Having paid his Silicon Valley dues, the email security CEO is at the forefront of the cloud, sanguine about the future. By Paul Fisher.
It's the night before my interview with Gary Steele, the CEO of email and data protection specialists, Proofpoint. There's four of us sitting down for a meal at the Pizza Kitchen on Palo Alto's main drag, University Avenue.
At the table are: Marty Tacktill, Proofpoint's diligent head of PR; Keith Crosley, its director of communications; and someone introduced as Proofpoint “employee number 1” – its VP and general manager, Andrés Kohn.
Tired and jetlagged, I wasn't expecting quite such a delegation, but the pizzas and vino are ordered. It's time to chat.
In the restaurant bustle, it's a struggle to keep up with the conversation, but inevitably the topic turns to President Obama and the big questions: how is he doing, can he turn round the economy? All at the table agree that Obama has such huge approval ratings that it will be some time before the US public even begins to doubt him. We move on to the US car industry and its request for government bailouts to stave off death.
But my dinner party decides it's all too late, that the Motown patient is terminal. The reason is simple and brutal: the US consumer doesn't want to buy US cars. We are in German-car-loving California, of course, and I doubt the same question is so easily dealt with in Detroit.
As it turns out, these questions on the economy prove a good warm-up for the main event next day, when my chats with both Gary Steele and Paul Auvil, Proofpoint CFO, touch on the economy and its effect on the security markets.
Like many of his peers, Steele has paid his dues in Silicon Valley. His CV includes development, marketing and engineering roles at Sun Microsystems and HP. He also knows what he is talking about, with a BSc in computer science from Washington State University.
Tall, crew-cut and broad shouldered, Steele could pass for the actual man of steel and with a broad smile he invites me to sit down in his sun-filled office.
We kick off with a disagreement: how can Proofpoint remain a contender in a market vulnerable to commoditisation?
“Actually, I don't think there has been much commoditisation, but the problems have increased in complexity. Today there are very few solutions that can meet what most enterprises are faced with. People who bought early solutions are actively replacing those and that has driven a lot of our growth and success. It hasn't commoditised – it isn't like I can just go and pick any old vendor because they're all the same – they won't be,” he says.
But he sure believes that customers should get a single solution from one vendor – and preferably Proofpoint.
“Customers are saying they want to consolidate point solutions, bring in a platform that deals with all of these risks and issues – buy from a single vendor.”
Yet, perhaps aware of the increased competition in the market, Steele made a partner deal with Sunnyvale neighbour Blue Coat Systems, which aims to build on each company's strengths to fight the growth of blended threats.
“Blue Coat has a perspective on the web world and we're obviously very in tune with what's happening on email,” he says. “There's a lot of innovation on the spam side, focused on the individual who may be affected by the downturn. It could be a phishing attack as their bank folds or it could be a work-at-home scam,” Steele says.
Proofpoint recently highlighted an increase in fake recruitment emails that ask the recipient to provide personal information – or “recruit” unwitting recipients into what turn out to be illegal activities such as money laundering.
There are other technologies, whose adoption will have been accelerated by economic conditions. In the security market, this means virtualisation and the cloud. It's another “must-ask” question.
“Customers want flexibility in how they can deploy, and they want to be able to balance security and control against economic advantage. There's a middle ground. Customers are saying they want part of it out in the cloud and part of it on the premises. Making that all work together is something that we've uniquely dealt with – because fundamentally we believe that we shouldn't dictate how customers want to deploy; they should be able to make that determination and take advantage of it,” he adds.
So, then, what is it Proofpoint thinks customers are asking for, what do they perceive as the advantage?
“Two things: security and compliance requirements continue to increase, but their budgets and their staff are going down, so how do you balance increased requirements with reduced budgets? You have got to do something fundamentally different. It's a rethinking of the problem that's going on in many enterprises today that leads them to the conclusion of cloud computing.
“Many SaaS companies talk about multi-tenant like it's a customer advantage, but it's not; it's an advantage for the vendor, because, in theory, it gives you better economics. We've taken an architectural approach that gives us great economics but at the same time gives the customer privacy and much more control and security,” he adds.
As well as the economic and security benefits, the global imperative is the environment, one we would be foolish to ignore. Does the Proofpoint cloud match up to the challenge?
“Yes, because we run in a different environment than a customer can on their own – and as a result of that, we're going to consume less resources and less power. We're not running the same amount of systems that our customers would have to run individually; we can run different configurations that consume a lot less power and rack space.
“It has helped us as a company, in that we never wanted to be in the business of just pushing boxes. We make money in different ways – you don't make money by pushing boxes – so our objectives are aligned with our customers',” he says.
Amazon has been a surprise player in the cloud with Amazon Web Services (AWS), but as yet has refrained from offering security as part of the package. However, that could change, and its size could easily tempt smaller to medium-sized businesses looking for a reliable brand name offering a complete service.
Steele says he admires what Amazon and others are doing, but that “we're looking at creative ways to leverage what they're building. So we see Amazon as a catalyst, but our differentiation is not how we run our cloud, it's the capabilities that we've built there.
“The more cloud infrastructure and capabilities that exist, the more prevalent cloud computing becomes. That's good for us, because they help to tell the cloud story, which gets our customers more comfortable and more educated.”
It's perhaps lucky that the cloud has come along, given the need to store more and more – sometimes just to fulfil mushrooming compliance laws. This is not always a good thing.
“If you look at the financial services industry, it has got seven-year retention of records, dictated by the government, and seven years is a long time. Those periods aren't getting shorter. I think it is always better to make it shorter.
“But if you're going to do it, then you've got to be rigorous about it, and you've got to stop people retaining things on laptops that are discoverable. You really need to push this problem into the infrastructure and then let that help you manage and maintain the retention policy. People are retaining longer because they're afraid – and, a lot of the time, that is for legal reasons,” he says.
The problem is that the fall-out from the banking crash and the subsequent governmental response in banking bailouts, the end of “light-touch” regulation and strings-attached recapitalisation mean that there are likely to be more compliance and governance pressures than ever before.
“In the US, the government is going to be much bigger and as a result of that, the level of regulation and compliance is going to grow dramatically. That's just going to put more of a burden back on IT – that's going to cost organisations money that they don't really have to spend. Thinking about the cloud as a vehicle to get advantage over what's coming your way makes a ton of sense,” he says.
I revert to last night's conversations. With a determined, aggressive President breathing down their neck, financial services is not going to be allowed to behave the way it has done – is it?
“There are going to be very specific controls and compliance requirements that don't exist today, but will in the new administration. I think the American public will demand it. Obama has no choice, he has to do it, because the US public is outraged by what's gone on. And, because of that outrage, there will be a lot more oversight.”
Proofpoint appears to be having a good recession. Although as a private company it doesn't publish details of its finances, PR boss Tacktill said its 2009 first quarter revenue “increased substantially” over the previous quarter and year-on-year. IDC reported that 2007 revenue was 70 per cent up on the 2006 result.
“We're still hiring, we haven't had any layoffs. That's driven by the fact that people have dollars allocated to this problem and they cannot eliminate those dollars from their budget, because they need it to survive.
“We're well funded; there are a lot of younger companies in the Valley that aren't and will not survive without additional capital. We're going to be around for a very long time,” he says.
Tough words, but if capitalism is all about taking advantage and the survival of the fittest, then they are the words you need. Steele sounds like he has the metal to survive and prosper and be part of the post-recession security industry.
Steele on the recession and the President...
What the world needs right now are hope and inspiration that we're going to get to the other side of the recession, because it's had such a wide-reaching impact on individuals and businesses and there has been so much negativity.
One of the good things that Obama and his administration have done is actually bringing that level of hope and inspiration that didn't exist prior to the inauguration. I think it actually matters.
At the same time, we could sit here and debate what is the exact path to get us out of the mess we're in, and I don't think there's any one answer, I don't think there's anybody in the world that has the exact answer. What is required is quick, prudent action and what I'm seeing today is such action.
We could also debate whether the US goverment's stimulus package is made up of the right elements or not, but at some point you need to do something to help get the banking system and the financial environment back on track, to get people back to work.
At the end of the day, what's going to make the global economy better is the consumer back at work, buying and being able to borrow money – those basic elements have to get back on track.
I'm encouraged and I think that we can power through this, but it's going to last a little longer than people would like, or had hoped. I don't believe that we're at the bottom and coming out yet, but we're getting closer to the bottom.”