Palo Alto Networks Unveils Big Upgrades To Partner Profits, Sales Rep Incentives

The cybersecurity giant is shifting to backend rebates and adding a new seller incentive to its NextWave Partner Program, as the company looks to drive sales of more products across its platform.

Palo Alto Networks is rolling out major new enhancements to partner profitability and predictability as part of its drive to enable the channel to sell more products across its broad cybersecurity platform, Channel Chief Tom Evans told CRN.

The update to the company’s NextWave Partner Program includes a pair of significant changes that are being disclosed to partners Monday. With the changes, the cybersecurity giant has now shifted to a compensation model based on backend rebates. The company has also introduced a more-lucrative incentive for individual partner sales representatives.

[Related: Palo Alto Networks CEO Nikesh Arora: Why 2023 Is The Year Of The Channel]

For partner businesses, the shift to backend rebates should “make their profitability much more predictive, and enhance their profitability, so that they can figure out ways to invest” in growing with Palo Alto Networks, said Evans, who is vice president of worldwide channel sales at the Santa Clara, Calif.-based company.

In the past, Palo Alto Networks — which generates 95 percent of its revenue through the channel — had focused heavily on upfront discounts as a means of enabling profitability for partner businesses.

However, the margin that would result from that was often “all over the board,” Evans said. “Some deals were higher, some deals were lower. So it wasn’t as predictive. And as we talked to many of our partners, [we heard] that it made it challenging for them to invest long-term.”

Rebate Expansion

With the shift, Palo Alto Networks is moving from offering just a small number of rebates to its largest partners to providing nearly 40 different backend rebates — some of which will be available to all NextWave partners.

Two types of new rebates will be offered to NextWave solution provider and MSSP partners — “Expertise” rebates for closing or registering deals in the partner’s area of specialization or proficiency, and “Opportunity” rebates for providing additional sales or technical value.

The new “Expertise” rebates are particularly aimed at enabling partners to sell more of the portfolio, Evans said. In addition to its flagship next-generation firewalls, the Palo Alto Networks platform now includes its Prisma SASE (secure access service edge) and Prisma Access zero trust security offerings — as well as cloud and application security via Prisma Cloud and AI-powered threat detection and security operations through its Cortex offering.

For NextWave partners, “if you bundle solutions together, if you sell more than one solution, if you expand beyond just firewall — you actually earn higher rebates,” Evans said. “So that specific rebate category is dedicated to really driving the entire breadth of our platform — not just the firewall.”

“Expertise” rebates will be available to all NextWave partners. As for the “Opportunity” rebates — which are available to all partners except for entry-level Registered partners — the goal is to incentivize partners who can “provide extra value” while working with Palo Alto Networks, Evans said.

The “Opportunity” rebates reward partners who add value such as bringing in deals with customers who are brand-new to Palo Alto Networks or facilitating evaluations such as proof-of-concept tests, he said.

Ultimately, “with [CEO] Nikesh [Arora] saying that 2023 is the year of the channel, we realized that if we’re going to expect more out of our channel partners, we’ve got to find ways to incent them to do that,” Evans said. “This allows us to enhance that profitability — so that they will make more margin on the value they provide.”

Sales Rep Incentive

Palo Alto Networks is also “focusing heavily on the sales team” through the introduction of the new “Partner Perks” sales incentive, he said. The move represents an increase in available financial rewards meant to encourage partner salespeople to focus on the company’s products, according to Evans.

Partner sellers will be able to “make some serious cash from this,” he said, with individual sales reps eligible to earn up to $5,000 per deal.

While Palo Alto Networks has previously offered one-off sales incentives to reps based around key sales pushes — such as at the end of a quarter, for instance — the Partner Perks incentive is not time-bound, according to the company. It’s the first time Palo Alto Networks has offered an ongoing sales rep incentive, Evans noted.

Based on recent trials of the incentive, “we’re very convinced this is going to change the mindset of a lot of our partner sales reps,” he said.

At Optiv — No. 24 on CRN’s Solution Provider 500 and a top Palo Alto Networks partner — the introduction of Partner Perks will no doubt help to “better enable and incentivize our sales force,” said Alan Mayer, senior vice president of partners, alliances and ecosystems at the Denver-based company.

All around, Mayer applauded the “enhanced NextWave partner program” and its updates around profitability and incentives. Optiv has found a “tremendous amount of opportunity” in working with Palo Alto Networks to deliver services and consolidate customer tooling in security, Mayer told CRN.

And with the new updates, Palo Alto Networks is making it clear that it’s committed to rewarding partners who are focused on “driving greater value” with the company, he said.

“What we’ve seen [from Palo Alto Networks] is continued investment — both for us and for our sellers, as well as for enabling and growing our overall partnership in service of our clients,” Mayer said.

Major Investment

On the whole, the combination of the new backend rebates and Partner Perks incentive will add up to a “large financial investment” from Palo Alto Networks, according to Evans.

“It really goes back to what Nikesh was saying about how important our partners are — and that we need them to scale moving forward,” he said. “We’re putting our money where our mouth is — and we’re doing this very differently, I think, than a lot of other companies. We want to break away from the competition and say, ‘This is what we’re doing to drive our partners to really focus heavily on us.’”

Looking ahead, Palo Alto Networks is planning to launch a new set of compensation-related tools for partners to use as part of leveraging the new model and its improved margin predictability, Evans said.

The tools — which should be launching “shortly” — to get a deeper look at both past business with Palo Alto Networks as well as a predictive look at future business, he said.

For example, partners will be able to see what their earnings will be if they close different deals that are in their pipeline, according to Evans.

With the forthcoming tools, “they can really start to put some plans in place based on what’s coming,” he said.

‘All About’ Channel

For its fiscal fourth quarter, ended July 31, Palo Alto Networks beat Wall Street expectations on earnings and increased its earnings guidance for its full fiscal year 2024. On revenue, Palo Alto Networks reported growth of 26 percent, year-over-year, to $1.95 billion.

Strong sales of the company’s Prisma SASE platform and Cortex XSIAM (extended security intelligence and automation management) platform were among the highlights of the fiscal Q4 results, Arora said during the company’s quarterly call in August.

In an interview with CRN late last year, Arora forecast that 2023 would be “all about go-to-market and the channel” for Palo Alto Networks — adding that his own focus would shift to spending 70 percent of his time “to make sure we actually take all these products to market and upsell all of our customers into a better security proposition.”

In speaking with CRN in July, Arora said the company’s partner-focused initiatives were paying off. As an example, “the proportion of business we do through some of the key partners who are building services capability has increased,” he said.

“Whether it’s our traditional partners’ services teams or transformation teams or cloud adoption teams—or whether it’s MSSPs with network transformation skills, or systems integrators with cloud security skills or SOC transformation skills—you are seeing a clear trend toward more solution orientation [by partners] for the customers,” Arora said.