Palo Alto Networks: New CEO Gets The Channel

Incoming CEO Mark McLaughlin will be the right fit for fast-growing Palo Alto Networks because he cares not only about product innovation and customers but is also a channel advocate, said one of Palo Alto's top executives this week.

"We didn't want someone to come in here and rock the boat," said Rene Bonvanie, vice president of worldwide marketing at Palo Alto, in an interview with CRN. "We had taken our time to find a CEO, for sure, and it was a decision, especially when a company is doing so well, that you don't take lightly."

McLaughlin, who was most recently CEO of VeriSign, was announced as Palo Alto's new CEO earlier this week. His appointment caps a nine-month search for a new CEO following Lane Bess' departure from Palo Alto last December.

A veteran IT security executive, McLaughlin spent 12 years at VeriSign following the acquisition of Signio, McLaughlin's former company, in 1999. He was named president and CEO of VeriSign in 2009.

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McLaughlin, who was unavailable for comment this week, transitions to Palo Alto at a time when the Santa Clara, Calif.-based network security upstart is one of the most buzzed-about companies in Silicon Valley.

According to Palo Alto, whose firewall technology manages applications and content by user instead of by IP address or port, the company has achieved a bookings run rate above $200 million, defined as four times the bookings amount, or $50 million in non-cancelable orders, of the most recently finished fiscal quarter. It also has seen five straight quarters of positive cash flow.

The company's managers have made no secret of their IPO plans. Palo Alto has also developed a healthy following in the channel. Among its 700 or so North America partners are some of the most influential security and infrastructure VARs in the U.S.

Dan Wilson, co-founder and vice president of partner alliances at Accuvant, a Denver-based solution provider, said he was pleased Palo Alto finally has a new CEO in place. McLaughlin should bring strong security business experience to Palo Alto's engineering expertise, he added.

"A lot of organizations that have put too much emphasis on the technology don't have a strong business leader," Wilson said. "Mark McLaughlin's background on the VeriSign side seems like just the right business acumen to add to the engineering acumen they already have there."

Wilson said he was glad Palo Alto didn't select an executive from a global tier-one company like Hewlett-Packard, Cisco or IBM. VeriSign is well-known in the security space, he said, but someone like McLaughlin would have a better grasp of how to bring Palo Alto out of startup mode without compromising why partners like it so much or trying to change its image.

"Nothing against HP, IBM, or Cisco, but from there you might have someone who'd change a lot," Wilson said. "Mark's background comes from more a startup kind of an environment, and even though VeriSign's been public for a long time, it's not a multibillion-dollar company."

NEXT: What Set McLaughlin Apart Among Palo Alto Candidates

Bonvanie told CRN that McLaughlin had been in the mix for a while as the company narrowed the list of its potential CEO candidates. He declined to comment on whether former McAfee president Dave DeWalt was under consideration, as had been briefly rumored.

One thing that stood out, said Bonvanie, who was involved with the ultimate selection, was McLaughlin's channel acumen.

"Channels have always been a major portion of the business for him," he said. "It's absolutely clear to us that he values the channel as much as we do. It's part of his DNA."

Bonvanie said average deal sizes for Palo Alto partners are increasing, especially as solution providers wrap more services around Palo Alto technologies. Palo Alto is committed to leaving services in the hands of the channel, he said.

As McLaughlin gets settled into his new role, Bonvanie said Palo Alto is looking to hire as many as 300 new employees over the next year. About half of those will be sales roles, he said, and the rest in marketing and various support functions.

For channel partners, Bonvanie said, Palo Alto is looking forward to its best year yet.

"You ain't seen nothing yet," he said. "We are absolutely killing it. Partners who hang in there will be very happy as far as the opportunity and level of reward in our program."

"I''m hoping they don't change anything," said Accuvant's Wilson. "Things are going so well right now and they need to continue to find ways for the channel to make their model more profitable. My fervent hope is that they continue on the same lines."