(TNS) - The original plan of Mark McLaughlin, chairperson and CEO of information security company Palo Alto Networks, was to have a long military career as a combat helicopter pilot. He was accepted to the West Point US military academy in 1984, where he spent the next four years in officer's course and getting a BSc, and met his future wife -- another helicopter pilot. Everything was going according to plan, and after completing training as a Cobra pilot, young McLaughlin made preparations for a period of service in South Korea.
Shortly before the journey, however, a training accident changed all of his plans. During a night vision drill, McLaughlin thought that the helicopter he was flying was on the ground, while it was actually several meters above the ground. It ended in two prolapsed discs and the movement of several more discs. "At that time, it felt like the end of the world," he said several years ago. "All of my life until then, all I wanted to do was go to West Point and fly helicopters." In 1991, after a long rehabilitation period, McLaughlin began studying law at the University of Seattle, and got his degree summa cum laude. He thought he would work as a commercial lawyer, but changed direction again a few years later by taking a job as VP business development at a smart card company. He then spent 11 years at VeriSign, a global leader in domain names and Internet security, gradually rising in the ranks to CEO of the company. Then, in 2011, he got a call from ex-Check Point Software Technologies Ltd. (Nasdaq: CHKP) employee Nir Zuk, who founded Check Point rival Palo Alto Networks. McLaughlin became CEO of Palo Alto, and later also chairperson.
Palo Alto's growth has been impressive since McLaughlin became CEO. The company's market cap has more than doubled in four years, from $6 billion to $14 billion. The company has 45,000 customers, and is gaining 2,000 a month. Its staff has grown from 250 to 5,000, and continues to grow by several hundred each quarter. The really big news came last July: Palo Alto's revenue during the fiscal year was greater than that of Check Point. The company's investment of over $900 million in sales has boosted its revenue to $1.76 billion, compared with $1.74 billion for Check Point. Check Point still leads in profit.
These developments led Palo Alto's Israeli development center to open four floors of new offices in Alon Tower 1 in Tel Aviv last week. The center is based on two companies acquired in Israel by Palo Alto: Cyvera, bought in 2014 for $220 million, and LightCyber, acquired a year ago for $105 million. Palo Alto has an option for two more floors, and aims to add 100 technology personnel to its current staff of 200. For McLaughlin, who is not usually inclined to grant interviews, this is an opportunity to make several declarations of intent.
"Because Palo Alto is based on a technological platform and needs the best developers around, we decided a long time ago that we would have only two development and excellence centers: one in Santa Clara and the second here," McLaughlin tells "Globes." "The reason why we chose Tel Aviv is the extraordinary talents here in information security. More than 1,000 of our employees are development personnel, and 11-13% of our revenue is spent on R&D. Almost all of our technology people are part of organic growth, and we have acquired only three companies to date -- two of them here." "The cyber battle is becoming faster and faster" It is hard to miss the rapid growth of the cyber sector in recent years and the intense competition taking place in it. "This multiplicity of companies is important, because the threats are dynamic and rapid, and a high degree of innovation is essential," McLaughlin answers when asked how he deals with the crowded market. "On the other hand, it creates a problem for customers, because they are faced with a large number of solutions. Once upon a time, organizations bought many things, each one of which was important, but none of which communicated with the others. At a certain stage, they said, 'There's a limit to what we can do'."
"Globes": What did you do then?
McLaughlin: "Two things. The first was to focus on automatic prevention of attacks, and the word 'automatic' is very important, because the battle over cyber defense is becoming faster and faster as computers become more powerful. The second thing is to change the consumer model of cyber defense." An organizational cyber defense system operates at several key points: a firewall at the entry to the organizational network, a system for internal network security if the firewall is breached, technologies for protecting end-user computers, and software for protecting the information located on the cloud. In some cases, awkward physical devices are involved, the use of which Palo Alto is trying to reduce.
McLaughlin says, "We decided to adopt an approach that uses the same solution for all the parts. In the first stage, we decided that we needed the next-generation technology for protecting the endpoints, and that's why we acquired Cyvera. At the same time, a lot of data accumulated which made it necessary to use analytics and machine learning in order to process it at increasing speed and provide automatic prevention. Two years ago, we set ourselves the goal of being the best in analytics-based protection, and the question was who does this the best. The answer was LightCyber, here in Tel Aviv, so we acquired the company.
"In security, the attacker usually has to do one thing right in order to succeed, while the defender has to do everything right in order to thwart the attack. LightCyber's approach, which has been installed with us, in effect turns the tables on the attacker; if he makes one mistake identified as an anomaly, he will be thwarted. Our approach has made us special, because we use automatic prevention in the same way on the cloud, at the endpoints, and on the network. As we become larger, we have more data to work with, and that's creating a positive cycle of growth in the number of customers." If I understand you correctly, this is very different from Check Point's approach, which says that you have to focus on a good enough firewall in order to keep the organizational network protected.
"We decided that we had to be everywhere the information was, not just on the organizational network. What has happened with time with the profusion of different devices and cloud computing is that the way security is done can no longer be based solely on networks. Sometimes your information is on the network, sometimes on end-user computers, and sometimes on the cloud. If I'm sitting with my laptop in a cafe and uploading a file to Dropbox through the local network, the organizational network doesn't see it."
"A reduction in the number of security providers"
Despite Palo Alto's ambition to provide a comprehensive solution, many organizations prefer to buy only one of its products, and McLaughlin hopes that this will get his company's foot in the door. "A customer usually says that he is interested in better security for his network, end-computers, or cloud, and then starts working with us. As of now, nearly 70% of our 45,000 customers get network security from us. At least 2,000 are using our security for end-computers, and over 3,000 are using the cloud security solution. There are thousands of users with various combinations. As time goes on, the organizations realize that they can forego all sorts of other solutions that they have, because we have features that can replace them with better continuity. There is a trend towards a reduction in the number of security providers." The desire to be the sole provider is not due only to technology, and McLaughlin is pushing an open platform.
"Since we have a broad presence and a vast amount of data, we can offer other companies, even competitors, connection to our platform and information through an application programming interface (API). If they have interesting solutions based on algorithms, analytics, and machine learning, the customer can use them as software, without hardware requiring a connection to the organizational network and hiring people to deploy and operate it. We can't invent everything for them, and the customers know it. No company can invent everything; the customers will always need a lot of innovation, and this is a way of applying it without deploying unnecessary equipment." What trend in cyber do you expect in the coming years?
"I believe that there will still be many cyber companies in the market, but in view of the growing objections by customers to implementing and operating many different solutions, we're at a point at which operational complexity has become no less of a problem than the security risks themselves. So I predict that the next big change will provide a response to the desire to apply as much innovation as possible in a way that will not constitute an operational burden."
(c)2018 the Globes (Tel Aviv, Israel)
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