to qualify for campaign lead distribution, and the opportunity to be invited to Palo Alto's NextWave Partner Advisory Council. To qualify, Platinum partners must have two accredited configuration experts, two Palo Alto-trained sales reps and two NFR demo units.
Both types of partners have access to various levels of deal registration, market development funds, lead generation and rebates.
"The big thing is that we're working with a number of our partners to do very innovative co-branded marketing," Bonvanie said. "We use a third-party company to design full campaigns that focus on what they're good at, and we take on some of the marketing tasks. Overall, we're adamant about maintaining tiers but adamant about maintaining partner relationships. We classified existing partners based on how they met the requirements already."
Partners have in the past year consistently told ChannelWeb that Palo Alto's channel has progressed admirably, and that stumbling blocks -- such as the confusion around Reynolds' abrupt exit -- have proven minor.
"They're positioning themselves as the next hot security manufacturer and, from every facet, they get it," said Sandy Salty, director of business development for Trace 3, an Irvine, Calif.-based solution provider. "The program has been really good already, but I think there was concern they would dilute the channel by signing too many partners. I think they've demonstrated they're not going to do that. They've been very accessible and have given us a lot of dedicated resources."
Salty suggested it would behoove Palo Alto to do more in the way of joint PR and marketing with its top VARs.
"This is tough because a lot of vendors want to stay partner-neutral, but at the same time, Trace 3 would like to position itself as the finder of cutting-edge technology. I see an opportunity to promote that image with Palo Alto," she said. "Compared to all the things that could be going wrong with their channel, that's not exactly a do-or-die, though."
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