Palo Alto Networks CEO: We Are Now Bigger Than Check Point, Fast Approaching Size Of Cisco's Security Business

Palo Alto Networks CEO Mark McLaughlin said there is soon going to be a new biggest network security company on the block.

In a recent interview with CRN, McLaughlin said that as of its last quarterly earnings, the Santa Clara, Calif.-based network security company has surpassed competitor Check Point Software Technologies in size and is quickly approaching Cisco Systems' security business in size.

Palo Alto Networks reported sales of $509.1 million on Aug. 31 for its fourth quarter, a 27 percent increase year over year. In its most recent earnings report on July 16, Check Point reported second-quarter sales of $459 million, up 8 percent year over year. That is the first quarter that the company has reported higher sales than its competitor, McLaughlin said.

[Related: Q&A: Palo Alto Networks CEO On Sales Force Reorganization, Overtaking Check Point, And The Future Of Network Security]

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Cisco, which has been investing heavily in its network security portfolio, reported security sales of $558 million in its fourth quarter earnings on Aug. 12, up 3 percent year over year. McLaughlin said he expects Palo Alto Networks will soon eclipse Cisco's security practice, as its growth rate is about nine times higher year over year.

While that doesn't change much about how the company goes to market, McLaughlin said the company's size is a key factor in conversations with boards of directors, ensuring that it is part of more network security purchasing conversations.

"I think one of the things that a lot of partners don't realize because we've grown so quickly in such a short amount of time is actually how big Palo Alto Networks is. I think most people don't realize that we're bigger than Check Point and we're 90 percent the size of Cisco and growing nine times as fast. They just don't see that and when you get that data at the CEO level, they start to make decisions about resources to say if they aren't heavily invested with Palo Alto then someone else is," McLaughlin said. "I think it's very hard to ignore that at this point just given the size and velocity of the growth."

For partners, McLaughlin said that size has played a key factor in channel conversations with customers. It also has helped bring partners on board with Palo Alto Networks that previously were focused on the competition, he said.

"Some of the largest folks in the distribution community, who have historically had longtime relationships with Check Point and Cisco and were continually just renewing things for customers … almost all of them have said, 'I'm on the wrong horse. Palo Alto is clearly taking market share at very high rates and at scale. We really need to invest heavily with Palo Alto Networks.' We've been privileged to have that occur more and more and more with our partner community," McLaughlin said.

One partner who has made that transition is Presidio, No. 21 on the 2017 CRN Solution Provider 500 and a longtime Cisco partner. While the New York-based solution provider is still a large Cisco partner, Chief Information Security Officer Joe Leonard said the company also has started working more with Palo Alto Networks. Presidio started working with the security vendor about four or five years ago and it now has one of the highest growth rates of any of the company's portfolio partner companies, he said.

Leonard said Presidio faced some cultural barriers given its longtime commitment to Cisco, but the company has since worked to balance its portfolio and relationships between the two companies given customer requests for both technologies. Ultimately, he said the technology decision comes down to the customer needs.

"I think when you really look at it, it really comes down to the relationships as we look at the competitive landscape. We have to look at the competitive landscapes and the account and what we can do to work together," Leonard said.

Palo Alto Networks' growing size means it is becoming a part of most, if not all, conversations about network security with boards of directors, Leonard said. That means large solution providers like Presidio need to be able to talk about and offer the technology, he added.

"While we are vendor-agnostic, we look at some companies that are in cyber and we need to watch. We know these companies will be in deals and we see Palo Alto Networks as one of those companies that will always be in the discussion," Leonard said.

Chris Stolley, vice president of sales for North Central U.S. and Canada at Denver-based Optiv Security, said Palo Alto Networks continues to be one of the company's top vendors. Stolley wouldn't say exactly how much growth the security solution provider has had, only saying the company is a "huge partner." While Optiv also partners with Palo Alto Networks' competition as it looks to provide many security options to customers, he said Optiv's growth with Palo Alto Networks is higher than with its competition.

"It's our goal to go out and support our customers in whatever decision or technology they have chosen. Many have invested in solutions and partners and it's our job to support those companies. That being said, we have seen our growth with Palo [Alto Networks] outpace the other guys," Stolley said.

While Optiv looks to work with vendors across the security market as one of the largest pure-play security solution providers, Stolley said Palo Alto Networks' size often makes for an easier conversation with customers.

"We do have messaging around the strength of Palo Alto [Networks]. We can walk in and say there is a handful of things if you were to invest in you won't go wrong. You can just tell market adoption is behind them," Stolley said.

"I think we have seen some definite momentum," he said. "We see them as a key strategic partner going forward."