Frank Rauch: Cato Networks Sales Shift from 'Agent-Centricity,' Adding VARs, GSIs
The SASE vendor reports an uptick from resellers, integrators and service providers.
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Channel Futures: Are there any highlights for you since joining Cato earlier this year?
Cato Networks’ Frank Rauch: It’s been about seven months now. It has been a really really good experience. You think you understand a situation before you get into that situation. You talk to industry analysts, guys like you and partners, and even competitors, and everybody said, “Wow, that’s a fabulous move.” And for once, it was understated how fabulous it was.
It’s cool the way the channel embraced me coming over to Cato. Most of those relationships and partnerships became transferable. The technology is great. It really is. When you look at SASE as a category, I think it’s going to be reaffirmed in a couple of different ways by some of the analysts a little later in the year. It’s a maturing category. I think they’re recognizing the fact that Cato was an early adopter, an early starter and early catalyst of the market. We haven’t been static whatsoever. We’ve done it purposefully, we’ve done it with intent, and we haven’t done it through acquisition either. So pieces are more built to be able to fit together.
And when I’m talking to an MSP or I’m talking to some of the larger customers, the cost to operate is very different than what they’re seeing from some of our competitors. So that’s a good thing.
FR: I would say the second thing is really the culture. The culture has been great. It exceeded my expectations. I heard a lot of good things about [CEO] Shlomo [Kramer], [president and chief operating officer] Gur [Shatz] and the rest of the leadership team. They’ve turned out to be better than what I originally thought they would be. It’s a culture that’s very common in this industry. It’s not about who’s right; it’s about what’s right. And that’s a little bit different than what I’ve experienced in some of my other jobs as far as far as the channel goes.
We’ve taken this channel from very agent-centric – which by the way is still a great, sustainable, growing model – to have more of a worldwide service provider and worldwide VAR type of market. I think we had a really good presence regionally and really good presence with the TSDs and the subagents, but now the big names are absolutely taking a hard look — not only taking a hard look but being able to sell Cato; they’re transacting at this point.
And the other thing that surprised us a little bit were the GSIs. Some of the GSIs have embraced this model too. This used to be a midmarket thing, and I think it’s quickly moving into the enterprise. [GSIs] are starting to see networking and security groups merge. As network and security groups merge, basically SASE becomes a lot more relevant. And some are even adding resilience. When you look at the strength of our network with the 85 POPs worldwide, that seems to resonate with them as well. A lot of work to be done. We’re in no way claiming victory, but when we look at how some of our competitors have been doing as late as last week, our story is a lot more favorable. And it’s not opinion; that statement is really fact-based.
CF: How would you quantify that shift to having more of a focus on the worldwide service providers and solution providers? What will the share between agents and the resale model be?
FR: I have all the respect for the agents. I talk to them literally every week. But I think you’re seeing it move closer, at least in the Americas, to a 50-50 model. That’s where really the agent model was the most prevalent for Cato. We’re starting to see that even out. But the good thing is, it’s not evening out, because one is shrinking and one’s growing. It’s because they’re both growing, and one’s growing a little bit more.
CF: What investments, whether in programs or personnel, are helping to drive that increase?
CF: We started to develop a program. And I think we’ve matured a program in terms of benefits for some of the larger opportunities we have. We’ve come up with some very creative licensing models for some of the service providers that want to use us as a managed service or a way to be able to go to market.
We’ve come up with more flexibility in our licensing models. We’ve made some great hires in the field. A guy like [vice president of Americas sales] Matt McSweeney and some of the people that he’s bringing over. We’ve also beefed up our channel team with some real pros and people that are making a difference. Those people have come from companies like Proofpoint. They’ve come from companies like Check Point, Lenovo, Cohesity, etc. It’s a hot place to be. We’re very, very fortunate right now that based on what people are seeing in [business review website] Glassdoor, based on what people are hearing from their friends, and hearing from the industry, Catto’s a pretty good place to be right now. We’re certainly not getting any shortage of resumes.
CF: You mentioned that you’re pleasantly surprised by the GSIs. I’d love to hear more about that. How are you differentiating this managed unified SASE play compared to the more acquisitive SASE providers (like Palo Alto, Fortinet, etc.) that perhaps come from more of a hardware background?
FR: I have to be a little bit careful, because we’re under NDA with three of the GSIs. But in general, I would say first of all, we have flexibility to be able to really go into a … co-sell, co-build type of environment. Because of the flatness and the agility of Cato, they’re able to get into our product people, R&D people, etc., to really understand what possibilities are and be able to build in really different ways. I know that sounds vague, but some of them may be interested in a really, really small piece of Cato, like one of the largest GSIs in the world. And other GSIs are saying, “Well, you know what? There’s a crowded market out there” with some of the companies you’ve mentioned. They’re saying, “Cato has a little bit less of a crowded market. Your deal registration might be a little stronger. You’re certainly not taking deals direct.”
As the margin picture and macroeconomic environment start to tighten up a little bit more, for some of these companies you’re seeing not only deals go direct, but you’re seeing services go direct – whatever you have to do to be able to make up for margins. A lot of people say “cloud-first” or “SASE-first.” At Cato, I’ll say “channel-first.” We were built from the channel to the market. Honestly, in the companies I’ve worked for, I’ve never heard of the channel person being in the board meetings. Yet, I have the ability to be able to bring the voice of the channel into board meetings, and Shlomo permits me to do that. And quite honestly, I think it creates a very, very unique environment.
CF: So would you say that you’re hearing from partners about channel conflict rising amid some of their traditional vendor partners?
FR: I would say so. I think that’s very true. I’m not going to disparage any of our competitors, and I’m not going to reveal any of the channel partners, but there have been some pretty well-known large deals that have happened in the last six months that a channel partner had certainly worked on, that basically went to direct with some of our competitors. And I don’t think the macro winds are changing fast enough to not see a few more of those.
CF: On the flip side of that, we hear from a lot of partners who are trying to identify the distributors and vendors that are actually going to bring them business. Is there any philosophy that you have around lead gen?
CF: It’s a really interesting question, only because there are very few things that surprise me in this stage of my career. The amount of channel-generated business – what we call channel-fed – was crazy when I got here. They were giving me percentages, and I’m [saying], “I’m sorry, you must be reading your dashboards a little wrong.” But it’s true. It’s really a virtue of being able to start with the agent model, but it carried on into the resale model too. So we’re very, very fortunate that the majority of our business is created by the channel. That’s not fulfilled by the channel. That’s not getting somebody deal registration at the last minute and making it look like the channel, or appeasing a partner. It truly is the partners that are creating business. That gives us the ability to be able to work with our SDR team and to be able to feed the channel when we can feed the channel. As Cato goes for both force and market, we still have that base of partners that are absolutely generating business.
And then everything else is … coming over the top because of the brand awareness, and we’re able to feed them even more. Maybe I’ll use the word “unique” the next seven times, but it’s a pretty unique situation from what I’ve seen in the industry. I was just talking to Rob Rae over at Pax8, and I was just in a channel meeting with Veeam and GPC and a bunch of other companies too. We talk openly about different trends. We’re in a really good spot right now in terms of what the channel is doing for Cato, and that recognition goes all the way up to the board level. Therefore, we’re very much willing to invest in the channel.
CF: I’m always intrigued to hear what you think about the TSDs and technology advisors. When we talked to you several months ago you were on a listening tour with that group. What were some of the most interesting things that you learned about that community and that you’ve come to appreciate?
FR: First of all, I was really not intimately familiar with Telarus, Avant, Intelisys, Bridgepointe — a lot of those guys. What I learned is fascinating. They’re highly motivated. They’re hungry. They absolutely hunt rather than farm. By the way, if you’re not part of the agent/TSD community, that’s one of the myths. Second of all, the self-sufficiency of the agents is pretty cool. I had an opportunity to go to Telarus’ partner advisory board. When I was there, the depth of the questions and the depth of the knowledge about SASE and about Cato was absolutely extraordinary. And these weren’t sales engineers. These were people that ran fairly big subagents. The willingness to win, the loyalty of their customer base and their willingness to be able to understand and really be experts in technology makes them a very, very viable route to market.
CF: And the myth is that agents farm rather than hunt?
FR: I’m the first one to admit that I was wrong. And I’m the first one to be able to like that I was wrong, because normally it creates a new opportunity. I was talking to a bunch of companies that you and I know very well that use the agents as as their primary model. I was under the false impression that these people had a limited amount of accounts, that it was relationship-only. And I was wrong. There’s absolutely a hunting aspect to it.
CF: Tell us about what you’re doing with communication service providers. Cato announced a partnership with BCN recently. I’m getting inundated with stories about about network as a service being hot. How do you see that trend impacting your business? Do you see increased demand as everyone’s talking about outsourcing their network?
FR: I would say a few things. The service providers’ business is changing, just like the GSI business is changing. Everything’s kind of morphing into everything else. We’re seeing service providers – small, big worldwide – basically get more and more into the managed services business. A managed service is a way for them to mitigate a few things. Maybe loss of MPLS. Maybe extra margin with extra services and extra topline, etc. So we play very, very well with some of the large service providers. You mentioned BCN, and that’s that’s a great example of a midsize service provider, but there are names that are not only well-known in the U.S. but fairly well-known worldwide. And you’ll be hearing more about that.
If you do the math … Let’s say there are 3.5 million security jobs open there, and then RSA says there are 4,500 companies that have identified as a security company. You just look at that. Forget about SMB — how can any midsize enterprise hire the right amount of talent and manage an environment that’s as complicated as that? Therefore, they gravitate to two things. They gravitate to an integrated, well managed, easy cost-to-operate service like Cato and the SASE environment. And they also gravitate toward managed service providers. And sometimes the managed service provider that they want is one with scale, just simply because they’re operating in different geographies … And that’s what makes us a perfect blend for these large service providers.
CF: Is there anything else you want to add?
FR: I’d just like to really thank the partners, to be honest with you. I’ve been really, really lucky that for every place that I’ve gone, partners have embraced my role and embraced that company when I got there. I love to say thanks for that.
I would just like to point to the future. Cato has been around since 2015, but it’s still so young in the market. It may not be so young in technology, but it’s young in the market. As some of the really big analysts come out with their opinions later this year, I think they’re going validate more and more of the strength of Cato, and I think you’re going to see some of the really, really large wins. I think you’re going to see some of the agreements announced with partners that are household names. And I guess the interesting part of it is, I haven’t heard a lot of people say, “Go away. We don’t need this. We don’t think it’s a good idea. We have enough Palo [Alto Networks] business. We have enough Netskope, Cloudflare or Zscaler business. Forget about that standard test case.” Or I wouldn’t be trying so hard to get out to Black Hat to be able to make 15-plus meetings.
CF: Is there anything else you want to add?
FR: I’d just like to really thank the partners, to be honest with you. I’ve been really, really lucky that for every place that I’ve gone, partners have embraced my role and embraced that company when I got there. I love to say thanks for that.
I would just like to point to the future. Cato has been around since 2015, but it’s still so young in the market. It may not be so young in technology, but it’s young in the market. As some of the really big analysts come out with their opinions later this year, I think they’re going validate more and more of the strength of Cato, and I think you’re going to see some of the really, really large wins. I think you’re going to see some of the agreements announced with partners that are household names. And I guess the interesting part of it is, I haven’t heard a lot of people say, “Go away. We don’t need this. We don’t think it’s a good idea. We have enough Palo [Alto Networks] business. We have enough Netskope, Cloudflare or Zscaler business. Forget about that standard test case.” Or I wouldn’t be trying so hard to get out to Black Hat to be able to make 15-plus meetings.
Cato Networks is moving toward a “50-50” balance between technology advisor (agent) partners and value-added resellers (VARs) that drive Cato sales.
So says global channel chief Frank Rauch, who joined Cato in January. He promised to bring accretive growth to the secure access service edge (SASE) provider’s channel program. That includes leveraging his strong relationships with large enterprise partners from the solution provider and systems integrator world.
Cato Networks’ Frank Rauch
And he told Channel Futures that he’s finding success, with more of those partners joining the fold.
“We’re starting to see that even out. But the good thing is, it’s not evening out because one is shrinking and one’s growing,” Rauch told Channel Futures. “It’s because they’re both growing, and one’s growing a little bit more.”
Cato Sales Draw In GSIs
Rauch also said he’s seeing global systems integrators express more interest and conduct business.
“Some of the GSIs have also embraced the model …” he said. “This used to be a midmarket thing, and I think it’s quickly moving into the enterprise.”
In this Q&A, Rauch shares highlights from his first seven months at his new employer, how he sees the mix of Cato channel sales shifting, how he’s been pleasantly surprised by the technology advisor community, and what he sees in the larger SASE market.
Read his comments in the slideshow above.
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