Palo Alto Networks Making Second SD-WAN Pivot with CloudGenix Acquisition

Palo Alto Networks is shelling out about $420 million in cash to acquire SD-WAN provider CloudGenix in what is likely to be an isolated deal, as cybersecurity M&A otherwise has ground to a halt during the COVID-19 pandemic.

Palo Alto’s Prisma Access secure access service edge (SASE) platform delivers a global cloud network with cloud-delivered security for all users. With the proposed acquisition, Palo Alto said it will integrate CloudGenix‘s cloud-managed SD-WAN products to accelerate the intelligent onboarding of remote branches and retail stores into Prisma Access.

This combination will “extend the breadth” of Prisma Access, addressing network and security transformation requirements, and accelerate the shift from SD-WAN to SASE, according to Palo Alto. The deal is expected to close by July 31.

Palo Alto Networks’ Nikesh Arora

“As the enterprise becomes more distributed, customers want agile solutions that just work, and that applies to both security and networking,” said Nikesh Arora, Palo Alto’s chairman and CEO. “Upon the close of the transaction, the combined platform will provide customers with a complete SASE offering that is best-in-class, easy to deploy, cloud-managed and delivered as a service.”

Palo Alto said it won’t address questions regarding how its partners and those of CloudGenix will be impacted until after the acquisition closes.

Eric Parizo, senior analyst at Omdia, tells us this acquisition represents Palo Alto’s second major strategic pivot on SD-WAN in the past six months. This is yet another acquisition that pulls Palo Alto closer to the Ciscos and Symantecs of the world, “offering a solution set made largely of someone else’s parts,” he said.

“Prisma Access is the vendor’s cloud-delivered network connectivity and security service,” he said. “Hence it’s a natural fit for Prisma Access to have SD-WAN capabilities in order to facilitate the delivery and management of secure connectivity to enterprises, particularly those with branch offices and other distributed deployment scenarios. So in November, Palo Alto announced its own home-grown SD-WAN offering built into its PAN-OS, the software running its physical and virtual firewalls. The goal was for Palo Alto to use its own next-generation firewalls or even third-party devices such as Cisco routers to connect to Prisma Access.”

Omdia’s Eric Parizo

When Palo Alto made that initial announcement last fall, it represented a significant strategic shift as the vendor had been relying on third-party SD-WAN partners, including CloudGenix, for this functionality, Parizo said. But the November announcement made clear it intended to provide SD-WAN features – such as path metrics (latency, jitter, loss), path selection and dynamic path change – all on its own, managed through its Panorama management system, he said.

“It was somewhat surprising at the time that Palo Alto didn’t decide to acquire a pure-play SD-WAN vendor, but Omdia believes Palo Alto likely passed because acquiring one of those vendors would simply be too expensive,” he said. “This acquisition of CloudGenix highlights yet another shift away from those entirely home-grown SD-WAN capabilities in favor of an acquisition and integration of CloudGenix’s technology. Omdia suspects Palo Alto underestimated both the potential addressable market represented by SD-WAN, as well as the time, effort and ultimately cost … of building its own capabilities. Palo Alto has had an ambitious vision for SD-WAN that involved unifying the functionality with cloud-based data loss prevention (DLP), but the reality is it lacked the experience to develop and deploy the core SD-WAN functionality. Doing that on its own wasn’t going to be fast, easy or cheap.”

CloudGenix has about 250 customers, many of which are in the Fortune 1000 and include companies in …