SonicWall CEO: How To Beat Cisco

First and foremost they are making more money on the actual sale of the solution. Just because our box is cheaper than Cisco doesn't mean they are passing that on. They are retaining more margin with the customer.

The second thing is remember we sell security as a service. Every one of our products is dynamically updated. Every day I am pushing a new profile or a new personality to every box that is out there if you buy our subscription services. Our VARs make money on that renewal subscription business. Unlike a lot of our competition where you make the initial sale and after that engagement is done you don't get to participate in the economic stream until there is a complete refresh cycle. We allow our VARs to participate with our subscription service every year, every month, every day.

Talk about the buying trends you are seeing with how attractive alternatives are to the bigger brand offering?

You have to have state-of-the-market technology. If you don't have the technology right just being less expensive isn't going to work. A lot of companies have tried to fight the big guys from the standpoint of only price. What we have done is tried to define and defend ourselves with our technology. We are the only company right now with a 16-core multiprocessor delivering incredible, unmatched UTM performance, almost at a 10X factor, compared with what Cisco's current ASA product is doing. We have got a compelling technology offer. We are not asking customers to compromise. Now you couple that with the ability to go off and say we are less expensive. The second discussion is let me show you how you can be more effective with your budget. Let me take a pain point away from you which is I can help you preserve more of your budget for more alternatives that you have to have. The neat thing about that is once we have saved them money on UTM they are quick then to look at SonicWall's product lines for email security, SSL VPN or CDP. By broadening our product offering and offering a superior economic solution we are actually able to get a substantial larger invoice value than just the one UTM box. By doing that we are building customer relevancy. We are building vendor relevancy. We are becoming far more sticky within that customer. Sixty percent of our VARs are not dropping boxes and walking away. They are managing these solutions. In fact a lot of our customers don't even know what is in their IT cabinet.

What's coming in 2008 from SonicWall?

The first and most important thing is our customers are going to see continued new product introductions from SonicWall. So we are not pulling back on our R & D spend. We are investing heavily to bring seamless very important solutions to market. 2008 will be a record year for new product introductions in all categories for SonicWall. That is very important because our VARs may have sold a UTM device and now they need to sell an SSL VPN device. The fact that SonicWall is number one in the world in unit share of SSL VPN is a great opportunity for our VARs now to go back to that strong customer base they have had and continue to penetrate with further product offerings. That is very good situation we have put our VARs in given the current economic trends. Finding new customers may be harder in 2008, therefore taking care of older customers with new technology may be the right approach for a lot of our VARs in 2008.

Do you see a flight to SMB technology and value compared to high priced enterprise solutions with the downturn in the economy?

I do not wish anybody potentially the effect of a downturn in the economy here in North America. I just would not want to wish that on my worst enemy and clearly on ourselves. But what I can tell you is that as we see the economy getting pushed closer and closer to a recession, alternatives are being talked about far more frequently. So the sheer fact that customers are asking to look at alternatives is giving SonicWall and other alternatives a great advantage. It is the economy that is driving this perhaps more so than any other thing. People again are getting their budgets squeezed and saying 'If I have to have my budget again halved or cut by one third because of the current economic issues then I am going to go back and look at alternatives. I still have to do security. In fact I would argue during bad economic times we are probably more likely to see even more security strikes. So security is going to be top of mind with all of our customers. The question is how can they get more out of their budgets. And that is where it becomes a great opportunity for SonicWall To really take advantage of being the alternative. I think we are positioned very well to do that.

One of the things we have been studying for the last three years is if you talk to enterprise CIOs who we do a lot of business with primarily in their distributed and remote branch office networks. We still get in conversations with these guys. We just never had the conversation with them about their hub or data center. What we are finding out is it is not that these enterprise customers are reducing their performance requirements. What they are saying is they want more pragmatic and stable technology. Bear in mind the technology we are offering in UTM is much more stable. It is not that we are commoditizing the technology. What is real important is that they are asking for stable pragmatic technology and that is what we are providing.

Any data from the field that more enterprise CIOs are coming to the table with their budgets being cut?

Absolutely when I peel back my Salesforce.com pipeline which our sales team provides us pretty rigid input into in terms of our pipeline report there is no question this is a common indicator in the reports I am reading daily.