It's a tale of two strategies.

Zscaler cofounder, Chairman and CEO Jay Chaudhry noted the vendor didn't see any cybersecurity spending fatigue among the vendor’s customers and dismissed its competitors’ strategy of giving away free products to boost platform adoption.

On the contrary, Palo Alto Networks Chairman and CEO Nikesh Arora said last month during the vendor’s earnings call that the security vendor started to notice customers are facing spending fatigue in cybersecurity. To drive the security platform approach transition, Palo Alto Networks offers a “no-cost” period for its platforms until customers’ existing legacy contracts expire.

When asked by analysts about the strategy of giving away free product during Zscaler’s Q2 2024 earnings call, Chaudhry said, “Many vendors have been trying to give it away for a while and we have been successfully winning against this strategy for a long time.”

He said Zscaler’s customer retention rate is in the high 90% range, saying “Fundamentally, cyber is so mission-critical that customers will invest in the industry's leading solution rather than rely on cheaper and less effective products that are included as a part of an ELA [enterprise license agreement] bundle.”

Chaudhry claims many CIOs have ELA fatigue despite seeing cybersecurity as a priority for spending, “because a lot of stuff has been becoming shelf wear and it's being scrutinized.”

He added the role of firewalls is diminishing and the demand for zero-trust security is growing, which “is bound to impact sales of firewall vendors and this naturally puts the legacy vendors in a defensive position.”

“And they're trying to cover giveaway products as bundles, which end up becoming shelf wear, and this strategy starts to unravel over time. We'll stick to our strategy,” Chaudhry said.

Zscaler in January announced the general availability of its Zero Trust SD-WAN solution and portfolio of plug-and-play appliances, designed to help customers modernize secure connectivity for branch offices, factories and data centers while also eliminating the need for ineffective firewalls and Virtual Private Network (virtual private network (VPN)).

Chaudhry claims the vendor’s new single-vendor SASE solution has “the full potential to disrupt the traditional SD-WAN and SASE market.”

He argues traditional SD-WAN, like previous networking solutions, lacks security capabilities that inhibit lateral movement.

The SASE market is becoming increasingly crowded. When questioned about the challenges posed by the newcomers, including some firewall vendors, Chaudhry differentiates Zscaler by emphasizing the distinction between point products and platforms, arguing that mission-critical platforms like Zscaler's are not easily replaced.

He said reliability, availability and effectiveness are key and customers have many firewalls and VPN but threats are still growing, so “the credibility of firewall vendors overall is less.”

“The platform keeps on growing. We started with outbound traffic, now inbound traffic. The platform must have the most comprehensive data protection. None of these firewall vendors can do a lot of data protection,” which starts with the proper SASE architecture, Chaudhry said.