Dell SonicWall GM On Split From Dell And What's Next As A Stand-Alone Network Security Company

What's Next For SonicWall?

Dell SonicWall is charging back into the market with partners as it prepares to split from parent company Dell, SonicWall General Manager Curtis Hutcheson told CRN in an interview this week at the company's Peak 16 partner conference in Las Vegas. Dell said in June it planned to sell its software division to private equity firm Francisco Partners and the private equity arm of activist hedge fund Elliott Management. Hutcheson said efforts are already under way to separate the two companies, and the network security vendor is laser-focused on partners, rolling out new technologies and getting the business back on track. Take a look at what Hutcheson had to say about what the next steps are in the separation and how SonicWall plans to take share in the SMB network security market.

How has SonicWall evolved over the past year as it moves toward independence from Dell?

The business is much stronger, more capable and much easier to do business with than a year ago. We really embarked on our two biggest development initiatives around a multilayered sandbox … to have something where we knew we'd have a better hand in ransomware is important. You will hear more and more about Capture. The second is helping our VARs scale. The really good VARs are resource-constrained, so they need the manageability and they need zero-touch deployment. With Cloud GMS … now that they have a way of remotely lighting up, deploying policies, orchestrating firewalls with workflow, centralized reporting, it's all the things [they need]. Today about 10 percent of our population is controlled by GMS – that will expand exponentially now that we've lowered this barrier to be a capability for everyone to leverage. We're excited about that.

The products really moved well and then the next big phase is, our install base, we made a lot of progress cleaning up … and building an incredibly strong effort around ensuring that we can resolve issues quickly and prevent issues. It's all a lot of things about improving our install base satisfaction. Now, it's down to how do we take that to a more aggressive go-to-market. Being an independent company will allow us to do that.

What were some of the issues under Dell?

I wouldn't call them 'issues.' I think it's just we were a very small business inside of a $60 billion company. Part of the reason 15 months ago, the reason we were going to stand up these businesses is, like SecureWorks, we are better off being independent. There can be no compromise in security and no lack of focus. The pure-plays are separating from the pack. The winners and losers are obvious. We were trying to ride the middle and this is the opportunity for us to clearly be the winner in SMB. That means not only to continue to sell through Dell as part of an OEM relationship, but it also means getting back to our bread and butter channel. Eighty percent of those VARs were not Dell partners, so they didn't get the benefit. All they care about is running a world-class network for a small business in K-12 or retail or any one of our target verticals.

Will you be 100 percent channel after the split?

We effectively are today because we have arm's length rules with Dell. We instituted those a few quarters ago. I think we have much better controls around that. But yes, we are 100 percent channel. We don't even have the systems available to place a direct order. We still run our own management system, none of that was ever integrated [into Dell], so every order goes through the channel.

How do you plan to continue that momentum with the channel as an independent company?

The biggest is helping [partners] understand our solution story and helping them sell solutions, instead of a point firewall product. The second is [making sure] they really understand and view us as a very predictable partner. These are things that Steve [Pataky, vice president of worldwide security sales at Dell Security], stands for and that team stands for: partnering with integrity, the long-term nature of these partnerships. … The third is just shifting our incentives so we're rewarding the partners that are creating the most value. When you create, when you get a customer upgraded to a faster, more secure network, that's when you get the most value. As a partner, you take a risk to go do that. You invest pre-sales time, you run a [proof of concept] … you attach subscription services, sometimes you attach first- or second-level support – that kind of partner deserves more compensation than someone that waits for you to search 'SonicWall 2600' and sells it to you three points cheaper. We have both types of partners and we welcome them both, but they have to have different incentives. We call them the high-value partners … and the future of our channel program is rewarding channel partners with the more value you provide, the more compensation you will earn.

Do you anticipate you'll be able to recruit more channel partners as an independent company?

I think so. I think we will have a good Dell channel. I think we will be able to maintain that through the OEM business as an extension of the networking line. I think we will, frankly, having greater independence will help us with partners who view Dell as a competitor. I sure don't view them as a competitor, but there are some partners who view Dell as a competitor. … I just think we will be louder. We will be more visible. We will be 100 percent, singularly focused on world-class network security for SMB and distributed enterprise. That's a good focus and that's what we're good at. We're back to our roots.

Do you have any examples of partners getting re-engaged with SonicWall since the sale was announced?

I love to tell the story of CDW. We hadn't grown with CDW in years. When the acquisition happened, we lost our floor access and were effectively demoted as a brand. … This isn't rocket science. We always had a really good product, so we hired a new CDW leader, put a dedicated team in place, put in new incentives. We got our floor access back and we now have two quarters in a row of double-digit growth back at CDW. ... This is focus and execution. This is take care of your partner and water the tree that feeds you. That's hopefully what [partners] are seeing. It's the same with registered partners. We went back and started communicating with them again and gave them these resources: we gave them a way to get trained and to re-engage. … And now they're back growing again.

What sort of role will the private equity teams have in SonicWall?

They have 40 companies. They do not have a controlling investment in any competitors. They have some residual influence, but they are not controlling. They've been incredibly involved to help us stand up the functions to be a stand-alone company. They're helping us get launched. I've been spending a ton of time with them and they also are helping us set up systems, leverage best practices from portfolio companies. I view them really more as a demanding owner with a weighing hand and, second, as a consulting firm to help us solve problems and leverage best practices. For me, that's about perfect. They have a lot of expertise. They know how to run this play. … They've run this carve-out process many times with great success and that's a big part of this: proving that they can help us run this carve-out.

Will the executive lineup remain the same through the transition?

That's our intent, for sure. We want the company to be very similar on Day 2 as it is today from a management continuity standpoint. There will always be some people who decide not to go to the next level, the next leg of the journey, but I think you will see a very consistent approach. You will see the same priorities and the same execution. I like to say you will see the horse out of the gate. The horse has been in the gate and the gates are going to open and you will see a team that is really energized and aggressive on winning with integrity.

What do you see as the big priorities from a technology perspective for SonicWall?

From a customer and a VAR standpoint, I think we all have a responsibility to our customer base to slow down ransomware and proving we can help customers manage that and still run their business effectively and give them effective countermeasures. That's incredibly important right now and hopefully everything you've seen from us moves that way. There's no one thing that stops ransomware. You need a full solution and a network that is also secure. … It's only getting bigger every week. … SMBs can no longer ignore it.

How have you been talking to partners about the shift? Are they excited about it?

I think so. I gave that quote … about the due diligence. We had a blind survey and 35 out of 35 partners said it was a positive change. That was with no conditions. That wasn't someone saying if we do X, Y and Z will it be positive? It was just a straight question from a consultant if they believe it will be a positive change for SonicWall.

Does that optimism and positivity from partners mean it's guaranteed to succeed?

Of course not. There's a lot of hard work for us to do. We have a lot of good resources from Francisco. They brought in a team of experts to help us with this transition. … Plus, we have had great retention of the management team at SonicWall. The tenure of the team, they've done this before and they are excited. Will there be tough decisions in front of us? Yes. Will we be lean and mean? Yes, but we will be fast and it will fuel higher growth in the future.

What are the immediate next steps?

We have planned to roll [the new partner program] out in Q4 and it will be a gradual implementation. … [We will be] getting new infrastructure and tools, improving our ease of business. We've been building up this marketing muscle for two quarters now, where we brought our marketing dollars back to SonicWall and now every lead goes through our third party and to the channel so they can manage it and close it. These are big changes and we're now getting the benefit of it. … We are just now starting to get our demand gen leads. This is blocking and tackling.

Are you excited?

I am very excited. We have a lot of work to do, so I also have the 124 things that I know have to happen. But, I am very excited and I am looking forward to getting through this phase because it's a lot of heavy lifting for all of us. But, frankly we will be insulating that from the VARs. It shouldn't be disruptive to the VAR community. I give my full commitment to the VAR channel that it will be a smooth transition for them and we are doing the work to make that happen.