NET provided color on this during investor day last year. The counterpart to the unsexy/boring part of the business crossed 25% of ACV at the end of 2022. It’s hardly immaterial, and most certainly even less so a year later.
While I can’t dig up the transcript at the moment, the CFO has acknowledged the need for more transparency as they grow larger, while still being mindful of the fact that there are competitors out there, and I honestly don’t see anything unusual about it.
As an example, a while ago I tried breaking out the size and growth rate of the various components that PANW includes in their “Next Generation Security” ARR. Sixteen quarters worth of presentations and transcripts netted just a few data points. E.g. Cortex ARR was ~$400 million in Q2 CY21.
One could do the same exercise with other SaaS/IaaS/PaaS companies - including those discussed here, and the result would be similar.
Cloudflare One was introduced a little more than three years ago and has since then matured into a full-blown single-vendor SASE solution, capable of displacing competitors, with RBI, CASB, DLP, email security, “branch connector” appliances (Magic WAN Connector) and more.
I’ll refrain from trying to list everything that goes into the what customers want bucket, but it’s a lot.
You do have a point about throwing something at the wall, however. Cloudflare runs almost like two separate developer organizations in parallel, with one of them being “Emerging Technology and Incubation” (ETI). That’s the “throw something at the wall and see what sticks” department. So you have something akin to one organization focused on innovation and making lots small bets, and another one focused on meeting customers’ needs and improving and maintaining products. It’s an approach on tackling the innovator’s dilemma.
The other thing to know is that Cloudflare’s “innovation weeks” aren’t just for fun or publicity. It’s a way to motivate and rally teams behind a deadline. E.g. actually shipping products or getting them out of beta. Blog posts are often written by the lead developer(s) or team lead responsible for the product/feature. In a way, you could see it as a reward - you’ve worked hard on something and get to write a blog post about it.
The problem here - with innovation weeks and two organizations running in parallel, is that you’re facing a huge amount of announcements, and financial media and investors will quite naturally highlight the fancy stuff. For example, I find the Magic WAN Connector important and pleased to see that it’s generally available, but I doubt there’s much discussion from an investment perspective about this particular product/on-ramp. (It’s a physical or virtual appliance that you can simply plug in at e.g a branch office, that in many cases greatly simplifies the transition to a SASE/ZT architecture. It’s something that customers’ been asking for.)
(From your prior post, that I feel is related to the above.) I wouldn’t expect hypergrowth. I’d expect a stacking of S-curves to translate into growth durability rather than hypergrowth. To illustrate, here’s an example of the sum (red) two sigmoid curves (green and blue).
In an environment where growth is slowing across the board in the SaaS/IaaS/PaaS space, one could argue that it’s starting to show. (With the caveat that we’re still in earnings season.)
But product announcements aren’t just about pushing growth. To use one of my favorite quotes from monday.com’s CFO, "There is a lot of innovation going on because we know that without innovation, you die eventually.. Cloudflare does indeed come out with a lot of announcements. For my part, I tend to sort them into buckets.
You’re right, you wouldn’t use it for deployment. Not yet. It’s currently in (free) beta, and - most importantly - pricing hasn’t been released. I’d expect a pricing announcement within a few weeks.