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New network security vendor tries old selling model

Palo Alto Networks enters Canadian market with a new/old channel approach

The first thing that executives from Palo Alto Networks want Canadian resellers to know is that they’re not a knock-off product vendor.

While the company says it competes with networking powers such as Cisco Systems and Juniper Networks, it isn’t quite sure where given Palo Alto’s product line. It isn’t sure if it competes with CheckPoint, even though they come across each other during competitive bids.

But it doesn’t seem to matter for the newbie to the Canadian market because they believe the company, founded just a few short years ago by executives from the three above mentioned companies, that Palo Alto Networks can play in the $6 billion-plus network security space.

As a new company all of its business is done through the channel. The opportunity for Canadian solution providers, according to Mike Haro of Palo Alto, is in solution providers who have strong expertise in storage and in applications areas such as CRM.

“All those players have a direct influence on network security and would want to partner with a very channel friendly supplier,” he said.

As for Palo Alto’s product set for firewall and UPS filtering it has no additional components such as blades. The other unique aspect of the product is that its focus is on next generation firewall tasks, Haro said.

Haro said these next generation firewall tasks go beyond just blocking, but keeping massive amounts of applications safe from incoming traffic and protecting them from malware. It also prevents applications data from leaking out.

The product also is driven by policy of apps and users and not on ports or protocols. “We look at all traffic and identify it and shape it in a certain way. For example, if two people work for TD Canada Trust and one is an analyst, while the other is a sales guy I can permit one to do certain things on Facebook and not the other because of compliance risks,” he said.

Even the company’s go to market strategy is different as its doesn’t charge by number of seats or users, opting for the age-old method of selling the product itself.

Palo Alto structures its pricing by the box, typically between $70,000 and $80,000, depending on the amount of gigabytes. In that box Palo Alto integrates several solutions such as threat management, IPS and anti-virus that are usually sold separately.

“This consolidates lots of technology and there is no seat-based pricing,” he said. About 60 per cent of that price is for the hardware, while the rest is a subscription.

Channel compensation is as follows: in year one channel partners can expect to earn between 35 to 40 per cent margin off the subscriptions. This means channel partners will get paid each year of a three to four year deal, he said.

The price for the product has been set to be lower than a collection of solutions from multiple competitors would be. This approach has yielded bookings of more than $100 million in just under three years, making Palo Alto cash flow positive. They’ve also received interest from venture capital powers Grey Lock and Sequoia, which backed Facebook.

With its 100 per cent indirect selling model the company has forged two-tier distribution partnerships with Westcon and upstart German-based VAD ComputerLink.

Through distribution, Palo Alto is looking for Canadian partners who are security specialists. They currently have 170 resellers in North America.

“We don’t push boxes and we don’t want resellers to do that either. They should run the business and services and support for customers. Palo Alto will not do any professional services and want the channel to do first and second line support,” he added.

Follow Paolo Del Nibletto on Twitter: @PaoloCDN.