Palo Alto Networks' strategy, essentially, is to build the industry's biggest enterprise security toolbox. As such, it needs as many quality tools as it can find to fill up that toolbox. One it didn't yet have was IoT security, and that's what drove its acquisition of startup Zingbox.
In a meeting with industry analysts at the Palo Alto Networks Ignite conference earlier this year, CEO Nikesh Arora presented a master class of sorts in how to rapidly scale an enterprise security business.
According to Arora, who cut his teeth as an executive during stints with Google and Softbank, his objective is to position Palo Alto Networks to pursue the lion's share of the global enterprise cybersecurity product industry's total addressable market, which according to various industry estimates is at least several hundred billion dollars annually.
When any company grows its size and revenue as rapidly as Palo Alto Networks has – notching an impressive five-year compound annual growth rate in excess of 40% as of fiscal 2018 with $2.3bn in revenue – its operating costs also increase significantly, a necessary evil in order to fuel growth. For any company in this position, continued growth requires increasing revenue, reducing costs, or both.
Arora's strategy centers on the former. He inherited a large, capable sales force when he took over the top job from Mark McLaughlin a little more than a year ago, but he quickly realized they didn't have enough solutions to sell. According to Arora, the cost associated with selling products varies little, regardless of whether they sell 10 unique solutions or 100. But more solutions means more opportunities to increase the size of deals.
So it's no surprise that during the past 12 months, Palo Alto Networks has acquired numerous security tools to add to its toolbox, including RedLock (cloud configuration management), Demisto (orchestration), Twistlock (containers), and PureSec (serverless). Each addresses a specific set of enterprise cybersecurity problems, and can be smoothly slotted into Palo Alto Networks' growing portfolio of cloud-delivered security solutions.
Its newest offering, the pending $75m deal to purchase IoT security vendor Zingbox, follows the same pattern. It analyzes IoT network traffic metadata via the cloud to identify devices, apply policy, and identify abnormal device behaviors. Zingbox already offers API support for Palo Alto Networks' next-generation firewalls to conduct Zingbox policy enforcement, which will accelerate portfolio integration.
In and of itself, Zingbox represents a strong addition to Palo Alto Networks' product portfolio, especially amid growing enterprise need for IoT security. For Arora, Zingbox also represents more fuel to help Palo Alto Networks achieve "escape velocity," increasing revenue while minimizing costs. And with ambitious growth targets, Zingbox surely won't be Arora's last acquisition.
"Palo Alto Networks is redefining what it means to be a cybersecurity platform vendor," INT005-000018 (July 2019)
Palo Alto Networks Cortex XDR spans endpoint, network, and the cloud for detection and response, INT003-000351 (April 2019)
"Palo Alto enters incident response with Demisto buy," INT003-000331 (February 2019)
Eric Parizo, Senior Analyst, Infrastructure Solutions