I saw this “The Street” interview with CloudFlare co-founder and CEO Matthew Prince about near-term trends, CloudFlare’s R&D efforts and what the company sees as its competitive strengths.
Prince’s comments gave me confidence in the company’s direction.
Here is a summary of several major issues with a few of my observations in [brackets].
Although they are seeing internet usage level off after the Covid influenced increase, they have seen an increase in cyberattacks, from over 30% in Q1 to 67% in Q2. Some is due to bored kids experimenting with basic hacker attempts, but there is a disturbing increase in nation sponsored attacks against other countries both in against governments/elections and healthcare, especially Covid related.
[My take. They expect these cyberattacks to continue to increase, which makes adaptable cybersecurity essential. As we approach the November election and the latter phases of Covid vaccines development, an increase in cyberattacks and spreading disinformation should intensify giving cybersecurity companies more business, more usage, and more chances to demonstrate their effectiveness.]
On business pressure to limit spending on NET to save cash:
Their analysis found that less than 8% of our revenue was exposed to COVID-sensitive industries. Over Q2, that exposure decreased to only about 7%.
This was due to the rest of their businesses growing even faster than the Covid-sensitive.
Most companies place CloudFlare in the “must have” category, not the “nice to have” one.
They are seeing new customer growth and record expansion among our existing customers with few opting out of cybersecurity.
Prince discussed several examples of the success of CloudFlare for Teams, which replaces VPN firewall technology. Business shifts due to the pandemic which overwhelmed physical appliances and accelerated the need for CloudFlare-type solutions.
They decided to extend CloudFlare for Teams to small businesses at no cost through September. Then due to calls from governments and larger businesses, they decided to do the same for all.
“And now we’re talking to those customers about being full time customers. Not only are they thankful for us having been there at their time of need, but it’s really allowed them to accelerate their digital transformation plans.
[This decision allowed CloudFlare to reach more potential customers and demonstrate its value while also building tremendous goodwill. It will be interesting to see how many customers they retain post-September].
Who are their competitors?
Prince sees the physical hardware companies as the biggest competitors, more so than other cloud security vendors such as Zscaler or the cloud giants.
For example, a lot of Cisco hardware needs replacing over the next 10 years; NET is positioned to do that.
However, when competing with other cloud services, CloudFlare offers a broad set of services, having one broad platform where you can get everything from DDoS mitigation, to firewalls, to VPN replacement is an advantage.
He mentioned that other cloud providers, such as zero-trust based, are CloudFlare customers for our DDoS mitigation or our [web application firewall] product.
They work will with Microsoft and Google. Amazon is tougher, but they are still times where they partner to create solutions for customers.
At first, they thought speed was the killer feature. It is one for some applications such as credit-card processing,
But, other features are more essential to most applications.
Consistency, including reducing cold start time.
Cost: the ability to run the same code base on CloudFlare Worker for less than AWS Lambda.
Ease of use: support all languages so developers don’t have to learn a proprietary language. we’re thinking a lot about is, ‘How can we use the fact that there are already nearly 30 million websites and APIs and applications that sit behind our platform, how can we use that as a way to allow developers to more effectively reach our customers and sell more to them?’
[By effectively using developers as informal sales reps, this increases their outreach and marketing at no cost to them.]
Compliance: not exciting to most, but matters to General Counsels, CSOs, and CIOs. Building global applications that comply with different rules and policies around the world is difficult and impossible on traditional platforms.
[As the recent Tik-Tok story shows, international companies need to adapt rapidly to ever-changing compliance issues. Cost and ease of use are more important to compliance than speed. I don’t have the technical background to evaluate CloudFlare’s technology in these areas versus other cybersecurity solutions, so others may want to comment on that.]
There is much more in the interview, including use of machine learning/AI and international vs. domestic markets.
All the best,