Citrix CEO Vows To Stay ‘Channel-Oriented’ Amid Company’s Cloud Transformation

‘Citrix is a channel-oriented company — we always have been,’ CEO David Henshall tells CRN. “And channel plays an incredibly important role. The vast majority of our solutions are fulfilled through partners, and they will continue to be.’

In a year of enterprises big and small transforming their business operations through cloud computing, software vendor Citrix is in the midst of its own digital transformation.

The Fort Lauderdale, Fla.-based company has moved toward a business model with more subscriptions, recurring revenue, users and more revenue per user. Adding onto the business transformation, the company is also on the search for a new permanent channel chief after Bronwyn Hastings departed the company for Google Cloud.

But CEO David Henshall told CRN in a recent interview that the company will continue to rely on partners to navigate these waters.

“Citrix is a channel-oriented company — we always have been,” Henshall told CRN. “And channel plays an incredibly important role. The vast majority of our solutions are fulfilled through partners, and they will continue to be.”

Tim Malfara, vice president of hybrid IT and cloud services at Citrix partner Anexinet, told CRN that virtual desktop interface (VDI) will become a “continually increasing market” due to the stress of more remote workers on virtual work environments. Citrix’s offerings across on-premises, cloud and hybrid environments and not relying on virtual private network (VPN) technology for security is good for customers.

“We are seeing more and more organizations re-evaluating their VDI environments and look to optimize the VDI experience for their employee base,” Malfara said. “In addition, we are seeing many industry leaders and customers choosing to embrace a more permanent working from home environment.”

Malfara’s advice to Citrix as it invests in channel partner programs is to increase investment in engineering relationships with the partner community. Technical briefings, education and collaboration opportunities would provide more value to end customers, he said.

“Co-branded or funded, proactive re-assessments of customer environments is a specific area that can help clients ensure their environments can meet the continuously growing requirements of their VDI landscape,” he said.

For the first quarter of its fiscal year, which ended March 31 and was reported April 29, Citrix reported $776 million in revenue, down 10 percent year over year and missing analyst expectations. The stock is down about 9 percent this year, trading at $116.75 on Monday.

But Citrix’s cloud investments are apparently paying off in driving more customers into that side of the business. Cloud paid subscribers rose to 10.3 million last quarter, a 34 percent increase year over year. And total annual recurring revenue — a recent metric Citrix introduced to investors that comes from subscription annual recurring revenue generated by term licenses, SaaS annual recurring revenue and maintenance annual recurring revenue — grew 15 percent year over year excluding the recent $2.25 billion acquisition of work management application vendor Wrike. SaaS annual recurring revenue grew 43 percent year over year, up from 39 percent the prior quarter. And future committed revenue was about $3 billion, up 20 percent year over year.

Here’s what partners need to know.

Describe for channel partners what Citrix the company is today.

We would describe ourselves as a company providing a cloud native digital workspace experience with the idea of empowering all people to access securely and collaborate and execute work across all the different work channels, devices, locations.

It’s a big vision. We’ve been meeting this discussion of the future of work for many, many years. And we’re fortunate enough to work with 400,000 customers around the world. We service about 100 million individual users on the planet.

If you think about the investments that we’ve been making it really just supports the needs of our customers in a number of different ways. What’s powering the business right now I’d say is this need for IT modernization to deliver infrastructure necessary to support secure, flexible work and then provide the work solutions necessary to enhance the productivity of distributed teams.

We are investing aggressively across a number of areas, whether those are new product innovations like cloud-delivered VDI (virtual desktop infrastructure) and DaaS (desktop as a service), application and access security, zero-trust network access, collaborative work management, tons of new innovation.

But I think the more important message to partners is how we’re investing to allow them to engage with our customers at a higher level, to be able to have that conversation about transforming business versus individual products, to be able to work with some of our large ecosystem partners, whether those are the hyper scalers or major ISVs (independent software vendors) like SAP and others to be able to sell together, with them, to create larger and larger solutions. Or, frankly, in a lot of cases, just move beyond what they’ve done traditionally, which for most of our partners has been around virtualization.

We have so many capabilities now that are outside of the world of traditional virtualization, and so helping them understand how those fit together in this idea of an integrated workspace, I think it‘s critically important. And we’re investing to make that successful for them.

How satisfied are you with Citrix’s market penetration?

If I look at our business right now, we have seen growth accelerate over the last year or so. We have been transforming the company from a traditional enterprise software company to, truly, a cloud delivered set of services. And so the metrics have changed. Just to give you an indication, the annualized recurring revenue of our SaaS business is now growing 70 percent year over year. Subscriptions growing at 1 percent year over year. We have well over 10 million subscribers now on Citrix Cloud.

We’re transforming aggressively across all these areas, and we‘re seeing adoption of the new solutions. Where a lot of our partners have engaged with customers over the years, they have done it generally in the context of virtualization, because it’s the most secure, easy, managed way to deliver Windows applications. But now with new innovation like Citrix Secure Internet Access, you can now help them onboard SaaS and web apps as they’re looking to modernize part of their portfolio. We can marry that with endpoint management if you want a managed device or an unmanaged device.

The whole idea of making sure we’ve got a security wrapper that allows them to drive that business transformation across all of those customer initiatives. That’s where a lot of our focus has come from and that’s what’s really been driving the overall growth of the company. We’re fortunate enough to work with about 100 million users, day to day. We think that number can be a multiple of what it is by continuing to drive across all applications, all work resources and transform to where, frankly, customers need to go in the future versus where they’ve been.

What investments should Citrix channel partners make to join you on this transformation?

We’re investing in innovation to give them more opportunities to engage with customers and solve larger problems. We’re investing a lot in the ecosystem. We’re investing in the cloud delivery side. For our partners that want to have a consultative approach, that’s fine. Those that are adopting more of a CSP (Citrix Service Provider) approach, and they want to be service providers, we’re providing them the infrastructure to do that.

And then the big ask for partners is to invest in understanding where Citrix is taking the workspace, to move beyond the traditional constraints of virtualization because there’s so much more.

There are programs that we put together where it’s sell up, sell with and sell beyond. And the idea of “sell up” is investing to understand how the Citrix workspace can facilitate those big transformational type projects. We’re working with those strategic partners to be able to make sure that we’re going to market in a unified fashion bringing those technologies together. And then “sell beyond” is the idea of moving beyond virtualization. So we’re investing a lot to make sure that these are profitable engagements for them, that they understand how the customer relationship with Citrix is going to work in terms of initial engagement, ongoing engagement, active use and renewals of solutions. My ask is to always invest the time. Understand what we’re up to these days. Engage with us on the enablement that we’re providing. Extend that into those three attributes.

Are smaller channel partners and the midmarket still important opportunities for Citrix?

What I’m seeing right now is that customers of all sizes need to go through some level of transformation, whether it’s because IT complexity has gotten inherently difficult over the years or whether it’s coming through the pandemic and realizing the need for business continuity, agility and all those other attributes. The channel has always been a fundamental part of the Citrix business and will continue to be.

The way we’re organized right now is most of our infrastructure solutions, that hybrid work infrastructure is applicable to small, medium and large businesses. The capabilities are more modular than they’ve ever been in the past so that there are solutions that are simpler to adopt, simpler to implement, more targeted toward those simple use cases, all the way up to the infrastructure that’s being used by the biggest companies in the world.

And then the set of work solutions — which are applications in areas of content collaboration, content workflows, micro-apps, collaborative work management — those are all largely sold into small business and departmental buyers and lines of businesses as an initial point and eventually meet up at enterprise IT. So I think partners have a role to play in all of these areas, and then for those that are turning themselves into service providers, we have great CSP programs and infrastructure to be able to make them successful and make sure that we’re giving them the tools to keep that a very profitable fast growing part of the company.

In there an industry-by-industry focus in how Citrix is growing?

One of the benefits we have over the years is that we are integral to just about every medium and large enterprise out there at some level. That cuts across all major industries as well as geographies.

So the growth strategy is relatively simple. Today, we touch around a third of enterprise knowledge workers largely with solutions like cloud-hosted VDI and whatnot. As we start to drive penetration more completely, working with many of our customers we’ve identified those adoption triggers necessary to make a truly wall-to-wall piece of infrastructure. Those included being able to have native SaaS and web access, being able to include tools to manage distributed teams, being able to have an analytics view that cuts across all of these work resources.

The strategy is to use the complete workspace to drive penetration to the entire population of users inside of our customers. And then there’s opportunities to continue to sell incremental services over time, like analytics, like some of our network and security services and many others. It’s basically a breadth and depth strategy.

How should Citrix channel partners think about specialization with your products?

Personally, I’d start with the customer outcomes that customers are looking for right now. That is more important than one of our individual technologies. A primary outcome that we tend to serve is around secure, flexible work, providing the infrastructure for that. It’s one of the primary use cases these days, especially with the work-from-home experiment we’ve all been going through over the last year or so. That brings together many of our different product areas.

The modernization of IT is another major outcome — how we help customers move their infrastructure from where it is today, usually on-prem, to some form of hybrid cloud or public cloud. And then the ability to help drive productivity of the distributed teams. I’d rather have partners focus on delivering the outcomes than any individual technology because when they do that, I think it becomes easier to bring our complete solution stack to bear in a way that’s differentiated, in a way that is speaking the language of customers more often than not.

I have seen a shift in the last few years away from talking about products and talking about outcomes. More increasingly so, those outcomes become higher level, more transformational in nature.

We’re going to continue to focus on moving customers to the cloud, and that is a lot of our install base. I mentioned earlier that more than 10 million users have already moved and they’re moving at a rate of well over 30 percent year on year. So we’re making that move really rapidly because we can demonstrate a lot of incremental value both in terms of new capabilities as well as cost reduction, lower TCO (total cost of ownership) for moving to the cloud, whether you do that with just Citrix or with Citrix on one of our partners.

So I think partners need to be really invested in understanding where we’re going with that, because once we have a customer in the cloud, it’s much easier to expand laterally into some of these new capabilities — secure SaaS and web app analytics and others. And so we’re going to be investing to make it easier for customers to move from where they are today to where they need to go. Not a rip and replace but a truly incremental, more a la carte strategy. As they look to modernize parts of their infrastructure, we have a solution to help them do that. But that is what really cuts across products and again focuses more on outcomes.

As I mentioned, we’re investing a lot in making sure that our partner network not only has the capabilities for themselves but also working with these big strategic partners and the platforms and others.

There’ll be one of our more traditional partners working with Microsoft and the Citrix consulting team together on holistic solutions. And I think that’s a great model. That’s one that economically works for everybody individually and usually provides the best results for customers. So that’s what I would encourage. Learn about what’s new at Citrix. Our pace of innovation has never been faster than it is right now. Our No. 1 investment in the last two years has been in engineering, and so you should expect more to come.

How is Citrix investing in its channel partner programs?

Without giving anything away, I’d say keep an eye on what we’re doing with partners over time.

Because of how important we are to our customers’ IT infrastructure, we’re in a fantastic place — especially for platform partners, where we can do more to make customers successful and usually that facilitates a much, much tighter relationship. We will continue to expand those with not just the hyperscalers but other ISVs (independent software vendors) to continue this trend of selling solutions versus selling products.

In terms of acquisitions, we just did our largest acquisition ever with Wrike. That is about bringing a market-leading, really cool collaborative work platform for distributed teams. You’ll see some interesting integrations with some of our other solutions over time and I think that’s going to allow us to continue to differentiate, to tell a very simple but powerful story of delivering all of the complexity of distributed IT and help provide tools to manage distributed workforce.

Any preview for what lies ahead with the Wrike integration?

It‘s brand new. We’re just starting the enablement capabilities right now. Over the last few weeks we introduced our first joint demand generation and go-to-market activities with our internal teams, the Wrike team and the core traditional Citrix team, and I couldn’t couldn’t have asked for a better outcome.

Traditional Citrix sellers have generated nearly 95 percent of the joint pipeline. They’ve got lots of opportunities with our existing customer base, and it gives us an opportunity to go in and have a net new conversation. Partners should really take a look at that because they’ve made customers super successful delivering applications over the years. Now let’s talk about making sure that all those distributed people are productive, they’re engaged. I think that’s a very very powerful message. Expect more to come on the enablement side. It’s rolling out now and we’ll do a lot more over the course of the next two, three months.

Is multi-cloud good for Citrix?

Multi-cloud is something our customers are asking for. And that‘s for various reasons, whether it’s an individual public cloud that just has a certain set of capabilities that they feel marries their needs more directly. Or it’s diversification from a risk management strategy. Or, frankly, it’s just a personal preference. As you know, Citrix has always been a very neutral company, and we’ve become a bridge between all of these different ecosystems. Whether you’re adopting parts of a Google ecosystem or an Apple or a Microsoft (ecosystem), Citrix could be the central element that allows you to do that seamlessly. And we’re not going to force customers to choose.

We have a number of customers that I have seen that run part of their infrastructure, for example, in AWS, part of it in Azure, part of it on-prem. The challenge is just making sure all the partners can come together in a way that provides a unified face to that customer. So it is truly a solution versus the piece parts, and I think our channel partners can play an incredibly important role there orchestrating all of these different activities. And making sure that it‘s customer-backed is the primary lens we’re working through. But multi-cloud is definitely here.

How does Citrix and others get more companies to adopt cloud products and services?

Any IT project is generally hard. It’s complex. It costs money. And so the role of vendors and partners is: How do you simplify that work for customers? How do you provide a level of best practices? How do you focus on outcomes so that it’s not a project for moving from on-prem to cloud — it’s really a project about, ‘This is how I’m going to transform my business to drive this set of outcomes. And if I do that effectively, I should be able to yield this cost outcome that hopefully is less than what it used to be.’

There‘s a level of clarity in terms of what problems they’re really trying to solve. Too many times in our industry we focus on the technology first versus the outcome. We have to invert that. That’s what’s going to keep cloud growing much, much faster. If done poorly, cloud is going to be more expensive than a traditional IT model. And, frankly, it may just become more complex because it increases the number of moving parts. That’s why, you know, you’ll hear me constantly talking about working backwards from outcomes.

We just have to keep making it simpler and simpler. One specific example in Citrix’s case — we‘ve invested a lot of money in cloud transformation tools, whether those are tools to help a customer ease that migration from on-prem to cloud or some form of hybrid. We’ve created profile management solutions on the major clouds to simplify how we deliver applications. Machine creation services so you can spin up. And, most importantly, a lot of ongoing management capabilities so that you can regulate the use of a cloud utility much more effectively. That addresses both the project simplicity as well as the ongoing cost model. And I think we need to do both.

How is Citrix investing in security?

Security is one of the fundamental attributes that have always existed in our products. It‘s one of the main reasons why partners have sold virtualization, for example, over the years. It’s because it’s one of the most inherently secure ways of distributing applications.

We have invested a lot in product innovation, around everything from access security, application security, endpoint management. We have new product innovation around providing secure access to SaaS and web applications. So those are things like secure web gateways, CASB (cloud access security broker) and others that are now part of the digital workspace.

Security will be an increasingly important part of what we do because it is one of the most complex areas of cloud adoption. So the philosophical approach that we have is that security needs to be contextual and it needs to be invisible to the end user as much as possible. And by having all of these capabilities together with the workspace, we can actually lend a contextual element that allows you to deliver applications based on those unique attributes — where a user is, whether it‘s a managed or unmanaged device, the type of request. And in that case, it’s about how do we deliver applications securely. Users shouldn’t care about how that happens, but it needs to be dynamic. As they change their work environment — Starbucks, home, in the office, you name it — the security bubble follows them around. It is one of the most important investment areas that we have been investing in, and I think you’ll continue to see that.

Is there still opportunity to grow virtualization in the enterprise space?

Virtualization as a category has actually been accelerating over the last 12 months. It‘s been accelerating due to the pandemic in some ways, due to the realization that virtualization — whether you were talking about a hybrid VDI (virtual desktop infrastructure) model or cloud-delivered DaaS (desktop as a service) — we invented these categories and we’re the leader in cloud-delivered DaaS.

What we see is that it is a really important part of how regulated industries, for example, are delivering all of their infrastructure. It is an increasingly important part of how many customers are delivering a hybrid work model, because now they have visibility, control, security around that entire experience. It is the original zero-trust network access. I think virtualization is really an important part of how people think about delivering elements to their infrastructure. But it‘s predicated on whether that is due to a security use case, whether that is due to a legacy application use case and just managing complexity. But we tend to think about it in the context of that workspace that I talked about where Windows applications, a secure way to deliver them, virtualization is fantastic. If you need a temporary use case — like you’ve got some contractors onboard — a fully managed DaaS service, you can turn that on at the same time. If you want to adopt more modern applications, turn on those capabilities. All in the context of the Citrix digital workspace is where our strategy takes them. Virtualization is a growth business. It’s growing faster now than it has in years.

How important are channel partners in Citrix’s strategy?

Citrix is a channel-oriented company — we always have been. And channel plays an incredibly important role. The vast majority of our solutions are fulfilled through partners, and they will continue to be.

The investments that we‘ve made in our channel business are focused on a traditional VAR (value-added reseller) and VAD (value-added distributor) channel to make sure that we’ve got the programs and the enablement and the services so that it can be a good economic business for them to be in, and one that we’ve got a set of solutions that are differentiated and defensible in the marketplace. For the big GSIs (global system integrators), we are increasingly working with them on larger-scale, transformational practices and areas where they want to differentiate themselves and a digital workspace or a workforce transformation or something is a critical element of that.

I also think about public cloud platforms — not just as infrastructure partners, but also we‘re increasingly investing in marketplaces and things where it reduces some of the friction of buying from a customer point of view. And our partners should be engaged in all three of those.

We continue to think channel is a critical part of our strategy. It‘s a very good economic business for our partners to be in.