Best of Breed vs Platform Based: The age-old Cybersecurity Dilemma

Palo Alto Networks gave investors a scare recently, revising its revenue forecasts for the year. While still healthy (the company is anticipating $10.1 to $10.2 billion, where it had previously forecast $10.7 to $10.8 billion) spooked investors sent the share value plunging by 21%.

Palo Alto is best known for championing a “platform” approach to cyber security. Thanks to these results, people are now questioning whether that approach is right for the current market conditions.

A 21% decline in share value does, on the surface, look disastrous. On the other hand, it is worth noting that the former Speaker of the US House, Nancy Pelosi, almost immediately saw an opportunity, purchased shares in the “dip,” and Palo Alto’s price lifted 7.3% almost immediately after the dive.

Such is the fickle nature of the stock market, and it’s not often a metric that you want to use to analyse the underlying strength of a company’s product. To put it another way, a lot is going for Palo Alto’s platform approach.

Why the platform approach explains Palo Alto’s behaviour.

?To deliver a platform, a company needs a very wide set of products and services, and Palo Alto Networks has been investing heavily in both acquisitions and organic growth to gain access to these capabilities. It now offers a range of products and services that span network security, cloud security, endpoint security, identity and access management, threat intelligence, and more.

This throws up challenges, however, perhaps most significantly is that of acquisition. As a customer, if you’re going to put all your proverbial eggs in one basket, you need to be absolutely sure that you’re making the right decision, and so it can take longer for a company like Palo Alto to drive conversions.

One of the reasons that explains the financial performance is that Palo Alto is being aggressive in addressing its challenges here. The company offers up to six months of free services to customers who are switching to its platform, which is at a significant cost to the company.

But there’s an upside to this. The benefit of this approach is retention. Customers that are relying on a single company for their entire security environment, rarely feel the need to move off that platform. Palo Alto and the platform approach represents stability, both in terms of the services that they offer customers and the business model that they operate on.

The best-of-breed alternative

The main advantage that best-of-breed has over a platform approach is that it allows customers to choose the most suitable and effective tools for their specific needs and preferences, and benefit from the innovation and expertise of niche vendors. This means that the technology suppliers can focus on being very good at a single thing.

There are clear benefits in using technology by organisations motivated by the need for sheer innovation and to be seen as a specialist in a particular area. But there are downsides to this approach, too. For one thing, compatibility between technologies can become difficult. The average organisation has 75 different cyber solutions, and they don’t always work well together (or at all). This puts the onus on the customer to develop holistic solutions that won’t leave them vulnerable.

Weighing these dynamics up, four general guidelines can help think through the decision between a platform and a best-of-breed approach:

1)???? Assess your current and future security needs and challenges, and prioritise the most critical and urgent ones.

2)???? Evaluate the existing and potential products and services that can address your needs and challenges, and compare their features, benefits, drawbacks, and costs.

3)???? Consider the reliability and reputation of the vendors and their vision and direction for the future.

4)???? Beware of the risks and trade-offs of consolidation in the cybersecurity landscape. If your tool vendor’s plans are misaligned with your strategic goals, and they get acquired by a larger company, it’s likely to change its product roadmap, support, and pricing structures. The smaller and more niche a vendor is, the more likely it is to be an acquisition target.

This last point is, perhaps, the most important. Technology in general is an entrepreneur’s playground, and this means there are a lot of companies out there that are building a business model purely to attract an acquisition and exit.

But these are rarely good companies to work with, and given that their business model can dramatically change post-acquisition, they can be very disruptive to a business. One of the greatest benefits of the platform model is that the companies building platforms do so with a long-term view to stay.