Fortinet's Mike Valentine: Taking First Steps Into The Cloud

CRN Security Editor Stefanie Hoffman sat down with Mike Valentine, Fortinet vice president of Americas sales, to discuss the company's recent IPO, its aim to transition its resellers to take on managed services and its initial forays into the cloud. Here are a few edited excerpts.

Ken Xie said that Fortinet's market is basically a third enterprise, a third mid-tier and a third-SMB. Do you see that enterprise segment expanding in light of your IPO?

It's interesting. What I think it is, is a lack of marketing. Everyone has us perceived as an SMB company. And the reason I smile is because when we came out as a public company people went, "Oh, they're not really SMB." That's our perception, right? People only saw us there, when in fact you take a look, we're one of the top three, maybe top two, depending on where you look, providers to all the major carriers in the U.S. We own so many different government agencies overseas and it's all chassis-based systems with blades. So I think if you take a look at our business, it fluctuates. But it is very evenly distributed. SMB is pretty simplistic. The enterprise is basically everything that we sell that's not a chassis-based system. And then everything above blade and chassis is where they draw the line. A lot of the different companies are saying to their channel, "Here's the product line and we're going upstream." Well we want to expand.

By how much? Significantly?

Yes. We're a growth company, so it's definitely going to be a double digit percentage growth. And I think that's going to help hopefully in the Americas. It's going to be with the account base that we already have, going back broader, deeper. But I think you're going to see a surprising push, or a little bit more put into the SMB space.

What are you going to do with the SMB space?

I think you'll see us move in a new product direction. The product line will get deeper mid Q2. If you want come back and talk with something revolutionary that's going on there from a technology perspective that will allow us to truly attack that space.

The SMB?

The SMB space. I think that you'll see our programs really evolve to the next level. What I mean by that, it's not creation any more. Now it's enhancement. We heard loud and clear in 2008 and 2009, "You're growing too fast." We're going to invest in facilities, invest in human resource. We heard loud and clear they need more technical training on hand for our partners. We went to a modular online, we're enhancing that. And as we talked a little bit earlier in the interview, we have the entire team dedicated of SCs dedicated to the channel. So they're very focused in understanding the needs. I think that you'll see a more educated, channel come from that. Going out on a buddy ride with an SC truly works -- I think it's the quickest way to educate our channel.

Next: Fortinet Rethinks Support Model

Talking about enablement, partners have said that one of the areas in which Fortinet could use some improvement is in support. Where have you fallen short in support and how do you hope to address those issues?

I think where we've fallen short is we've put a lot of effort and lot of resource into it and we try to come up with this one model. And that one model I don't think took all the different regions into consideration. We break it down into the typical APAC, MMEA, and Americas. And one blanket strategy for support I don't think exists. And I think what we've done now is hired to the strengths, and maybe it's as simple as not reinventing the wheel. The questions we're asking when we want customer satisfaction scores -- are they industry standard? Where are people located? Do we really know how an end user or a partner reacts when they get a non-local support? Is it a good thing or is it a bad thing? Is it truly about the tech? What's the impact of our channel chat program? Do they want to speak with somebody? These are all things that we're doing internal studying on. And it's not that we didn't think about it before, but I think it's all part of a growing and maturity process. Now that we have become this larger company, now that we have more sophisticated tools, we have more sophisticated people as far as the discipline and support is concerned, we're moving really quick. The people now know the question asked. They know how to fix it once we get the data results back.

What do you anticipate as some of your biggest challenges in 2010 and 2011 with the new IPO?

2010 I think the challenge that we see, in the short term, is making the adjustments to being a public company. With the leadership team, most of us come from a publicly traded company, and that helps. But management through the size of the organization has grown tremendously, our numbers are growing tremendously. I see that it's definitely going to be a challenge -- one that we'll conquer. But I do believe that. Competition is always a challenge. There's a lot of very, very capable people out there that are producing excellent security products. So we always keeping an eye on that.

Who are your biggest competitors?

It's Cisco, but that's boring to say. That's the truth, no matter what deal I'm in. That's the real answer. I think the other answer is going to be neck and neck on the security side with Juniper. Looking back at what Ken said, a third, a third and a third, so you take a look at a high end SP service provider, we're replacing Check Point on a daily basis. You look at our enterprise business and it's Juniper, Cisco day in and day out. You look at the low end and we're consistently replacing SonicWall, Watchguard.

Are you planning to do more partner recruitments now that you've gone IPO and what kind of VARs are you really looking for?

I would say that we will never, as long as I'm here, we'll never stop recruiting. But I do believe that that recruitment process has come down a notch. I think it's education now. It's all part of a plan -- thin the heard, keep the best of the best. And now the next plan would be to educate the best of the best, make sure that they're doing all that they possibly can to sell our product line. But we're constantly recruiting. The market changes too much. People change too much. VARs change too much. We constantly look to industry events like XChange. And it's purely recruitment. And as long as we're doing that, that will be the backbone. I do believe that education will overtake that. I'm comfortable with the base that we have now. I'm relatively satisfied. You're never 100 percent satisfied but I believe that educating them and going broader and deeper is where we want to be. I'm truly happy with what we've done. We have our first partner council now, which is an evolution in and of itself, right? It has been put to me, this is wrong and this is right. [In the past] I don't think that we even had the base from a partner perspective to form a council. Again, evolving, getting better, education, improving the odds but education first.

Next: Fortinet Transitions Partners To The Cloud

It sounds like you're going to focus on the partners that you already have.

Correct.

And you are transitioning them as more partners want to become managed service providers? How are you helping facilitate that?

Actually we're having a blast with that. When we go to places like XChange and (partners) say, "This is the year I'm going to manage services," the reality is, there's a lot of lip service and not a whole bunch of moving. And I think we've looked into it and now that we've got enough time under our belts not only with the channel, but spending so much time with large service providers. Having an understanding of what it means to stand up there and make it profitable. We have a good feeling for the brick and mortar box, the moving type of business. And then you got your solution provider -- we deal with all of them. We collect all that information and it really makes us a value company, valuable source to them. So all these guys that they want to make the jump, it's a lot harder than it seems.

How so?

To move a box, the DNA or mentality of a salesperson is sell this box to you for a price and make a profit. Why can't I sell this service to you for a price and make a profit? It sounds simple to you and me in concept, but when it really hits the street, how do you manage that? There's not that large a hit, right? I just sold you $129 dollars a month for the next five months. That's not as sexy as a hundred-thousand-dollar sale. And from a management perspective, they're used to going out at the end of the month, end of the quarter, end of whatever cycle, and selling more, sell more to get it out there, get the revenue dollars up. It's harder to push along full forward to those contracts. It's more of a business solution type of mentality. So we're working with the CEOs, the presidents, the owners of these VARs and saying, "This is what we're seeing, this is how the business change is going to happen," and from the sales people, it's an educational process to do that.

All the experience that we have and where we're going with our chassis-based systems, with our core-based systems, understanding the profitability, as well as all the functions that a UTM package offers, and how they're getting so much more money with that, it is going to be a fantastic business model and we want to stick with our channel people that have worked with us so far. (The cloud) is important to us, and our partners who for the most part, say they want to do it. Now, quite honestly, when you sit down and you have a good business discussion with the owner, some choose not to. It's the newer business or younger owner that says, "I'm willing to take that risk, I'm willing to take the business to the next level." And it is a complete overhaul of a business model. You don't just flip the switch.

It's a huge paradigm shift. You think the younger generations are adopting that faster?

Absolutely. I do believe that. We believe that but we also see it working out in reality.

There's also a lot of talk of a transition using a hybrid approach, selling an appliance but maybe wrapping services around that. What opportunities are there for partners there?

Typically the people who make the slower transition say, "We're going to do that." They sell you the box, like a CP model. Maybe we transfer title name, maybe we don't. But you take the box on your location, I'm going to charge you a monthly fee. It's usually a good first step. They get a little feel for what that recurring revenue model is. The problem with that is, it's easier for the salespeople and harder for the ownership or the management. Because I've got this box on site. Do I own it? Who owns it? Did I sell it to them so now I got to go back and hit them with a contract? What you're doing is taking the operational piece, the logistic piece, and you're adding some complexity to it. it’s a lot of demo units, how do I build it? And if you're going do that, you're still spending money. Capital expenditures are still going out for inventory. Where are you going to get the capital to build that NOC or SOC that you need to run that? Because you know with salespeople, it's a good training wheel. Management, not so much. If we've seen anything through the recession, the good VARs have found a way to survive. They partner with people like us, they make smart decisions. This is somebody who is not only growing, they're giving me a product where I can make money, and those are the guys who will find their way. And we figure, we helped them. We educated them, we're there for them and we're the main staple within that portfolio and we will continue to grow our sales, as well as our channel base.

Everyone's talking about the cloud. Tell me how Fortinet is playing in that space and what opportunities are there for channel partners?

We've entered it in two ways. We've entered it in working with the service providers. We have a very strong business. And the business that we have with your service partners is not only one of reselling, for the obvious "You are going to buy security services from any one of the large providers and you want to pick three or four different disciplines." We're working with them, running on our equipment. We're heavily involved, working with the federal side. And as we go down the road, taking a look at the smaller business units, how do we handle that? We talked about the Vancouver data center that we purchased, starting to put our toe in the water with our manager and analyzer service, it's called FAM, Fortinet Analyzer Manager. And finding our way too.

Is that a big transition for you?

It is. Think about the ability to do that. Ingram Micro sells a SKU number to a VAR who sells it to an end user and nothing takes place except for basically a code going from Fortinet to the end user. And yet we've kept the entire channel intact, the entire channel profitable. We've just increased our scope of sell. It's pretty fun to do, right? It's easy to say, "Yeah, we'll just sell it and go without (the channel)." We as a company will never be successful without the channel. We need that one-to-many touch no matter what we're doing and we will strive to make a traditionally direct product into a channel product. And that's fun to do. It is all those guys, so that FAM product that we're selling, everybody's running their mouths, "Next year 2011 I'm going 100 percent service. No more hardware sales for me." And then they sell a few of these. And this gives them that transition, there's no true product (sales) taking place. They are selling services. It's monthly recurring, and we've added storage now too. They wanted off-site storage. And it's fun to see. It's fun to see the education process. And be part of that, to be a catalyst in the movement.

I think that we're on the cutting edge of the cloud. Everybody's talking about the cloud. How long were we talking about managed services? Everybody's becoming a managed service provider.

It might be iterations of the same thing.

And that's why I answer the question two-fold. Everybody is going to come out with a cloud story. But again, you can't jump into the cloud that easily from a vendor's perspective. The (Fortinet) data center was a huge investment. You can't just stand up some gear in the back of a warehouse and say 'I'm ready.' So I think we'll see the people who are really into it and the people who are [saying] "It's the new thing to do."

Some people have expressed doubt about the seriousness of Fortinet as a cloud provider. Is Fortinet really "staying the course" with its cloud offerings?

Absolutely. Staying the course is more related to security. It's not that we're going off into the cloud. Like with wireless. It's not that we're going into wireless. Everything stays the course as it relates to security. Security is becoming very popular in the cloud. Security and wireless is just a huge marketplace. Something we owe to our partners. We didn't reinvent wireless. We did make it as secure as possible by routing back through the FortiGate. So make no mistake about it, we're staying the course. That course is security. It may take on different faces but those are two really good examples.