10 Things To Know About Palo Alto Networks Buying Twistlock, PureSec

From the role of containers in cloud architecture to Twistlock's customer footprint to the factors informing future pricing decisions, here's what the channel should know about Palo Alto Networks' latest cloud security purchases.

Capitalizing On Cloud Momentum

Palo Alto Networks took the cybersecurity industry by storm Wednesday with the acquisition of not one, but two, cloud security startups, scooping up rising container security star Twistlock for $410 million and early-stage serverless security startup PureSec for $47 million, according to filings with the U.S. Securities and Exchange Commission.

The deals will allow Palo Alto Networks to build on the public cloud capabilities it established through its 2018 acquisitions of Evident for $300 million and RedLock for $173 million. Expanding into adjacent technologies like containers and serverless will ensure customers can get all of their cloud security needs met with a single platform and without cumbersome, manual integrations.

"Twistlock was immensely successful due to the combination of its extraordinary people (management, workforce, and board) and a massive perfectly-timed market opportunity," YL Ventures managing director and Twistlock investor Yoav Leitersdorf wrote in a LinkedIn post.

From the role of containers in cloud architecture to Twistlock's customer footprint to the factors informing future pricing decisions, here are 10 things channel partners should know about Palo Alto Networks' proposed acquisitions of Twistlock and PureSec.

10. Latest Deals Builds On Success Of 2018 RedLock Acquisition

The success of Palo Alto Networks' October 2018 acquisition of RedLock gave the company confidence that Wednesday's introduction of the Prisma cloud security suite will boost the company's ability to keep winning in the space, Chairman and CEO Nikesh Arora (pictured) told Wall Street investors. RedLock's success has been critical to the company's leadership in cloud security, according to Arora.

Arora said the company's acquisition of Twistlock will bring best-of-breed container security products into the new Prisma suite. Containers are one of the fastest-growing segments of both private and public cloud workloads, and Arora said Palo Alto Networks is looking forward to being able to offer container security to its customers.

The acquisition of serverless security provider PureSec should also enhance the company's Prisma cloud security suite, according to Arora.

9. VC Firm YL Ventures Was Instantly Impressed By Twistlock's Leaders

YL Ventures' Leitersdorf said that he and colleague Ofer Schreiber four years ago recognized the vast potential of Twistlock co-founders Ben Bernstein (pictured) and Dima Stopel to capture the nascent but exponentially-growing market of securing virtual containers.

Bernstein and Stopel both shared a quite charisma that blended introspective intelligence with confident vision, convincing Leitersdorf that they would be able to execute. Within hours of that meeting, Leitersdorf had Bernstein and Stopel speak to several of the company's trusted advisors in the U.S.

Market feedback and founder references were overwhelmingly positive, Leitersdorf said, so YL Ventures ended up seeding Bernstein and Stopel with $2 billion. Ultimately, Leitersdorf said YL Ventures invested just under $12 million in Twistlock over a four-year period.

8. Customer Conversation Has Evolved From Public Cloud To Containers

There are not enough security tools being offered to customers making the journey to the cloud, Arora said. And over the past two years, Arora said the conversation has evolved from talking about public cloud to talking about containers.

Customers have indicated to Palo Alto Networks that they're still looking to buy best of breed products in each area of cybersecurity. Arora said the container security market has only two players, with Twistlock emerging by far as the leader.

Palo Alto Networks therefore made the decision to acquire Twistlock and integrate that with RedLock as soon as possible, according to Arora. The next conversation customers are looking to have is around serverless computing, and Arora said PureSec has stood out as the leader in the serverless security space.

7. Containers Have Become A Foundational Component Of Cloud Architectures

Cloud applications are increasingly being architected with multiple different sorts of cloud services underpinning them, according to Palo Alto Networks EVP and Chief Product Officer Lee Klarich. Containers and serverless are increasingly a foundational component of these architectures regardless of if they're Platform-as-a-Service, Infrastructure-as-a-Service, or virtual machines, according to Klarich.

Being able to combine all of those different types of cloud services into a single, integrated suite will make it possible for customers to see how their cloud applications are designed, architected and secured all the way from the build stage to actual run-time, Klarich said.

Twistlock will be the core component of this new capability, Klarich said, with PureSec and RedLock chipping in from a serverless and cloud platform perspective, respectively.

6. Twistlock Works With Seven Companies In The Fortune 10

Twistlock has about 300 enterprise customers, including 35 of the Fortune 100 and seven of the Fortune 10, Leitersdorf said. Specifically, Leitersdorf said Twistlock serves parts of the U.S. Department of Defense, nearly all of the U.S. Cabinet, as well as most of the top logos in banking and finance, healthcare, technology, media, and retail.

Collaborations with everyone from NIST and CIS to Google, Amazon Web Services and Docker meant that, sooner or later, pretty much everyone had worked with Twistlock, according to Leitersdorf. As a result, Leitersdorf said the company has enjoyed annual recurring revenue (ARR) growth in excess of 250 percent.

5. Buying PureSec Is A Meaningful Milestone For The Serverless Movement

Shaked Zin, Avi Shulman and Ori Segal founded PureSec in 2016 under the premises that the evolution of cloud computing into serverless architectures dictated a complete rethinking of application security, Zin wrote in a blog post.

It didn't take long to see serverless exploding, Zin said, with organizations ranging from early-stage startups to large global enterprises adopting it for their mission-critical applications. This was made possible by both the support of the thriving serverless ecosystem as well as leading cloud platforms from Amazon, Microsoft and Google, according to Zin.

The decision of Palo Alto Networks to acquire PureSec is both a tremendous vote of confidence in PureSec's team, product and technology as well as a meaningful milestone for the serverless movement at large, Zin said.

4. Customers Invest Too Much In Integrating Disparate Piece Products

Palo Alto Networks plans to integrate Twistlock and PureSec as soon as possible so that customers have access to an integrated public cloud security suite rather than having to buy piece products around containers, private cloud, public cloud, on-premise, SaaS or serverless security, Arora said.

The company is driving hard and fast to pursue integrations so that customers don't have to buy piece products and spend their own time integrating, Arora said. This offers the biggest potential for consolidation from a cloud security perspective, according to Arora.

The cybersecurity industry as a whole is spending roughly $80 billion to integrate $60 billion worth of product together, according to Arora. In order to avoid making this same mistake in the cloud, Arora said Palo Alto Networks has pursued an acquisition strategy to consolidate these products and provide a platform around cloud security.

3. Palo Alto Networks Built A Vulnerability Scanning Tool As A First Step Toward Containers

Palo Alto Networks launched a vulnerability scanning capability on its RedLock public cloud platform as an early step toward containers, but Arora said the company's customers wanted full, best-of-breed container security capabilities. It therefore became incumbent for the company to buy Twistlock and combine it with RedLock, according to Arora.

Given that Twistlock already has 250 customers using them for container security, Arora said Palo Alto Networks didn't want to wait before taking action. Arora said Palo Alto Networks should be able to use its core and cloud sales teams to go and create more revenue around the combined capabilities of RedLock, Twistlock and PureSec.

2. Selling Twistlock Was A Tough, But Right, Decision For YL Ventures

YL Ventures was the largest shareholder in Twistlock with a 20 percent stake, and Leitersdorf considered the company to be a "substantial and infinitely-promising star" in YL's portfolio. Given that YL Ventures had helped birth and raise Twistlock, Leitersdorf said it was a tough decision to sell.

Twistlock founders Ben Bernstein and Dima Stopel felt that selling at this time was the right decision for them at the company, a decision with YL Ventures completely supported, according to Leitersdorf.

Palo Alto Networks will be able to take Twistlock's cloud-native security platform to more than 60,000 customers in over 150 countries virtually overnight, Leitersdorf said. Plus it will provide Twistlock's team with the rare opportunity to work remarkable Palo Alto Networks leaders like CEO Arora, Chief Product Officer Klarich, Founder and CTO Nir Zuk, and Chief Strategy Officer Vats Srivatsan.

1. Pricing Will Be Consistent Regardless Of Where Applications Are Deployed

Although Palo Alto Networks hasn't determined the exact pricing for its cloud security suite, Arora said the company will charge a consistent price regardless of its customers are deploying an application in the public cloud, private cloud, containers or serverless. Pricing should be based purely on the volume of materials transferred to the cloud rather than the particular way a business went about doing it, he said.

Palo Alto Networks believes customers shouldn't have multiple, separate cloud security products since that creates security challenges for businesses and prevents businesses from capitalizing on their interdependencies, Arora said.

Having said that, Arora said Palo Alto Networks still plans to make its cloud security products available in their individual forms to compete directly with others in the market. However, Arora said the integrated product will have a lot more benefits than just buying the individual pieces from Palo Alto Networks.