Michael Khoury, vice president of Global Ecosystems Programs at Palo Alto Networks When Palo Alto Networks announced the first comprehensive overhaul of its NextWave partner program in more than three years this February, it raised a lot of questions for partners. What does the shift from transactional incentives to platform adoption rewards actually look like day to day? What happens to loyal, firewall-heavy partners who now face a diversification requirement? And is the promise of dramatically improved economics real, or is it marketing math? Michael Khoury, vice president of Global Ecosystems Programs at Palo Alto Networks, is the architect behind the changes. He joined the company, conducted an extensive listening tour with partners across markets, and built the revamp around the specific frustrations he heard: over-reliance on Palo Alto staff for routine tasks, managed services being valued like resale, incentive structures that looked good on paper but didn’t pay out, and training that wasn’t keeping pace with the platform’s evolution. In this conversation, Michael walks through the mechanics of the new program in detail. He explains why Platinum and Diamond partners will need to generate 20 and 30 percent of their business, respectively, from non-firewall product lineswithin 18 months, and why he believes most strategic partners are already within striking distance. He shares data showing the elimination of discount caps has resulted in 2-to-4x earnings improvements based on modeled past bookings, and explains why they timed the rollout to prevent partners from holding back orders. He discusses how the $25 billion CyberArk acquisition creates a new identity security practice path that counts toward diversification targets, the new Partner Development Fund that reinvests rebate earnings into partner growth, and what Canadian partners specifically should know about how their market stacks up. Read Full Transcript Robert Dutt: Hello and welcome to In The Channel from ChannelBuzz.ca, bringing news and information to the Canadian IT channel community for the last 16 years. I’m Robert Dutt, editor of ChannelBuzz.ca and your host for the show. If you’re a Palo Alto Networks partner, or you’ve been thinking about becoming one, you’ve probably been hearing about the NextWave Partner Program revamp that launched in early February. It’s being called the first ground-up redesign of the program in about three and a half years, and the changes are significant. A shift from rewarding transactional volume to rewarding platform adoption, the elimination of discount caps that were leaving money on the table for partners, new diversification requirements, and a whole new approach to how Palo Alto thinks about managed services. My guest today is Michael Khoury, Vice President of Global Ecosystems Programs at Palo Alto Networks. Michael is essentially the architect of these changes. He joined the company, did a listening tour of what partners were actually frustrated about, and the revamp is his answer to what he heard. We got into the details of what changed and why, the real economics of the new incentive structure, what the 30% non-firewall requirement means for partners who’ve built their business around firewalls, how mid-market MSPs and resellers fit into a program that could easily be optimized for global SIs, and what the recent CyberArk acquisition means for the partner ecosystem going forward. Michael brought real data and real candor, and I think you’ll find it genuinely useful. Let’s get right into it, my chat with Michael Khoury. Robert Dutt: Michael, thanks for taking the time. I appreciate it. Michael Khoury: Thank you, Rob. Great to be here. Thanks for having me. Robert Dutt: It’s been about three and a half years, I guess, since the last major partner program update for you guys. What changed in the landscape, or in what you’re hearing from partners, that made this the moment to do a kind of ground-up revamp rather than a refresh and update kind of motion? Michael Khoury: Yeah, great question. Rob, I joined Palo Alto Networks about 18 months ago, and what I did, in addition to getting the internal feedback obviously from the various team members and various stakeholders, I made sure to go out on basically a tour, a listening tour, meeting with partners and getting their input frankly about our program at the time and what are the areas we needed to address. It was obvious to me in a lot of areas we had some challenges that we needed to address as a company. I’d put these things in a way – it’s not like what we had was necessarily bad, but it just didn’t evolve with the way the business kept transforming and evolving. So we needed to update. And if you’ve seen this, probably you’ve seen it with other vendors – it’s kind of common in our industry that every few years you need to evolve the program to keep pace with the business needs ever changing. And as I met with partners – and I met with partners across the globe, various regions, some of them were virtual, other meetings were in person, some of the meetings were larger like partner events that we hosted – the consistent feedback that I kept hearing was this. Number one, it was around “Hey Palo Alto Networks, that’s great that you have a program, but it feels like we need you for everything. We need someone at Palo Alto Networks to do anything with you. So we’re always relying on you to get things.” And those things can be as simple as if we needed to get a quote, if we needed to get a price, if we needed access to more training – we always needed someone at Palo Alto to give us that access. That was consistent feedback number one. Number two, obviously when we got into the program it was particularly with the managed services motion, because that motion has been growing for us at a much faster rate – and I’ll give you some percentages in just a minute – but that motion has been growing at a much faster rate than the traditional VAR motion. So when we discussed with the managed services partners, they were like “Hey, you kind of have a managed service program, but it kind of works like resale, not like truly like a managed service.” So we needed to revisit that. And then obviously the other areas that our partners care about – for partners who provide services, how do we ensure we’re leveraging more of their capability and training them and giving them the right support from a training and enablement perspective so they can build not just a go-to-market motion but also their services around Palo Alto Networks. And lastly, the last area was around the incentives. It was only two years prior to me joining the company that the company – and you’re right, you said three and a half years ago – which was the time when the company launched their first rebates program to partners. However, the feedback that I heard from partners, they said “Michael, you have rebates, you have these incentives for us, but they’re mostly on paper. It seems like it’s very hard for us to earn these incentives.” So we had to open that up and revisit that. So overall, Rob, those were the big themes that I heard from partners and why we needed to evolve the program with bigger changes, and why we did the things that we did and we launched the recent program. Robert Dutt: You’ve talked about moving from rewarding transactional volume to rewarding the platform and selling across that. Can you walk me through what that shift looks like concretely for a partner? If I’m a reseller who’s been doing well selling Palo Alto firewalls, what’s different about how I engage with you guys under this new program versus the old one? Michael Khoury: I found – and this is by the way common across the industry – because sometimes a vendor builds a program and sometimes they look at it almost like a static thing. “Oh, we built it, here’s the requirement.” And sometimes you have to also look at where your own field sellers are measured on and what they need to do. Because if you have the company field sales organization and the partner organization that are not in perfect harmony in terms of what they focus on and what they need to work on, then you end up having more friction. So as we evolved the program, we looked at our expectations from our sales teams and we said “Look, we expect our sellers not just to sell our firewall, but we expect them to support the platformization strategy,” which Nikesh talked about a few years ago. And now every company says “Oh, I have a platform too.” But if you think about that concept of we’re not just a firewall company – yes, that is our history, that’s our legacy, that’s where the company started – but when you evaluate our business, when you look at our next-gen security growing around 34-35% year on year, that’s been a big growth engine for us. So as our field sales organization started to focus on embracing the platform, which means if you look at our product platforms, you have the network security, the NetSec part of the house, where you have the firewall, but you also have SASE, which includes SD-WAN and Prisma Access. And also you have what we call our SOC transformation, which is our Cortex product, which is also part of our next-gen security. And under Cortex you have XSIAM, which is the next-generation SIEM. You have XDR, which is around endpoint detection. And then recently we added identity as well, as you know, with the CyberArk acquisition closing last month. So as we looked at all these things that our field sales organization is going to be measured on, when I looked at our program, there were no requirements toward those next-gen security platforms. It was mostly like if you can do firewall and keep doing firewall – which is not bad, it’s totally fine, we love those partners who continue
