Zscaler CEO: Gartner’s SSE Magic Quadrant Overweighs CASB

‘Frankly, I was surprised to see two CASB vendors listed in the [Gartner Security Service Edge] Leaders Quadrant, because we don‘t see them in the real world out there,’ says Zscaler CEO Jay Chaudhry.

Zscaler CEO Jay Chaudhry criticized Gartner for overemphasizing cloud security and underemphasizing web security in its inaugural Security Service Edge (SSE) Magic Quadrant.

“Frankly, I was surprised to see two CASB vendors listed in the [Gartner SSE] Leaders Quadrant, because we don’t see them in the real world out there,” Chaudhry told investors Thursday. “In our customer base, we are replacing a lot of CASB point products that have been sold over the years.”

San Jose, Calif.-based Zscaler was one of three vendors named by Gartner as a leader in SSE alongside Netskope and McAfee Enterprise, both of which have CASB (cloud access security broker) as their foundational technology. Chaudhry said CASB is much easier to build since it’s out of band, meaning that it doesn’t reside in the main path of network data and instead uses copies of the packets.

[Related: McAfee Enterprise Snags Cisco’s Gee Rittenhouse To Run SSE Unit]

Conversely, Chaudhry said Zscaler’s core SWG (secure web gateway) technology is the foundation of zero trust and is much harder to build since it is inline, meaning that it is actually processing original network data. Zscaler was the sole leader in Gartner’s most recent SWG Magic Quadrant published in December 2020, while Netskope was listed as a visionary and McAfee was listed as a challenger.

“Our proven track record running the world‘s largest inline security cloud makes Zscaler the obvious and trusted partner of choice,” he said. “Zscaler pioneered the zero trust architecture. And over time, our platform subsumed functionality of multiple point products into our secure web gateway foundation.”

Netskope fired back, telling CRN a big reason the Santa Clara, Calif.-based company was named a Leader by Gartner is its ability to govern all cloud traffic inline. Cloud inline traffic is now at least 70 percent of an enterprise’s egress traffic, according to Netskope, while web traffic is now a much smaller percentage.

“We are proud of our SSE Leader recognition from Gartner, not least in how it highlights Netskope’s data protection capabilities and also identifies how competitive vendors lag Netskope in terms of advanced data security capabilities and cloud security capabilities,” Netskope said in an emailed statement.

McAfee Enterprise said its CASB offering provides comprehensive zero trust for cloud native scenarios such as a cloud-to-cloud data exfiltration, sensitive data sharing and misconfigurations on the cloud services, according to Chief Product Officer Anand Ramanathan.

“McAfee Enterprise is a pioneer in the SSE space, with innovations that have been validated both by our customers and Gartner,” Ramanathan said in an emailed statement. “Combined with zero trust and its native integration of DLP [data loss prevention] technology, it is truly one of the most unique SSE solutions in the market today.”

In SSE, Zscaler received Gartner’s highest rating for ability to execute – which focuses on the customer experience, overall viability, and the product itself – but was outranked by both McAfee Enterprise and Netskope in completeness of vision, which looks at market understanding, product strategy, and sales strategy. Gartner didn’t responded to a CRN request for comment.

Zscaler is larger and more valuable than either Netskope or McAfee Enterprise, with 4,372 employees as compared to 1,779 workers at Netskope and 700 at McAfee Enterprise. Similarly, Zscaler had a $36.89 billion valuation as of Thursday, while Netskope was valued at $7.5 billion in July and McAfee Enterprise – which included the SSE business and the Trellix XDR business – was purchased for $4 billion in July.

Netskope was founded in 2012 and built its CASB capabilities organically, while McAfee Enterprise acquired its CASB capabilities through the $590 million purchase of Skyhigh Networks in January 2018. Both companies also have their own SWG and zero trust network access (ZTNA) technology.

Zscaler was praised by Gartner for the size of its sales organization, its strong marketing message, its solid track record of innovation, its integrated management console, and strong SD-WAN partnerships. Gartner, however, criticized Zscaler for its renewal pricing, data security and cloud security capabilities, and performance issues with its dashboarding and reporting features.

“As the category leader in SSE with the widest and deepest offerings, Zscaler is the go-to platform for vendor consolidation, cost savings, increased user productivity, and better cyber protection,” Chaudhry said Thursday.

Revenue for Zscaler’s quarter ended Jan. 31 skyrocketed to $255.6 million, up 62.7 percent from $197.8 million a year ago. That crushed Seeking Alpha’s estimate of $241.9 million.

The company’s loss increased to $100.4 million, or $0.71 per diluted share, 48.7 percent worse than the loss of $67.5 million, or $0.50 per diluted share, recorded a year earlier. On a non-GAAP basis, net income surged to $19.2 million, or $0.13 per diluted share, up 36.7 percent from $14 million, or $0.10 per diluted share, last year. That beat Seeking Alpha’s non-GAAP earnings projection of $0.11 per share.

Zscaler’s stock plunged $45.48, or 17.27 percent, to $217.90 per share in after-hours trading Thursday. That’s the lowest the company’s stock has traded since July 2.

For the quarter ended April 30, Zscaler expects non-GAAP earnings of $0.10 to $0.11 per share on sales of between $270 million and $272 million. Analysts had been expecting non-GAAP earnings of $0.11 per share on sales of $257.4 million, according to Seeking Alpha.