Zscaler CEO: How Cloud Security Is Changing The Partner Model

The Rise Of Cloud Security

As cloud adoption continues to accelerate, demands for security are also rising. With that comes a need for solution providers and vendors to reinvent themselves if they want to stay relevant for tomorrow's cloud-first world, Zscaler CEO Jay Chaudhry said. Zscaler uses the cloud to offer a portfolio of security-as-a-service solutions – including firewalls, ATP, DLP, encryption and more - to protect web traffic. In an interview with CRN, Chaudhry said the cloud has flipped the partner model on its head, with security as an ever-more important piece of the cloud migration puzzle. However, the good news is that demand for cloud security is higher than ever, and he predicted those solution providers and vendors who can adapt to the new world will win in the market. Take a look at where Chaudhry sees the most opportunity for cloud security, and what partner models he predicted would succeed around the cloud.

How are you seeing demand change around cloud security?

I see it every week as I go out and meet customers: The momentum and adoption of the cloud is accelerating more and more. It's hard to find a CIO or CTO that says, 'Cloud-first is not my strategy.' It is becoming something where if a CIO feels like he is not embracing cloud or she is not embracing cloud, then they feel like the laggard. … The other thing we are finding which is very interesting is that applications generally take a long time to move. …While ERP is taking time to move, Office 365 is picking up big time at a much faster pace than any of us ever thought.

Some of those things have interesting implications for Zscaler because when you start going to the cloud for your core applications and Office 365 … that’s driving demand for a network transformation. … That network transformation is happening big time, where all companies are trying to change the network from hub and spoke to what they are calling hybrid, where they still have the connection going back to the data center for data center applications and going direct. That’s where we come in. You can't create a direct connection to the internet without putting security in place. It is accelerating our engagement, our business, and the displacement of some of the traditional on-premise security boxes that customers have been buying.

Where do you see traditional vendors falling short when it comes to offering cloud security?

On-premise functionality is in place at a few gateways. … It's not a matter of the functionality lacking in the appliance vendors, it's a matter of the model is not right to be able to deploy these check posts everywhere. That's why you're seeing the move. You will see every security vendor offer a cloud offering -- and they have to. Since they really don’t have the purpose-built cloud offering, the natural thing for them to do would be to take those appliances, put them in a data center and offer something hybrid cloud. … But, to try and say some of my firewalls stay on-premise that I manage, some firewalls for the branches to go through a vendor's cloud that that vendor manages, it starts falling apart. … One customer said to me: 'Do you think Tesla will build a hybrid car ever?' No. You only build a hybrid car when you know your electric car is not good enough to go the right distance. If you build the right car with the right things, you don't really need to do hybrid. Either you build something for on-premise or you build something for the cloud. If you try to really do something for both environments, you aren't really optimizing for either one. I think that's what gives Zscaler an advantage.

What kind of change does that drive in the partner community?

The partner channel is going through a fair amount of change. They are actually struggling. Just like there is a disruption in technology vendors and providers, there will be disruption in the partner ecosystem as well. … The VAR channel is evolving. There are some VARs who are hoping that the cloud never happens. That is wishful thinking. They will struggle and fade away, just like some of the technology vendors will fade away. We are seeing cloud-focused VARs emerging. … Many of them in the application space. Few of them are in the security space yet. … We are seeing a few new VARs that are emerging with a focus on cloud transformation only. We think they will be the next generation ... the new brand of VARs and partners are emerging whose focus is less about selling boxes. Their business is evolving toward what I would call managed services. … The new managed model is you don't have to buy all the stuff – the infrastructure and applications are available from cloud service providers like Zscaler and you are managing that with ongoing management. … There are more and more emerging. … We are seeing the same phenomenon happening in other parts of the world.

How do you see the type of partner that security vendors look to work with changing?

We put partners in four buckets because there is no such thing as one group of partners. We have the one probably you have seen from the security side, the biggest channel used to be VARs. … The second channel is I call the velocity channel – this is the CDWs and SHIs of the world. … The third would be service providers. This is telco partners who are expanding and have tried to sell security or managed security services. … Then, of course, there are systems integrators. … If you went to any of these appliance companies, VAR is the No. 1 channel for them, velocity is No. 2, SP might be somewhat, and systems integrators might be pretty small.

In the world of cloud, the model is turned on its head. Our largest partners are service providers. They are not used to selling boxes – these guys sell internet connectivity and security [as] the gateway to the Internet. It is a natural add-on for them. … The second is systems integrators. … As these applications are moving, who moves those applications? Customers have a limited skill set and this is where systems integrators come in. … This is where these SIs are becoming partners with Zscaler, helping customers migrate the applications and then use Zscaler. … That is emerging as a significant channel.

Given the rise in cloud and the need for security, do you see these models as the future of the channel versus the traditional VAR?

Just like the on-premise model for security and software is going away, we think the VARs who are focused on on-premise sales are going to go away. It's just logical thinking.

The question is: What happens next? The channel is needed and the channel is very important because channel is a multiplier. … But, the channel that doesn't adapt will go away. Some of the VARs will adapt and succeed, but also when disruption happens new leaders are created because they start from scratch. … There will be more and more shops out there focused on the cloud and providing you services in the cloud. I think they will become the big guys in the next three to seven years. Some of them will get bought, just as always happens, and some of them will be stand-alone on their own. The cycle continues. … I think now the biggest trend in the cloud – the combination of cloud and mobility – is making all these things possible. … The combination of the cloud and mobility is just disrupting lots of things and creating new vendors, new products and new partners.

How do you think the Internet of Things will impact the security partner model?

When I was starting this company in 2008, the internet was widely used as a source of information. … But, people were still asking the question if business applications would go to the cloud. The picture wasn't very clear. … IoT is sitting in a similar stage because IoT offers a lot of potential. But, if you really figure out who will make money and how will security happen, it's a big up in the air. … I look at the IoT market in two segments. Segment No. 1 is consumers. … The consumer IoT will keep growing because it gives lots of intelligence to good things. But, I think it will be hard to monetize from security. … I think IoT in the business world is bound to take off because it is running some of the critical business applications or business factories. If you look at the top IoT manufacturers … these guys are all trying to figure out how they build security as a part of it. … I'm not sure how it will evolve, but it's a good topic. We are working closely with manufacturers of these IoTs and business consumers of these IoTs to see where this thing goes. But, today our primary focus is how can users of different companies get to the cloud in a short and secure way.